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Valuation Multiples for a Landscaping Company

Valuation Multiples for a Landscaping Company

The landscaping industry includes companies that provide landscape care and maintenance services. This includes planting trees, shrubs, grass, flowers, and other plants. In addition, landscaping companies may construct walkways, walls, decks, fences, and other landscape structures. According to IBIS World, there are well over 600,000 landscaping companies in the United States. Together, these companies generate over $170 billion dollars in revenue. As such, owning a landscaping company can be extremely lucrative. If you are looking to buy, expand, or sell a landscaping company, it is important to receive a business valuation. During a business valuation, an expert uses valuation multiples for a landscaping company. 

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Valuing a Landscaping Company

Whether you are buying or selling a landscaping company, it is crucial to understand the value of a landscaping company. The first step is to receive a business valuation. When buying a landscaping company, a business valuation can help you understand a fair purchase price. It will also help you learn how to negotiate the purchase price. If you are selling a landscaping company, receiving a business valuation can help you maximize the value

There are many approaches that valuation experts use to determine the fair market value of a landscaping company. One approach is to use valuation multiples for a landscaping company. Below, we give a brief overview of what valuation multiples for a landscaping company look like. Keep in mind this is only a guide, for more extensive guidance, receive a business valuation for a landscaping company. You can start now by scheduling your free consultation with Peak Business Valuation, business appraiser. 

Be sure to also check out our articles on Valuing a Landscaping Company, How to Value a Landscaping Company, as well as Value Drivers for a Landscaping Company

Valuation Multiples for a Landscaping Company

The below visual shows average valuation multiples for a landscaping company. A business appraiser uses these when determining the value of a landscaping company. Know that these numbers are only a guide. For specific information, obtain a business valuation for a landscaping company. A business valuation will determine appropriate market multiples for your landscaping business. Schedule a consultation with Peak Business Valuation, business appraiser, to learn more.

Valuation Multiples For A Landscaping Company

Disclaimer: These multiples are for educational purposes only. As such, the information provided does not constitute valuation advice. These multiples do not represent the valuation opinion of Peak Business Valuation or its valuation professionals. Instead, seek the guidance and advice of a qualified business valuation professional about any matter in this article.

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What is a Valuation Multiple? 

A valuation multiple is a ratio that compares a business’s value to a financial metric such as earnings, sales, or cash flow. For instance, one of the most common ratios in valuation is an SDE multiple. The SDE multiple compares the seller’s discretionary earnings of the business, with the implied value of the company. A valuation expert analyzes multiples of other similar landscaping companies that have recently sold on the open market. They then determine an applicable multiple for your landscaping company to get a range of fair market value

For example, if a landscaping company has $270,000 in SDE, and receives a 2.83x SDE multiple, then the business would have an implied value of $764,100 ($270,000 times 2.83x). On the contrary, a 3.16x multiple would imply the value of the company would be $853,200 ($270,000 times 3.16x). 

As a business appraiser, Peak Business Valuation works with dozens of individuals looking to buy, expand, or sell a landscaping company. Below is a range of valuation multiples for a landscaping company. These are what landscaping companies typically transact at and are valued between. Every landscaping company is unique and as such the range of value can vary. Below we discuss SDE, EBITDA, and REV multiples for a landscaping company. For specific information, schedule a consultation

SDE Multiples for a Landscaping Company

Average SDE Multiple range: 2.76x – 3.21x

According to our data, landscaping companies transact between a 2.76x – 3.21x average SDE multiple. To derive an implied value of a landscaping company, apply the multiple by the most recent 12-month period of revenue. The calculation is as follows. 

SDE X Multiple = Value of the Business

For instance, a landscaping company generates $480,000 in seller’s discretionary earnings and transacts at a 3.00 x multiple. In this case, the business value is approximately $1,440,000. 

$480,000 X 3.00x = $1,440,000

Seller’s discretionary earnings is a common cash flow multiple a business appraiser uses when valuing a landscaping company. A business appraiser determines SDE by taking the company’s operating profit and adding back potential expenses that the new owner may not incur. These expenses may include the owner’s compensation, the owner’s personal expenses, and other expenses such as non-recurring or non-related business items. 

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EBITDA Multiples for a Landscaping Company

Average EBITDA Multiple range: 3.63x – 3.98x

The average EBITDA multiples for a landscaping company range between 3.63x – 3.98x. Apply this multiple to EBITDA to derive an implied value of the business. See the calculation below:  The calculation is as follows: 

EBITDA X Multiple = Value of the Business

For example, a landscaping company has an EBITDA of $410,000. It transacts at an EBITDA multiple of 3.72x. Using the above metrics, the landscaping company is worth approximately $1,525,200. 

$410,000 X 3.72x = $1,525,200

An EBITDA multiple measures a company’s return on investment (ROI). A business appraiser may prefer this multiple as it normalizes differences. Normalized ratios allow for comparisons to similar businesses. Normalized ratios also more accurately represent the future earnings a buyer can expect from the business. 

REV Multiples for a Landscaping Company

Average REV Multiple range: 0.67x – 0.89x

According to our data, landscaping companies sell an average of 0.67x – 0.89x of revenue. A valuation expert can calculate the implied value of the business by multiplying the amount of revenue or sales a landscaping company makes by the valuation multiple. 

Revenue X Multiple = Value of the Business

For instance, a landscaping company makes $2,000,000 in revenue. It then transacts at a 0.83x multiple. In this case, the business is worth approximately $1,660,000. 

$2,000,000 X 0.83x = $1,660,000

Summary

There are many factors that a valuation expert considers when using valuation multiples for a landscaping company. As such, Peak Business Valuation, business appraiser, is happy to work with you! During a business appraisal, we discuss the factors that impact the value of a landscaping company and the multiples applicable. To determine the multiples for a landscaping company applicable to your business, obtain a business valuation. A business valuation for a landscaping business will help you understand the value of a landscaping business and ways to increase it.

Peak Business Valuation, business appraiser, values landscaping companies on a regular basis. We focus on providing valuable information to help you buy, expand, or sell a landscaping company. Peak is happy to provide a business valuation and answer any questions you may have on multiples for a landscaping company. Start today by scheduling a free consultation with Peak Business Valuation below! 

Be sure to also read Valuing a Landscaping Company. And, Value Drivers for a Landscaping Company

 

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