If you own a landscaping business and you’re thinking about your exit strategy and how to one day retire, we’ve prepared a thorough checklist of all the things you’ll need to consider to get ready for the sale of your business.
The first question most potential buyers will ask is: ‘Why are you selling?’ For many, the answer is retirement. For others, they’re ready to do something else. Whatever the reason, start by understanding your “why” and crafting a response for potential acquirers. If you’re trying to understand if you should sell your business, here’s a helpful guide on thinking through whether or not you’re ready.
At Baton, we have worked with a lot of landscaping companies as they prepare to sell, and they tend to be ideal businesses for acquisitions. Landscaping businesses can be attractive because a lot of them have recurring revenue with consistent clients and are great for rollups, meaning that other culture-aligned owners of landscaping businesses can merge companies with relatively less effort than other industries.
All of that being said, even though this is an attractive industry with a good potential of successfully selling, it is helpful to understand all of the things that go into selling a business so you can prepare effectively, which is why we prepared this guide.
Prepare a Statement That Explains the Reason You Want To Sell
By understanding your internal “why” for selling, you’ll be able to articulate that to potential buyers. You’ll also set yourself up for a better understanding of the types of buyers you’re most interested in talking to. If you’re looking to maximize the sale price of your business and earning enough money for a long retirement is the goal, you may not care what the seller plans on doing with your business after you hand over the reins. If you want to pass on a legacy, you may want to consider buyers who are interested in preserving your brand and operating your company “as is” rather than rolling it into a larger entity.
Putting your “why” down on paper and writing up a short statement on the reason for selling will help you kickstart the package you’ll eventually pull together for prospective buyers, often referred to as a prospectus or Confidential Information Memorandum (CIM).
The first thing to consider when selling your business is what its actual value is. Baton believes every business owner deserves to know what their business is worth — so we made it free. We evaluate hundreds of comparable businesses, taking location, industry and other factors into consideration, and compare the results of a variety of valuation methods (e.g. discounted cash flow, cash flow multiples, revenue multiples, EBIDTA multiples, and more).
Their proprietary algorithm weighs these values to produce an estimated valuation range that gives owners a realistic view of what the business may be worth if sold today. Along with your valuation range, we’ll provide actionable advice on how to prepare your business for a sale and maximize your chances of selling on the higher end of the range, along with personalized connections to our vetted partners.
Creating a summary of your business can be a helpful tool to both target and share with potential buyers. You’ll want to describe things like how long you’ve been in business, what your customer base looks like, what your brand means to your local community, how many employees you have, and what type of equipment you own.
Depending on the type of business you run, you’ll have various licenses, contracts, and legal agreements the buyer will want to review. If you’re operating in a regulated or licensed industry, the buyer will want to understand that you are in compliance and that the license transfers as part of the sale. Similarly, the buyer will want to see any real estate lease agreements, equipment leases, employee agreements, etc., that could materially impact the business when they take it over.
We recommend putting together a “data room” – some sort of shared folder setup in the cloud that can easily be shared with advisors and potential buyers. You can start to compile all the documents mentioned in this guide in that data room and add to them over time as you work through this checklist.
Prepare to Work With Potential Buyers
After you’ve compiled all this information about your business, it’s time to start thinking about how to really sell your business. There are as many ways to contact prospective buyers as there are ways to acquire customers for your business. There may be competitors that would be interested in acquiring your company. There may also be large consolidators or private equity firms buying up businesses like yours. Plenty of “searchers” or solo entrepreneurs are also looking to buy small businesses as a path toward business ownership. For landscaping businesses, in particular, it is quite common to sell to a local competitor if you can come to an agreement and keep confidentiality – this is a place where a broker may come in handy.
Depending on the type of buyer you think will be interested in your company, your best first step here is to decide which advisors you want to help you through the sales process and to work with them on a buyer outreach strategy.
At Baton – you’ll start by receiving a complimentary valuation and connecting with an advisor to support you regardless of where you are in your journey. If you’re ready to connect with buyers, we surface lists of potential buyers that have indicated an interest in businesses within your criteria. This way, you can stay anonymous for as long as you’d like.
Once you start talking to buyers, be prepared for them to ask lots of seemingly invasive questions. Keep in mind that they’re considering paying you a lot of money for your business, so they’re going to want to intimately understand what it is they are buying.
When you first engage a buyer, having a document, like a “CIM” described above, can be a great starting point. That document should provide a high-level summary of your business and your financials and give the buyer enough to decide if they are interested.
From there, they may want to see some more detailed financial information, tour your operations, and have conversations to better understand the business. Once you’ve provided them with that information, they should have enough to decide if they want to make you an offer or not on your company.
An offer is usually sent in the form of a Letter of Intent (LOI), stipulating the purchase price for the business and any additional contingencies of the sale.
Once you sign an LOI, there is a due diligence period where the buyer will investigate all the documentation discussed above. They will want to reconcile all your financials to ensure that the way you are reporting income and expenses is accurate. They’ll dive into all the legal documents to make sure there are no pending legal liabilities. They’ll make sure the ownership structure of the company is conducive to a sale. If this all sounds overwhelming, great advisors (and Baton) can help.
Selling a business likely isn’t your business. There are, however, competent experts in legal, finance, and business broker that do nothing but help buyers and sellers of small businesses complete transactions. If you’re overwhelmed by this list, or just value having experts in your corner as you navigate a sale, we strongly recommend engaging some of these professionals. Not only will they make the process smoother, but they will often help you get more money for your business than if you sold it on your own.
Baton can help you connect to our vetted partners, so you know that your business and future are in good hands.
At first, the business sales process may seem a bit overwhelming. As you’re well aware, running a small business has countless moving parts. Documenting many of them and then packaging them up for a potential buyer is definitely work – but it can all be worth it if you are ready to sell and you find the right buyer.
Wherever you are in your journey, Baton wants to support you. Even if you aren’t considering selling at all and simply want access to partners to help you think about how to organize your business around some of these ideas – you’re in the right place. Get started with Baton today.