Bloom or bust for landscaping businesses?

BVWireIssue #260-4
May 22, 2024

industry analysis
market approach, benchmark, rules of thumb

It’s that time of year when flowers and trees emerge and grow. But the growth outlook for the landscaping businesses has wilted, according to the 2024 edition of the Business Reference Guide (BRG). The industry’s revenue will grow at a CAGR of 3.0% over the next five years, less than half the rate of the past five years. This business is tied to the health of the housing and property markets, as well as the level of per-capita disposable income because landscaping services are often discretionary. Median valuation multiples for a small landscaper (those with under $1 million in net sales) are:

  • Market value of invested capital (MVIC)/net sales: 0.60;
  • MVIC/gross profit: 0.75;
  • MVIC/seller’s discretionary earnings (SDE): 1.84; and
  • MVIC/EBITDA: 2.29.

When valuing these businesses, focus on the management team, customer concentration, AR aging, employee retention, financials, and equipment. Ask these questions: Does the company have contracts with its clients? Are all employees legal? How many customers are built on relationships with the seller, and what will happen to them if the business is sold?

This is just a small sample of the information in the Business Reference Guide, which is the primary source for rules of thumb, pricing tips, benchmarking information, industry resources, and general industry data on nearly 700 types of businesses. There is also an online version with a fully searchable database, and it includes the print version of the guide. 

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