Transitioning out of your business will take place at one point or another, but how successful you are at it will vary greatly.
If you’re wondering what your options are when it comes to selling your landscape company, you don’t want to miss the session, “12-Point Guide to Successful Transitions: Learn from the Experts” on Monday, Nov. 4, at 11 a.m. at ELEVATE.
Bob Williamson, director of the pest control division for Cetane Associates, will lead a panel discussion, which will represent the three main types of buyers: private equity, large strategic acquisitions, and small strategic acquisitions.
“They’re getting a lot of noise from buyers saying, ‘We want to buy your business, it has value,’” Williamson says. “That’s in their mail every day, or getting emails, and we’re saying, well, here’s who the buyers are so that when you enter into this game, you can get your handle on what they look like.”
The panelists include Brett Stoehr, vice president of Unity Partners, representing private equity; Phil Key, CEO of Ruppert Landscape, representing large strategic acquisitions; and Luke Zimmerman, owner of Green Image Lawn Care, representing small strategic acquisitions.
Keys to a Successful Transition
Williamson says the first step is to get your business in as order as possible.
“When you go to sell, a key transition is to get things as organized as possible,” Williamson says. “Sit down and try to do a rudimentary org chart for your business to understand who goes where, so that the buyers understand it and start maybe working on some SOPs and some employee manuals.”
He says it’s essential to have some structure in place, as without it, the buying process will slow down. Having a strong structure in place is particularly important if you want to be considered for platform acquisitions.
Williamson advises working with a broker to get in front of all the different types of buyers and see their offers. The best offer is typically the one the seller is interested in, and then the seller can interview them about fit and feel.
“Fit and feel for us is usually the biggest decision, more so than money,” Williamson says. “How do they fit? Is it a good feel? Do they know what they’re doing? That kind of stuff matters a lot.”
Asking the right type of questions can help determine if it is the right fit on both sides. Buyers will ask questions like why you are selling the business and how long you are willing to stay on after the acquisitions.
As the seller, you should ask what will happen with your employees, if they plan to keep your company branding or for how long. Williamson says it’s important for both parties to understand what the plan is for after the acquisition.
Creating Value
Williamson says a common question is how much someone’s business is worth. He says the bigger the company is, the better and recurring revenue is a critical factor.
“If it’s a maintenance firm, and it’s a recurring commercial service business, those are your best businesses to buy,” Williamson says.
He says buyers want to know if you have grown consistently by at least 10% for the last five years.
“You don’t want a high percentage of your revenue with a limited number of customers, so if 50% of your revenue is with your top 10 customers, that’s going to cause a different structure in the deal,” Williamson says.
Beyond your EBITDA, buyers also want to know how the business is run and if it has enough margin so that when it merges, it can generate enough cash flow to sustain what the buyer is paying for it.
Willamson notes that you need to have the business at a point where you can easily step away from it. If you can’t walk away for half an hour without getting 14 phone calls with questions, this is an indicator there is more work to do.
The Future of M&A
Williamson expects the market for landscape businesses to remain strong as the largest generation continues to exit the workforce and doesn’t have children interested in continuing on in the business.
“The boomers are going to continue to get older,” Williamson says. “We work longer, but as we age out, we’re going to be the largest population in the U.S. to go and sell our business.”
He cautions that all owners need a best alternative to a negotiated agreement. If a deal doesn’t work out, know your alternative to this not happening.
“You need to always have an option in your head and know that if this deal falls through, I can still stay in the business,” Williamson says. “Don’t wait until you don’t have that option.”
Williamson argues there’s no exact right selling time, but 90% of owners wait too long to sell and very few sell too early.
“Most wait too long,” Williamson says. “They lose interest. They get lethargic. They quit doing things. They’re not innovative anymore. They don’t have a plan.”
Want to hear real-life stories on how to complete a successful transition? Register for ELEVATE and we’ll see you in Charlotte, North Carolina!
