A Successful Sale of a Tree and Landscaping Business
There is a great quote that appears to have be attributed to different people. The quote goes as follows: “Experience is the best teacher.”
Earlier this year Rogerson Business Services finally closed the sale of a Tree and Landscaping business that we thought would never happen. As ‘experience is the best teacher’, here’s have 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.
In the end, both the sellers and buyer were very happy once the sale closed escrow. Here is their story.
Wonderful Tree and Landscaping Service business
The business that was up for sale was a tree and landscaping service business. It was very well run by a husband and wife and about 21 employees.
Gross revenue was just under $1.6 million and the owners were generating Sellers 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 per requirements of the State of California.
These were a 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 2 months after the business was listed, a buyer appeared who already had one of the licenses plus a General B Contractors license. This was great news, as he also needed an SBA loan to buy the business and real estate and without these licenses in place would not have qualified.
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 acceptable to both sellers and buyer, the next step is due diligence. The place where the buyer verifies the representations of the sellers and the sellers get to ask the buyer questions as they want to make sure the buyer is serious, and everything is kept confidential.
The best due diligence flows when both sellers and buyer are organized. Naturally, the buyer wants to know everything while the sellers want to be careful not to disclose too much confidential information about their customers or employees, potentially losing some or both.
In this case, both the seller and buyer were very organized, and we were able to get due diligence done very smoothly without taking too much time.
SBA loan and the federal government shutdown
A unique problem which I hope no one gets to experience again was the shutdown of the federal government prior to Christmas 2018 and not re-opening until early February 2019. This was the longest federal government shutdown ever and meant this transaction couldn’t close on January 2, 2019 as planned because the buyer was getting an SBA loan and the SBA, being a federal government department, were closed during the shutdown.
The result was the business finally closed escrow on February 08, 2019.
There were two keys of success to the sale of this business. If either ingredient was missing the business would not have sold.
Ingredient number one was the good communication between all parties. This was a complicated transaction with a buyer, SBA lender, attorney, accountant, business appraiser, real estate appraiser, environmental inspector and more.
Our principal role at Rogerson Business Services was to make sure everyone was kept up to date and ensure the pieces were all moving. If there was a ‘road block’, my role was to remove it and keep everything as smooth as possible.
The second ingredient was the willingness of the sellers and buyer to work together to reach a positive outcome; the 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 and made things that initially seemed difficult doable.
Both buyer and sellers were very happy.
The sellers of the business were very happy once it was official that escrow was closed. They went out of their way to ensure the buyer was happy and set up for success.
To read the testimonial from the buyer and sellers, please visit my website and go to the bottom of the home page and 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 place to start is to know the value of your business. If you would like more information about valuing your business, please visit my website Business valuation.
For more immediate help about selling or valuing your business, please send an email to Andrew Rogerson or give me a call at 916 570-2674.