Northeast Landscaping Business - Margins and Multiples

September 05, 2023

by a searcher from Boston College - Wallace E. Carroll School of Management in Newport, RI, USA

Hi all, a friend of mine not familiar with the SMB space is looking into acquiring a landscaping business from a friend and has asked for some help with analysis, structure, etc. For a business with $4MM revenue, what net margins would you expect to see? Also, what multiples would a business like this trade at? 2.5-3.5x? Thanks in advance!

2 Likes

6 Replies

165 Views

Replies

Reply by an intermediary
from Boise State University in 800 W Main St, Boise, ID 83702, USA

Do industry research on IBISWorld, First Research and perhaps RMA to determine what margins might be. As far as multiples, a company-specific multiple is what you are seeking. This is based on the earnings of the company in comparison to other similar sized companies in the industry. See DealStats, Peercomps, and perhaps Bizcomps. Pull at least 15 transactions with revenue range of a little smaller to a little larger (like $2,000,000 to $6,000,000) perhaps. Don't combine the data as each data base tracks things a little differently. In DealStats, pull Asset Sales (rather than Stock Sales). . And if you can't find at least 15 transactions, then widen the range. Only use comps that have a positive SDE.. Then run a regression analysis to see how your company compares to its peers and what the multiples might be. DealStats has a tool I believe.

Reply by a searcher
from University of Massachusetts Amherst in Boston, MA, USA

I have looked at a few landscaping businesses in the northeast but it is going to vary a lot and you can't trust the net margin in the CIM or P&L without making adjustments. Most SMBs will show a loss on purpose in quickbooks or taxes to reduce their taxable income.

Margins of any business have a range of outcomes based on exposures. Are they all maintenance? Is it residential or commercial? Is it irrigation? Do they do plowing in the winter?

That being said, most landscape companies I have seen (~4-5 of them), margins are 5-12%, depending on the mix and adjustments you make to the P&L. They trade at 2.5-5x depending on scale. $4mm is on the larger side if it is not construction driven

+4 more replies.

Join the discussion