IN THE AGRICULTURAL & LANDSCAPE INDUSTRY
Buying a Business
Selling a Business
Businesses For Sale
The value of a business is based on two things: what it owns and what it earns.
WHAT IT OWNS:
A business has tangible and intangible assets. The tangible assets are the furniture, fixtures, equipment, inventory, and real estate. The intangible assets can include the trade name, contracts, leases, client lists, licenses, recipes, and patents.
WHAT IT EARNS:
A business provides a certain financial benefit to the owner. The benefit generally comes in the form of business profits and a salary to the owner. It can also provide the owner with fringe benefits such as health insurance, a company car, or a retirement plan.
HOW VALUE IS CALCULATED:
Owner operated Landscape Businesses with sales of $1 million or less generally sell for the value of the assets, plus one to two times the earnings. If the earnings are stable and growing, the value is on the higher end. If the earnings are variable or declining, the value is on the lower end.
Landscape Businesses with sales of $1 million to $10 million may sell for straight earnings multiples of three. A thorough investigation of the financial information is required to uncover the true earnings capability of the business. Again, if the earnings are stable and growing, a higher multiple is used. If the earnings are variable or declining, a lower multiple is used.
Businesses with sales of more than $10 million often have specific industry criteria, which may be applied to determine the value. At this level, Buyers may be paying for market share, rights to patents and processes, or the benefits of strategic or administrative consolidation.
RULES OF THUMB:
Most industries have one or more rules of thumb. However, they can vary widely and in most cases do not give an accurate value of a business. Since each landscape related business is unique, a particular rule of thumb can be off by as much as 50% or more. Landscape Depot Investments will be able to decide what is the most relevant information about a business and then make an informed decision about its value.
THE VALUE OF A BUSINESS VALUATOR:
Business valuation is as much an art as a science. While the business valuator does employ standardized formulas and methods to calculate value, he works from assumptions that are based on his experience in the market place and his/her familiarity with the similar businesses. This process includes the selection of the most appropriate risk and return variables. In this way, his/her applied expertise leads to the best calculations of value for a specific business.
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