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how do you value a landscaping business?

As most landscape companies have referral business and few assets other than some equipment, how do you place a value on referral buisness (non-contractual)? How much do you base your valuation on cash flow, assets, gross revenue, etc? Are there rules of thumb for valuation?

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Answers (3)
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How to Buy a Business
WA

About 50% of annual gross sales.

But your best best is to contact http://www.landcarenetwork.org and ask.

Jul 14, 2009
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Inc. Magazine
Deputy Editor
NY

According to our last valuation report, the average sale price of a landscaping business is $355,000 against annual revenue of $576,000.

The most accurate valuation formula is 2.64 x discounted earnings, followed by 4.81 Ebitda, followed by 0.63 x gross profit.

You may go to the attached link to plug in your company's numbers and get a rough estimate of what your business's valuation might be.

Jul 14, 2009
Mel Vaz
Vested Business Brokers, Ltd.
Chief Operating Officer
Suffolk County, NY

Good question. Ultimately you will be paying a multiple based on cash flow. Usually 2 - 2.5x's the cash flow (including inventory, assets, etc.) Most landscapers do not have contracts (at least not gauranteed contracts). Your best bet is to ride along with them for 2-4 weeks to see what they are actually earning and to spot check accounts to see if they are real. Most companies will have a list of current customers that you can call to verify. They would typically ask for a deposit and Letter of Intent prior to providing such a list to show that you are serious and to protect themselves.

Jul 14, 2009