How to Buy a Landscaping Biz & Boost Profits Quick

ike Botkin’s story is awesome because it shows just how successfully an outsider can acquire an existing small business and quickly improve it.

Sure, it wasn’t without challenges. (See the section Punched in the Mouth.)

But the upshot is:

A mere 9 months after Mike had the inkling he might want to acquire a business, he now owns one that he’s stabilized, professionalized, and dramatically improved margins for.

The future is bright for 45-year-old B & B Landscaping under Mike’s new ownership.

Read on for his story.

(And make sure you study the section on unit economics.)

Choosing Himself

What initially turned Mike on to the prospect of acquisition entrepreneurship was his desire to bet on himself.

He was doing well in his career.

From humble beginnings in Orlando, by age 27 Mike found himself the COO of a real estate development company with $800m in assets under management, including a portfolio of small businesses.

But he had that entrepreneurial itch.

“I wanted the chips to fall on me, good or bad,” he recalls. “I wanted to take that journey out on my own and see what could happen.”

Spotting a COVID-Proof Industry

He’d never considered small business acquisition until he saw Twitter chatter about it.

His interest was piqued.

At his day job he’d had a window into a handful of small business industries, like HVAC, pool cleaning, property management, and (fortuitously) landscaping.

But it was an observation during his daily commute that triggered the epiphany.

He passed gas station after gas station driving down the highway on his way to work.

And every one was packed with landscaping trucks — even during COVID.

He also knew that the landscaping business his employer owned was running at full capacity through the pandemic.

“I started looking at that. Like, alright, this is obviously COVID-proof. There’s obviously something here. I know our metrics, our financial performance,” he says.

“So I started researching more and more into that industry, and liked what I found.”

The Search

And like that, Mike started looking for a landscaping business to buy.

He looked at the listing sites online and started reaching out to brokers.

As he built his list of deals for consideration, one listing, B & B Landscaping, happened to be 10 minutes from his office in Orlando, Florida.

This proximity allowed him to do a little extra due diligence (recognizance, really) on that particular business.

“On my drive to work I would look at their properties. I would go out to lunch, and I would see the HOA that they’re doing and the quality that it had. I would see the guys on the road.”

Mike says, “I don’t know if that played into me picking that one over the others, but I definitely got to see it more intimately.”

He also liked that B & B Landscaping had the second highest revenues of those on his list.

Mike figured there were two possibilities for immediately increasing the value of an acquisition: either clean up operations to improve margins, or increase sales.

He preferred the former, which meant prioritizing a business with already strong sales.

Bringing a Gun to a Knife Fight

B & B Landscaping was generating about $800k in annual revenue.

Mike had seen that acquisition multiples for landscaping businesses were lower than for, say, HVAC companies.

So he was negotiating from a position of strength.

"In a way it’s like we brought a gun to a knife fight with how we were able to set up the deal terms.”

To strike a favorable deal on the business, Mike went around the broker at one point, taking the seller to dinner.

He wasn’t worried about convincing the broker of his price, but he did think the broker would resist his terms.

His overture to the seller worked, and here’s the deal he got:

• 2x SDE.
• 50% in cash up front.
• 50% in a seller note paid over 4 years...
• …at no interest.

Not bad for an acquisition rookie.

Punched in the Mouth

At this point, Mike is pretty high on himself.

“I walk into the business with a list of 200 things. I mean, this is going to be a piece of cake. I’ve run much bigger businesses than this. I can grow this thing with my eyes closed.”

Not so fast.

Right from the start, “Every single day I got punched in the mouth.”

An employee went to jail.

Court dates.

Employees don't show up to work.

Trucks breaking down.

Equipment disappearing.

No systems, everything's a mess.

“My list of 200 things, I crumpled it up and threw it away and said, ‘I gotta deal with all these fires right here, right now before I can do anything with growth.’”

And that’s what he did for 3 months — inch by inch, process by process, employee by employee.

Mike got his arms around the business, and after those first 90ish days he came up for air.

He reached back into the trashcan, smoothed out that crumpled list of 200 things, and started looking forward.

It seems to be working.

B & B Landscaping generated record revenues in April and May.

Profound Lesson on Unit Economics

Mike is quick to note just how devoted to service the previous owner was.

But in some ways, Mike discovered, the owner had been too devoted to service. Too nice to his customers. Unwilling to raise prices or charge true cost.

After a few months of poring through the financials, something wasn’t adding up.

Mike realized that B & B was actually losing money on a third of its customers.

Pricing seemed arbitrary. They might be charging one customer $200 for lawn care, but only $100 to the next-door neighbor with the same yard footprint.

Mike went property by property, neighborhood by neighborhood, and calculated what the new pricing should be for every single account.

For about a third of his customer base, he raised prices 5% to 20%.

In one neighborhood of 17 underpriced accounts, he notified all of them that prices needed to go up 25% across the board or B & B Landscaping couldn’t continue to service them.

Fifteen of the 17 agreed to the higher prices.

Other customers had prices so low that Mike saw no other choice than to drop them altogether.

But even there, a few came back and said, name your price.

Mike did, and they remained customers.

So after this close examination of the cost & revenue for each unit (home) that B & B serviced, the company is much healthier.

Money-losing accounts are gone, while the margin on other accounts has increased.

Not to mention the soft benefits.

“Our guys are happier because we’re doing less accounts, we’re spending more time there.”

And as with so many businesses, the cheapie customers getting the best deal were also the hardest to deal with.

“They’re holding my guys up every trip because the grass is a centimeter higher than what it should be. They’re calling the office constantly. They constantly want face-to-face with me.”

No more.

“It frees up a lot of head space getting rid of them.”

Small Business Acquisition: It Can Be Done

There is a lot of enthusiasm on Twitter for acquiring a small business. (What initially got Mike’s attention.)

The idea is that many small businesses are behind on tech, they don’t advertise well, and they're under managed by owners who are either resting on their laurels or haven’t kept up with the times.

Low-hanging fruit everywhere.

Some ambitious younger buyer can just come in, buy the business on very favorable terms, improve it quickly, and get rich.

But there are also now detractors who say, “You’re dreaming.” That say small business is already so difficult and buying someone else’s small business just makes it more so.

What does Mike think?

Yes, those first few months were brutal.

But...“I wouldn’t change it for anything.”

“You have to be able to get through the first three months,” warns Mike. “If you can, there should be light at the end of the tunnel.”

He stresses that small business success, at least for blue collar businesses like landscaping, is very much about handling employee problems.

“Problems could be, they’re constantly ten minutes late because they have to take their daughter to school,” says Mike. “Or it could be, they don’t show up half the time. Or it could be, it’s hot. We live in Orlando, it’s hot outside and they’re getting lazier. Because the heat, and they gotta re-acclimate. Or it could be financial. They have new burdens. One of my employees had a baby, and that comes with a whole host of new issues, especially financial.”

Mike points out that none of these problems even relate to performance at the job itself. Just people’s personal lives seeping into their work.

Spreadsheets and deal numbers ignore all this.

“There’s more to a business and a deal than the multiple, the EBITDAs, the margins. It is a people business,” says Mike. “If you can understand that, you can have success.”

He refers back to his huge win from examining B & B Landscaping’s unit economics.

“This business has been in business for just over 45 years, and they were doing accounts that did not make money. And that’s part of small business, right?”

“If you can get through the weeds and understand it and do something like a unit economics test and figure it out, that’s real low-hanging fruit.”

“That’s the low-hanging fruit of turning that faucet off and now gaining margin immediately.”