Field Notes: Tree Service Company

Rooted in Success: Analyzing an Established Tree Service Company Listing

It seems you can’t swing a dead cat without hitting someone in the ETA community either buying, looking to buy, or has bought a tree service business. And I came across one currently on the market in sunny Duval County, Florida. It’s listed for $10 million, based on revenue of $2,367,369, cash flow of $1,237,293, and FF&E valued at $3 million. Let’s analyze the opportunity based on the details provided in the listing:

Financial Overview:

• Asking Price: $10,000,000. Back out the $3 million in FF&E, and you are paying $7 million for $1,237,293 in cash flow; or about 5.6x.
• Gross Revenue: $2,367,369.00
• FF&E: Valued at $3,000,000. These are significant assets. What’s the condition? The replacement schedule? CAPEX and maintenance need a fine tooth comb.

The asking price relative to the cash flow is on the higher end.

Business Operations and Market Position:

• The business was established in 1985, so the business has been around a while and likely has a strong reputation in the market.
• The high-demand services like hurricane and disaster cleanup suggest a niche market with a potential for higher margins.
• The business includes Commercial Real Estate (CRE) and over $3 million in specialized equipment. What wasn’t mentioned in the listing was the value of the CRE.

Competitive Edge and Market Potential:

• The specialized equipment and assets may be a barrier to entry for potential competitors, providing this business with a competitive edge.
• The inclusion of a non-compete agreement spanning 500 miles for 5 years is advantageous, reducing the risk of immediate local competition from the seller. Yet, if the seller is in fact retiring, why would you need it?
• The tree service industry is generally considered recession-resistant and could see growth due to increasing concerns over climate change and urban greenery maintenance.

Transition and Risks:

• The seller is offering four weeks of training at ‘no cost’, which is beneficial for a smooth transition, especially if the buyer is less experienced in this industry.
• The reason for selling is retirement.
• Potential risks could include regulatory changes affecting the tree service industry, particularly in Florida where home insurance costs are skyrocketing. You’d also need to look at what ongoing investment in equipment, maintenance ,and upgrades are required.
• The business’s dependency on natural disasters for a significant portion of its revenue could introduce variability in yearly earnings. Diversifying services could mitigate this risk.
• The nature of the work involves significant safety and liability concerns; a thorough review of operational practices, insurance, and liability coverage is essential.

Strategic Considerations for a Buyer:

• A buyer should assess the company’s existing client relationships, contract renewals, and pipeline to ensure sustainable revenue.
• Evaluate the condition and age of the specialized equipment and real estate to estimate additional capital investment needs.
• Consider the potential for expanding services or geographic reach, leveraging the company’s established reputation and operational capacity.
• A detailed due diligence process should be conducted to verify financials, legal compliance, employment contracts, and the condition of assets.

Wrap Up:

The Large Florida Tree Service Company represents a potentially lucrative investment in a niche market with substantial assets and an established market position. However, the asking price is steep. How much of the company’s revenue comes from insurance work? Florida seems to be going through a disaster insurance crisis right now.

About: Silverwave Field Notes combs through and analyzes thousands of businesses available for sale that may be of interest to entrepreneurs looking to acquire an existing business. We are not affiliated with the business listed for sale unless otherwise disclosed. The business highlighted above is represented by Transworld Business Brokers.