Latest / The Buyer & Seller Podcast with Fexingo: Business Brokers, Exits, and Private Sales Explained / How a Landscaper Sold at 30x EBITDA with Annual Contracts
Transcript
- Lucas: So today I want to talk about a landscaping company that sold for 30 times EBITDA — and no, it wasn't some giant national chain. This was a single-location outfit in Northern Virginia, doing about two and a half million in revenue. Luna: 30 times? That's huge for a landscaping business. I usually hear of those selling at 12 to 15 times, maybe 18 if they've got good contracts. Lucas: Exactly. And the industry average is around 14 times. So this guy nearly doubled that multiple. The secret? He converted about 90 percent of his one-off clients into annual contracts. And I mean real annual contracts — not just a handshake agreement to mow every week. Luna: How did he get there? I imagine most homeowners just want their lawn mowed and maybe a spring cleanup. Getting them to commit to a full year seems tough. Lucas: It is. But he didn't start with a big ask. He started with a single offer: a fall cleanup package. Leaves, gutter clearing, winterizing the sprinklers. For a flat fee, say 300 bucks. Then, once the customer had that experience, he offered a spring aeration and seeding package. Then mosquito control in the summer. Then holiday lighting in December. Luna: So he layered services on top of the mowing relationship. Smart. Lucas: Right. And each service had its own price, but he bundled them into an annual contract with a 10 percent discount for paying upfront. He used a CRM to track renewal dates, and he sent a handwritten note to every client two weeks before their contract expired. Luna: That's a lot of handwriting. But it worked. Lucas: He had about 400 annual accounts. And the retention rate was over 90 percent. So the recurring revenue was incredibly predictable. When the buyer — a regional outdoor services roll-up — looked at the books, they saw a steady stream of income that didn't depend on weather or the owner's personal sales ability. Luna: And the buyer paid a premium because that recurring revenue was sticky. They could add more services and cross-sell to an existing base. Lucas: Exactly. The buyer's calculation was: 'If we keep these contracts, we can layer in our own services — like snow removal, tree care, even pest control — without having to acquire new customers.' So the route density made the business worth more. Luna: Route density — that's key. The company operated within a six-mile radius. Every truck could service 10 to 12 homes a day. That's super efficient. Lucas: And the owner built that density intentionally. He would target specific neighborhoods, knock on doors, offer a free estimate, and if he got three clients on a block, he'd offer a referral discount to the whole street. He was systematic. Luna: So the valuation multiple wasn't some fluke. It was engineered. What was his EBITDA margin? Lucas: Around 25 percent. Which is solid for landscaping. But the multiple came from the quality of the revenue, not just the margin. The buyer saw that the contracts were sticky, the churn was low, and the route density meant they could scale without adding overhead. Luna: And I'm guessing the contracts also had automatic price escalation clauses? Tied to CPI or something? Lucas: You're spot on. He had a 3 percent annual increase built into every contract. So the buyer wasn't just buying a static revenue stream — they were buying one that grew automatically. That's gold. Luna: It's a great example of how even a seasonal business can become a recurring revenue machine with the right operational design. Lucas: And the owner didn't have some fancy tech background. He was a guy who started with a pickup truck and a mower. But he understood that predictable revenue commands a higher price. He built the business to sell from day one, even if he didn't know it at the time. Luna: What did he walk away with? Lucas: The deal closed at about seven and a half million dollars. Not bad for a lawn mowing business. Luna: It's a strategy that can work in a lot of service businesses. You just need to find the right services to bundle. Lucas: And the right geography. The density piece is often overlooked. If you're spread out too thin, the economics don't work. But if you can cluster your clients, the margins improve and the multiple follows. Luna: I think a lot of small business owners think 'recurring revenue' means a subscription box or a SaaS product. But this shows it can be as simple as a lawn care contract. Lucas: Exactly. And the lesson is: start small, layer services, and track your data. The CRM data — renewal rates, average contract value, churn — that's what buyers want to see. It gives them confidence. Luna: If this conversation has moved your work forward in some small way, we keep this show ad-free because listeners like you support it. You can find the link at buy me a coffee dot com slash fexingo. Lucas: Yeah, it's a simple gesture that lets us keep doing deep dives like this without any sponsor interruptions. So thank you to everyone who's chipped in. Luna: We really appreciate it. And it helps us bring you more case studies like this one. Lucas: Anyway, back to the landscaping story. One more detail I found interesting: the owner actually turned down a higher offer from a private equity firm because he wanted his employees to keep their jobs. He sold to a strategic buyer who promised not to lay anyone off for at least two years. Luna: That's a human element you don't always hear about. He cared about his team. Lucas: Yeah, and the buyer kept that promise. So it was a win-win. The employees stayed, the contracts continued, and the owner walked away with a life-changing check. A good reminder that the best exit isn't always the highest number. Luna: Alright, thanks Lucas. Great story. Lucas: Thanks, Luna. See you next time.