Tips for Buying a Landscaping Business

Looking for a business that provides recurring revenues and has little overhead? A landscaping business could be a great fit. The landscaping industry is expected to reach $207.9 billion by 2030, and there’s plenty of room for you to make a profit!

Pros and Cons of Buying a Landscaping Business

On the plus side, a landscaping business offers the opportunity for recurring revenue. Many businesses offer service contracts to clients, which means they regularly trim grass, weed garden beds, and generally maintain a yard. 

Overhead costs are low for this type of business. Beyond employees, a mower, a few tools, and a truck, there’s little you need to spend money on. Those low costs help you achieve gross margins of 50-55%.

Another perk is that there’s always demand. Whether it’s for designing a blank canvas of a yard, maintaining a commercial shopping center’s garden features, or keeping a residential home looking tidy, there’s always a need for landscaping services.

A drawback to running a landscaping business is that it may be seasonal, depending on the weather where you live. Certainly, there will be a lot of requests for yard maintenance in the summer months when the grass grows high…but in the winter, your business may be extremely slow or even stop completely. This may mean uneven cash flow throughout the year. You can, however, offer other services like snow plowing or holiday lighting.

Another negative factor is that finding quality employees can be difficult. In fact, 84% of landscaping companies say that hiring and retaining employees is their biggest challenge. This may mean that you spend more time than you expected searching for, hiring, and training staff. And it might mean you have to step in to work if there’s a shortage from time to time.

This is a business that is dependent on the weather. If it rains, your employees can’t work. If it’s too hot, you’ll need to limit their sun exposure to keep them safe. It’s a job that can be physically demanding, which may account for the high turnover rate in the industry.

Cons aside, there are still plenty of reasons to consider a landscaping business. Let’s look at some of the questions you need to consider when looking for the right opportunity.

Why is the Owner Selling?

Certainly, the owner wants to present his company in the best possible light, but finding out the reason he’s selling can tell you a lot. If he wants to retire or is planning to move, there’s probably nothing to be concerned about. But if the reasons seem suspicious, dig deeper. The owner may be in financial trouble and may want to get the problem off his hands, which means you’d be inheriting a lot of problems, debt, and stress.

What Do the Finances Look Like?

Don’t take the owner’s word for it that the company is thriving; ask to see financial records, tax returns, and bank statements. Pay attention to seasonal fluctuations to determine whether this is a business that you could afford to run year-round or just in the warmer months.

Ask if there are any current liabilities, such as business loans or vehicle leases. Consider the structure of your purchase — will you inherit the debt as well?

Who are the Customers?

Are the customers residential homeowners? Commercial clients? Do they have maintenance contracts, or does the company offer one-time services like landscape installation?

How many customers does the company have? What percentage are repeat customers, and what is the average customer lifetime value? Ask if the company uses customer relationship management software to manage its contacts.

How Does the Company Market Itself?

For many landscape companies, marketing comes in the form of word of mouth. One happy customer tells others, who tell others, and so on. Or, they simply place flyers around town. Is that the case, or does the company have a more robust marketing strategy in place, leveraging advertising, social media, and digital marketing?

If there is a strategy in place, who executes it? The owner? An employee? A marketing agency? How much does the company spend on marketing each year?

What Does the Competition Look Like?

Generally, the landscaping industry is a crowded one, and the business you buy may be one of dozens in the area. It’s smart to understand who the competition is before investing. 

Ask about the big players; who caters to the same types of clients with the same types of services? What is this company’s unique selling proposition? Is it price? Stellar service? You’ll want to stand out in a crowded market, so it’s important that you can differentiate your future company from the rest.

What’s the Condition of the Equipment?

The sale of this landscaping business will likely come with equipment and company vehicles. Assess these to see what their condition is. You may need to buy new lawnmowers or a truck so that employees can do their jobs efficiently. Factor in these costs when budgeting your finances.

What Are Customers Saying?

Especially for a company that often relies on word of mouth, you want to know what customers think about this business. Check online reviews on sites like Google and Yelp to see what people say. While it’s normal to have a few less-than-perfect reviews, keep an eye out for negative reviews with a common theme. If you see many complaints about missed appointments or shoddy work, know that this issue is one you’re going to need to resolve as soon as you take over the reins.

How Involved Do You Need to Be?

As an investor, you may only want to purchase the business and make the occasional strategic decision. Is that possible with this type of business, or will you need to be more hands-on?

If the current owner is the manager as well and handles day-to-day operations, you may need to change the structure and hire a manager. Keep in mind that you’ll still need to keep tabs on that manager’s work, so being hands-off may not be an option.

What Would You Change?

Even if the business has been thriving, you likely can see areas for improvement. Make a list of what you’d change, and the timeline you’d want to implement these changes. Some examples:

• Hiring a receptionist (90 days from sale)
• Engaging marketing firm (6 months from sale)
• Expanding market (one year from sale)

Keep in mind that the current staff may be nervous about working under someone new. Make a plan for a gradual transition so you can be fully up-to-speed on how things operate. Communicate any changes to come, as well as reassure staff of what will remain the same, particularly their jobs, so that everyone can feel comfortable with the transition.

Final Thought

A landscaping business provides you with an opportunity to step into an industry that always has demand. But it’s not a decision to take lightly. Ask these (and more) questions so you have a full understanding of the strengths and weaknesses of the company you’re considering buying.