Smaller landscaping businesses can boost their business results in a number of ways by buying a business.
The factors that existed to make buying the right company attractive prior to January 2020 remain in place today. Most companies have recovered from sales losses they may have experienced in the early part of 2020 due to the pandemic. The demand for landscaping services is steady. Interest rates remain low and access to capital is favorable. The right strategic acquisition can accelerate growth and profitability.
The benefits to a small business owner include:
- Increase market share by taking over a competitor.
- Increase revenue beyond organic growth rates
- Add additional qualified team members at all levels
- Possibly add new service lines and/or product offerings
- Achieve economies of scale by applying existing infrastructure costs (technology, management, fleet, and equipment, etc.) to be applied to a larger revenue base.
- Become more attractive as a seller. Ultimately, today’s smaller strategic buyer can become an attractive target for those larger acquirers in the next 5 years or less.
Those same baby boomers who were planning to sell their businesses in the near future are still out there. Smaller companies (revenues of $1.5 mil or less) won’t attract the interest of larger acquirers. Larger buyers tend to focus on deals in the next tiers of revenue with more mature characteristics (stable customers, processes, management teams, etc.). This leaves the field more open for smaller companies to pursue strategic acquisition opportunities.
Here are some actual examples we’ve seen work well for smaller buyers
- Revenue Growth
A very profitable $2 mil landscaping company wanted to reach the next level of sales within their stated profit margin. Organic growth, although robust, wasn’t going to allow them to hit their target in the next 12 months. A smaller business was for sale in their area. They bought it, folded it into theirs and gained new clients, new revenue and most importantly, new talent. They’ve exponentially increased their ability to grow further in the future.
- ‘New Product Offering
A $1.5 mil business located in a high-end “niche” area wanted to grow its business by offering mosquito spraying services. Rather than start from zero on their own, they found a business providing those services that were much smaller but wanted the opportunity to grow too. With the purchase of the spraying business, both owners opened up new customers to each other’s services and were able to better meet their customers’ needs. The best part of this deal is that the smaller spray business owner was younger and structured the deal to eventually buy out the original owner.
- Competitor Buyout
Another client was operating in an attractive but somewhat isolated but “high-end” resort-type location, with only a couple of other competitors who were offering services at his level. He approached the owner of the company he wanted to buy and was able to structure a transaction that positions him as the dominant provider in his market. (over 50% of the market). Ultimately, he plans to expand his service offerings to all of his clients to grow revenues. (and to acquire his other significant competitor.)
The hardest part of the challenge for a small business owner is to take the time to think about the business from a strategic planning perspective rather than operating in reactive mode all the time. We know that you know that, and we’re here to help with keeping the focus so you can harvest your potential.
As always, if you would like to discuss this topic, your business valuation, your value drivers, buying or selling, feel free to reach out to me at 224-688-8838 or email me [email protected].