Lawn Care Business Valuation & Worth

When it comes to owning a lawn care company, it is no exaggeration to say that you put your blood, sweat, and tears into your work. From dodging weather situations so you can get your work done, to dealing with a hard-to-hold-onto workforce, you need a lot of moxie and innovation to keep your business growing. At the end of the day, you might wonder what it is all worth. If you want to understand how to value a lawn care business, there are only two things you need to worry about: cash flow and multiples. If you have ever taken a moment to ask “How much is my lawn care business worth,” studying your cash flow and multiples will get you your answer.

The valuation of a lawn care business is configured based on how much of the cash flow the buyer is willing to pay. The study of the multiples shows that a buyer will pay two times, four times, six times, etc. the value of the business.

• Under $500k free cash flow – 2x-4x / Valuation range $500k – $2m
• $500k-$1m free cash flow – 3x-5x / Valuation range $1.5m – $5m
• $1m-$2.5m free cash flow – 4x-6x / Valuation range $4m – $15m
• $2.5-$10m free cash flow – 6x-10x / Valuation range $15m – $100m
• $10m-$25m free cash flow- 10x-20x / Valuation range $100m – $250m
• $25m+ free cash flow – 25x+ / Valuation range $600m+

Another way to think about it is to consider how long it will take you to pay off the purchase price of the business. Two times will take two years, four times will take four years, etc. Most often, larger businesses will have a bigger base of customers, options that are easily diversified, a larger geographic reach, and more ways to garner revenue.

These facts make them more stable and reduce the buyer’s risk. Paying higher multiples is easier in this case because the company is less volatile. The cash flow and multiples grow together.

• New Construction (the lower the better – aim for less than 20%)
• Maintenance Contracts (the more contracts the better – 20% increase is strong)
• Growth of the Revenue (number grows each year- 20% increase is strong)
• Reputation Management via Marketing (based on star rating and Google reviews)
• Generation of Leads (sustainable and frequent lead generation desired)
• Technician Crew (the more crew the better, with more than ten being advisable)
• Integration of Technology for Workflow (ServiceTitan or HouseCall Pro is a plus)
• Ability to Work Independently From Owner (Less owner involvement is good. If the owner can step away for a few weeks it is great. )

So, how much is my lawn care business worth?

So how much is my lawn care business worth? Simply stated, multiply the free cash flow by the multiples, and you will have your lawn care valuation. But don’t stop there. 

Understand that the buyer is likely purchasing all of the equipment and inventory that comes with the trucks. They are also expecting to purchase your company debt free, so you will need to take care of all debts before the sale. 

You will definitely reach an agreement for capital left in the business at closing. And don’t forget about the taxes and fees. When all is said and done, you will likely spend 25-30% of the sale on fees.