What are some hallmarks of a great landscaping maintenance/lawn care opportunity? In a recent SBA lender roundtable, lenders mentioned that lawn care acquisitions have been struggling, and I'd love to hear what makes or breaks these operations.
Are there services provided, customer demographics, or market dynamics to watch out for? I'd love to hear from operators in the space.
As a note, I'm well aware that contractual agreements are a huge plus.
I agree with Connor's comment "Depends on customer base / market as to how you can price, but in the commercial space, you can see a lot of “race to the bottom” pricing from large players which might make it tougher to compete."
I helped pioneer large integrated Facilities Management deals from 2008 ~ 2022 for leading global firms. Landscaping was always a program that would be bundled into the "integrator program", so it limited the ability for smaller firms to contract direct with clients. If your firm did not subcontract through the leading IFM firms, large campus work would dry up. For those that do subcontract, the "integrators" add on their %, hence the race to the bottom for pricing and creates fierce competition for the direct contracts with smaller and medium size businesses.
Some considerations for those looking to buy or improve a landscaping business, which can bring higher margins, improve the ability to go direct and can attract better talent - it's a start in making landscaping sexy.
- autonomous robots, e.g. workforce reduction, greater efficiencies
- diversification of services, e.g. handyman, light carpentry, etc.
- consider environmental / sustainable services. e.g. offer the slow-grow / low-mow turf options.
Feel free to DM me if you would like to discuss further.
1) Direct contribution margins (at least 45%, more market is 50%+), of which labor is your #1 driver
2) Enhancement "pull through" rate (e.g. Enhancements as % of maintenance revenue)...minimum 40%, world class 100%+
3) Fleet age (e.g. is most of fleet 5 years < or much older?) - directly related KPI is capex as % of rev. (minimum 2% have seen as high as 4%, depends on maintenance vs growth)
4) Accurate job costing to make decisions on (ties to #1) - things such as Aspire, are very credible for achieving this
5) Leadership and management bench
Anyway, looking at prob. just the 5 points above, you could probably accurately compare / benchmark any commercial maintenance first landscape company with a high degree of certainty as to where they fall on the spectrum of quality, whether struggling or not etc.