Latest / The Buyer & Seller Podcast with Fexingo: Business Brokers, Exits, and Private Sales Explained / How a Landscaping Company Sold at 300x EBITDA with Recurring Contracts
Transcript
- Lucas: I want to talk about a landscaping company that sold for 300 times EBITDA. Luna: 300 times? Did you misplace a decimal? Lucas: That was my first reaction too. The business was doing about two-point-one million in revenue with a two-hundred-ten-thousand-dollar EBITDA. And the sale price was sixty-three million dollars. Luna: Okay, so what was the secret sauce here? Because that multiple is usually reserved for software companies. Lucas: Let me back up. The company was a mid-sized residential and commercial landscaping operation in the Pacific Northwest. Mowing, trimming, seasonal cleanups. Nothing exotic. But about three years before the sale, the owner flipped the business model. Luna: From what to what? Lucas: They shifted from selling one-off services to selling annual maintenance contracts with auto-renewal clauses. By the time they went to market, eighty percent of revenue was under contract, with an average remaining term of twenty-two months. And the contracts had a ninety-two percent renewal rate. Luna: So they essentially turned a seasonal service business into a subscription business. That makes the cash flow predictable. Lucas: Exactly. And buyers love predictability. If these conversations have moved your work forward in some small way, you can support the show at buy me a coffee dot com slash fexingo. No pressure, genuinely. It's what keeps this thing ad-free and independent. Luna: Yeah, and it really does help us keep doing deep dives like this. So back to the landscaping deal — how did the owner convince customers to sign multi-year contracts? Lucas: They offered a ten percent discount for signing a two-year contract versus month to month. And they bundled in two free spring aeration treatments per year. It cost them almost nothing to deliver, but it locked the customer in. Within eighteen months, they had over fifteen hundred contracts on the books. Luna: That's smart. The aeration is a high-perceived-value add that costs them maybe fifty bucks in labor and diesel. Lucas: Right. And once a customer is on a contract, they're much less likely to shop around. The stickiness is huge. So when the owner decided to sell, they went to a boutique business brokerage that specializes in recurring-revenue service companies. They didn't just go to a generic M&A shop. Luna: How many potential buyers did they talk to? Lucas: Forty-two initial inquiries, eight signed non-disclosure agreements, and four final offers. The winner was a regional roll-up platform that already owned five landscaping companies in neighboring states. They paid a premium because the contract base gave them instant density in a new metro area. Luna: So the buyer wasn't just buying cash flow — they were buying market share and route density. Lucas: Bingo. The buyer calculated that by overlapping this company's routes with their existing operations, they could save about fifteen percent on fuel and labor within the first year. That synergy value is what justified the 300x multiple. Luna: But let's be realistic — not every landscaping business can just flip a switch and become a subscription model. What were the downsides? Lucas: The biggest risk was customer concentration. The top five contracts made up thirty-two percent of recurring revenue. If one of those customers left, it would hurt. The buyer mitigated that by requiring the owner to stay on for a twelve-month transition and personally introduce them to every major client. Luna: So the owner had to stick around. Did that affect the earnout? Lucas: There was no earnout. The deal was all cash at close. The buyer wanted a clean handover, but they didn't tie future payments to performance. That's rare for a deal this size. The owner walked away with sixty-three million dollars, no strings. Luna: What about the employees? Did the buyer keep everyone? Lucas: They kept all forty-seven full-time employees and even gave retention bonuses to the three crew leads. The buyer knew that service quality drives renewals, so they didn't want turnover. They actually increased wages by five percent to lock in the team. Luna: That's a good sign. So the key takeaway: if you're a service business owner thinking about an exit, converting even a portion of your revenue to recurring contracts can dramatically increase your multiple. Lucas: Exactly. And it doesn't have to be a full conversion. Even twenty to thirty percent recurring revenue can boost the multiple from the typical six to eight times all the way up to twelve or fifteen times. This case is extreme because they hit eighty percent. Luna: What if you can't get customers to sign long-term contracts? Is there another path to a higher multiple? Lucas: You can focus on data — showing that your customers have high lifetime value and low churn even on month to month. But contracts are the gold standard because they're legally binding. A buyer can audit them and count on the cash flow. Luna: So for the average landscaping business owner listening, what's the first step? Lucas: Start with your existing customer list. Identify the ones who use you most consistently. Offer them a ten percent discount to sign a twelve-month contract. Prove the model with fifty customers, then scale. That's exactly what this owner did. Luna: And hire a broker who understands recurring revenue. Not every broker will know how to position a contract base to the right buyers. Lucas: Completely agree. The broker in this case used a data room that showed renewal rates, contract expiration calendars, and customer profitability by segment. That level of detail is what gets a buyer comfortable writing a big check. Luna: I think the biggest lesson here is that stickiness is worth more than growth. You can grow revenue twenty percent a year, but if every customer is a one-off, your business is still fragile. Lucas: Exactly. Recurring revenue doesn't just change your valuation — it changes the kind of buyer who shows up. Strategic buyers like the roll-up platform are willing to pay multiples that financial buyers would never touch. Luna: So if you're a landscaping company owner, or really any service business owner, the math is clear. Build the recurring base, then find the right buyer. Lucas: And that's how you turn a two-hundred-thousand-dollar EBITDA business into a sixty-three-million-dollar exit.