Earlier this year, Rogerson Business Services finally closed the sale of a Tree and Landscaping business in California that we thought would never happen. As ‘experience is the best teacher’, here’s a look at the moving parts of the transaction. Perhaps it will help you if you are selling or buying a business and wonder what that process might look like.
There is a great quote that appears to have been attributed to different people. The quote reads, “Experience is the best teacher.”
In the end, both the sellers and the buyer were pleased once the sale closed escrow. Here is their story.
If you are ready to sell your landscaping service business in California, consider these enhancements to make your business more attractive to buyers and sell on your terms.
Wonderful Tree and Landscaping Service business
The business that was up for sale in California was a tree and landscaping service business. It was very well-run by a married couple and had approximately 21 employees.
Gross revenue was just under $1.6 million, and the owners were generating Seller’s Discretionary Earnings of approximately $356,000.
The transaction not only included the business but also the real estate where the business was operating.
Buying a Tree and Landscaping Service business
One of the biggest challenges was that a buyer would need three contractor licenses, as required by the State of California.
These were C27, C61, and D49. Business licenses were also a requirement for the cities where customer work was completed, but they were easier to obtain.
About two months after the business was listed, a buyer appeared who already held one of the licenses, as well as a General Building Contractors license. This was great news, as he also needed an SBA loan to buy the business and real estate and would not have qualified without these licenses.
Offer from the buyer.
The buyer proved to be a quick decision-maker. After an initial conference call with the sellers and one face-to-face meeting, he prepared and sent an LOI or Letter of Intent.
As is normal, there were several back-and-forth negotiations before an agreement was reached in October 2018.
Next step: Due diligence
With an LOI in place that is acceptable to both sellers and the buyer, the next step is due diligence. The place where the buyer verifies the representations of the sellers, and the sellers have the opportunity to ask the buyer questions to ensure they are serious and that everything remains confidential.
Naturally, the buyer wants to know everything. At the same time, the sellers want to be careful not to disclose too much confidential information about their customers or employees, potentially losing some or both.
SBA loan and the federal government shutdown
A unique problem, which I hope no one experiences again, was the shutdown of the federal government in December 2018 and its reopening in January 2019. This was the most extended federal government shutdown ever, and as a result, the transaction couldn’t close on January 2, 2019, as planned.
The result was that the business finally closed escrow on February 08, 2019.
Lessons Learned
There were two key factors to the success of selling this business. If either ingredient were missing, the business would not have been able to sell.
The first ingredient was good communication between all parties. This was a complex transaction involving a buyer, an SBA lender, an attorney, an accountant, a business appraiser, a real estate appraiser, an environmental inspector, and additional parties.
The second ingredient was the willingness of both sellers and buyers to collaborate and achieve a positive outcome: the successful sale of the business.
As there were so many items to address before the transaction could close, it was necessary for each party, at different times, to give or take a little. This willingness was evident in this transaction, making things that initially seemed difficult doable.
Both buyers and sellers were pleased.
They went out of their way to ensure the buyer was happy and set up for success.
To read the testimonials from buyers and sellers, please visit my website and scroll to the bottom of the home page to the section called “A few words from our clients.”
Ready to value or sell your business?
Are you thinking about selling your business? The first step is to determine the value of your business. If you would like more information about valuing your business, please visit my website ,Business vValuation
Andrew Rogerson is a certified business broker based in Sacramento, California. Call Toll-Free at (844) 414-9700. If you prefer, email him at support@rogersonbusinessservices.com. Andrew services the whole state of California.