There is a resurgence of private equity investing in landscaping firms, which will impact everyone.

Some of my best clients are being propositioned. This fact says a lot about how well they have performed, and it also shows that a rising tide raises all boats (sectors).

It also begs the question: Is it time to sell? Or is now the time to buy? To answer these questions, let’s look at how to create value.

Landscape business value is based on cash flow over a consistent period (earnings before depreciation, interest, etc.), and it’s affected by the inherent business risks.

The higher the risk, the lower the value. Risk can include the amount of installation work, dependency on the owner, key employees, key clients and, up until recently, the amount of noncommercial work, but it depends on the buyer. The real secret to building value is building the size of your business sustainably. The larger the business platform, the more the business is worth.

Build your platform

Our industry is fragmented. Investors flush with cash are coming in to build up (“roll up”) a platform by buying companies.

Private equity investors know how to assess risk better than anyone. Their success stems from turning down bad deals and only funding truly good ones. Just because they approach you doesn’t mean they will deem you a worthy deal.

Private equity managers also know how to measure results and set growth goals. Remember, their job is to grow the size of their platform. What’s the ultimate goal? Some will hold long term, while others will sell the rolled-up company to a larger investor, who, in turn, will want to do the same (grow and sell it). Some will try to go public, despite how poorly BrightView stock has performed.

Ways to build a platform

Take these examples of different approaches to growth:

• George Tucker, owner of LanDesign in St. Louis, has been growing his firm through organic growth and acquisitions, using acquisitions to diversify and hiring consultants and smart people (including those outside the industry) to grow from $7 million to $17 million.
• Kurt Bland, CEO of Bland Landscaping in Apex, N.C., recapitalized his $20 million firm with outside investors and now assesses other landscape companies to add to the platform.
• Todd Pugh, CEO of Enviroscapes in Louisville, Ohio, has taken a third approach to growth by setting up branches and giving his employees opportunities.

All three leaders have built great platforms and will be speaking at my Summer Growth Summit, Aug. 31-Sept. 1, hosted by LanDesign.

Develop your succession plan

Whether you plan to sell your business to your family, employees or outsiders, it’s important to get the business ready to maximize its value and ensure a smooth succession.

Get the fundamentals in place: accounting, financial management, hiring strategies, sales system, leadership team and more. Build your platform now.

You must also establish what you want to do after the sale. This is ironically the hardest part of selling — letting go and reinventing yourself.

Lastly, make a financial plan because the money you gain from a sale must be invested. Your return on investment in the stock market will be far less than your return on investment from your landscape business.

Start now. It’s never too early to plan for success.