Thoughts on Subcontractor-Only Service Businesses? (e.g., Lawn/Tree Care)

May 12, 2025

by a searcher from University of Texas at Austin in Dallas, TX, USA

Curious to get the community’s perspective on service businesses that fully outsource service delivery through subcontractors. I’m evaluating a lawn and tree care business doing $2–4M in revenue and generating $500k-1M in SDE. What’s unique is that it owns minimal equipment, has no field crews, and subcontracts 100% of the actual work. The small internal team handles sales, quoting, scheduling, and customer service. All labor is outsourced to insured subcontractors who follow the company’s documented SOPs. While this creates a lean, asset-light model with strong margins, it also raises questions around: • Is this effectively just a lead-gen + project management business? • How would you think about valuation and long-term defensibility in models like this? • Has anyone acquired or operated something similar? Any lessons learned, good or bad? • Would you apply a valuation discount vs. more vertically integrated service providers? Curious if folks here have encountered similar models in home services, facilities maintenance, landscaping, etc., and how they ultimately underwrote the deal. Appreciate any input!

Reply by a professional
from Bentley College in Miami, FL, USA

You're essentially looking at a “managed marketplace” or “service aggregator” model. The benefits are clear: lower overhead, asset-light structure, scalability, and often stronger margins. But you're also trading off some control — over quality, scheduling, and customer experience — which can impact long-term defensibility. Key Considerations: Is it a lead-gen business? If the company is driving inbound demand, setting pricing, and managing the customer relationship, it's more than just lead gen. That said, buyer perception matters — if most value is in customer acquisition, expect closer scrutiny. Defensibility: Without proprietary tech or exclusive subcontractor agreements, the moat can be thin. Look for unique SOPs, strong brand reputation, or route density (especially in recurring services) as indicators of stickiness. Valuation Approach: Many buyers do apply a slight discount vs. vertically integrated models, especially if subcontractor dependence poses execution or compliance risk. That said, if the SDE is solid and systems are dialed in, plenty of acquirers will value the simplicity and scalability. If you’re moving toward a LOI or deeper diligence, DueDilio can connect you with specialists who’ve evaluated similar home services models. Having someone who knows what levers to pull in these subcontract-heavy setups can be a big advantage.

Reply by an intermediary
from Pennsylvania State University in Philadelphia, PA, USA

Hi, I work for a firm that supports buyers through a Done-With-You model. We have a full team of M&A analysts and private equity vets that handle sourcing deals (on-market and off-market), diligence, deal negotiation, and connect you with our network of SBA or private lenders. The goal is to take the heavy lifting off your plate so you're not doing it all alone. Feel free to reach out via LinkedIn if you ever want to talk or learn more.

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