Are you ready to sell your Arizona Landscaping Business?
Don’t make any of these mistakes, call us we will walk you through the process required to sell a landscaping business.
If you are, you have landed on the webpage of the very best Landscaping Brokers in America. KKBA Nationwide Business Advisors has a great deal of experience in selling Landscaping businesses. We know how to attract the very best buyers to your Arizona Landscaping business. Our Buyers who are ready, willing and able to buy. Our goals is to get you a fair price and agreeable terms in a reasonable period of time.
Why are you thinking of selling?
One of the first few questions a prospective buyer(s) will ask is “Why are you selling?”
Your answer to this question is important. The wrong answer might cause them to question your motivation to sell.
You should know that Buyers might be suspicious if a Seller under 55 says they are retiring. If you are not yet at retirement age you better have a believable reason for selling. If you are selling for health reasons or are relocating be up front about it. If you’re burned-out you must be able to make buyers understand that the business is still a good business. Sometimes it just isn’t a good fit for you anymore and that is a legitimate reason to sell..
If you’re planning to start an unrelated, or related business, be honest and up front about that. It is always better to get out in front of something like this than to conceal it. Addressing something like this up front will help to create trust between you and the buyer.
In most cases, handled this way, something that you thought was a negative turns out to be a non-issue. this will be acceptable to prospective buyers if it is totally above board and out front in the discussions regarding the sale of the business.
If you are retiring once the business is sold, prospective buyers view this as ideal. Buyers understand that people retire and they are less likely to worry about their being something wrong with the business.
What are you planning to sell?
Are you planning on selling accounts only, or your entire business? If selling accounts only, are you selling all or your accounts or a portion of your accounts? If you are planning to sell all your accounts, then what are you going to do with the equipment used to service those accounts? If you plan on keeping the equipment you better have a plausible reason for doing so or most prospective buyer(s) will be very suspicious of your intentions post acquisition.
If you are selling a portion, then you need to be clear exactly which accounts are for sale and how you derived at the decision on those accounts? Buyers will be looking for some reasonable explanation as to how the accounts were chosen and if appears to them during their due diligence that the accounts they are buying are your low margin accounts or troublesome accounts then they are liable to expect quite a haircut on the price. And, if the accounts you have decided to sell are mostly full-service accounts which offer little to no add-on sale opportunities this is also a bad situation for a buyer.
How is the business doing financially?
What is your net income?”
The answer to this question is not on your tax returns. It’s not on your year-end balance sheet statement, cash flow or profit and loss statement.
To answer this question we need to calculate your discretionary cashflow/income. This is the amount of money you are taking out of the business along with; 1. the value of any non-cash benefits the business is providing you or your family, 2. the value of any discretionary benefits you are providing any/all employees (not including paid vacations for employees), 3. depreciation and amortization, 4. non-recurring and/or non-operational related expenses.
This is done before the price is set.
Typically when you sell a landscaping businesses you will get a multiple of 2-4 times the seller’s discretionary cash flow. If the business is large enough the buyer could be a private equity group who might pay more than 4 times the multiple.
Some landscaping businesses sell for the market value of their furniture, fixtures & equipment, real estate and a premium for goodwill.
In most cases small business sale transactions are done by way of an asset sale. That having been said, there are circumstances that would warrant an equity sale rather than an asset sale.
What is your landscaping business in Arizona worth?
One of the first questions we get from owners like yourself is – What is my business worth? That might seem like a very simple question, but nothing could be farther from the truth. In a nutshell, it’s worth what someone is willing to pay for it. The buyer must have the means to purchase and run your business and is not be under compulsion. All the theoretical analysis by valuators notwithstanding, that’s how much your busines is worth.
Using a “Multiple of Earnings” or “Rule-of-Thumb” to value a company.
The Multiple of Earnings Method of valuation is arguably the easiest valuation method one could use to value a business. However, being the easiest method is also its biggest weakness. One need only consider the fact that there might be a difference of opinion between valuators as to the definition of the term “earnings” to conclude that no valuator worth his/her weight in salt should ever recommend looking at this method only to determine to any level of certainty the value for a business.
In the linked video Wharton Professor Rick Lambert explains two accounting methods to calculate the value of a company. Valuing a company is extremely difficult to do well. Companies are complicated entities — engaging in many activities that we only get limited information about. Moreover, firms last an indefinite length of time; most of their important value-creating activities haven’t even happened yet!
Sometimes Business Brokers will refer to the “Multiple” method as a “Rule-of-Thumb” method for determining the value of a type of business. Depending solely on the Multiple of earnings method for valuing a business completely ignores the individuality and uniqueness of a particular business. It is our opinion that the Rule-of-Thumb Method should only be used when valuing thumbs.
If you want to learn more about valuing a company, I suggest you purchase a copy of “The Art of Business Valuation.” The owner of KKBA, James M. King, assisted the author in the development and writing of the book. You can click on the image of the book to purchase a copy from Amazon.
 Excerpt from WhartonForFinance is property of WhartonForFinance
Which makes more sense for your situation?
As mentioned earlier, during negotiations leading up to an acquisition it becomes necessary for both parties involved to look at whether they would best benefit from an asset sale or an entity sale.
Understand this fact: YOU AND THE BUYER(S) HAVE COMPETING INTERESTS
It is because of this fact we urge to you consult early and often with your trusted financial, tax and legal professionals to make sure you understand completely the financial, tax and legal implications of the various structuring strategies you might be asked to consider making it possible for a successful sale.
In all cases there will be pros and cons associated with any structuring strategy and you will need their advice to be able to decide which strategy best meets your needs.
As the business owner you can chose to sell your business transferring all or some of the business assets by way of an asset sale or entity sale. Generally, most small businesses are sold by way of an asset sale. That having been said, in certain circumstances some small businesses are more likely to be transferred in an entity sale. The reasons for such a structure are many and varied and will be addressed in more detail later in this publication.
In an asset sale the business entity, whether it be a C Corporation, Partnership or Limited Liability Company, sells its tangible and intangible assets to a buyer, while the shareholders/partners/members retain their equity in the entity.
In an entity sale, the seller(s) transfers his, her, their shares/partnership interests/membership interests to the buyer who acquires the entity with all its assets.
There are many factors for both the Seller and the Buyer to consider before deciding which transaction structure, asset sale or entity sale, is appropriate and/or acceptable to all parties. Some if the issues that might be considered in making the decision are: