What type of future do you see in your crystal ball? The enterprise value specialists at Ceibass have been busy speculating, planning, adapting and re-planning with landscape business owners throughout the country.
“One thing for certain is that grass grows and you have to plant in the spring. We are blessed to have lawn and landscape designated as an essential business,” said Tom Fochtman, Ceibass CEO. “And with that in mind, how is your technology holding up? How is working remotely going for you? How are you maintaining efficiency with travel restrictions and quarantines? Are you holding costs down? What does profitability look like? It’s time to assess, redesign and improve.”
Other observations by the Ceibass team include:
PPP was a load-fire-aim program. Did you get your fair share? There is starting to be some backlash on larger profitable corporations that took PPP money as small business firms. Not so much in lawn and landscape.
Generally, if you received more than $2,000,000 you will probably be audited. No guarantee that your loan will automatically become a grant. Be conservative and view it as a 1% two-year cheap loan in case it is not forgiven.
Landscape has been blessed as an essential industry. Most companies are busy. Having a good to great year. Be thankful, grateful.
Private Equity has been hit hard in other industries. And they have not been willing to put their folks at risk with travel, although they along with others are just starting to travel again now.
In the future the due diligence process in landscape will include questions about pandemics and of business continuity. Who will be in charge if you are hit with a virus? Is your chain of command strong enough to survive and thrive? What does your planning reveal to a potential buyer?
Buyers and lenders are re-pricing risk after the COVID-19 outbreak. And to help reduce some of that risk, buyers are paying a greater portion of the purchase price in “earn-out,” which means sellers might be receiving less cash at Close and the remainder tied to some form of earn-out. We may also see a drop in EBTIDA multiples that buyers are willing to pay. Somewhat speculation but best to take a conservative view for now if you are a potential seller.
We might anticipate sellers to be more flexible with terms in the post COVID-19 days. Not as hot of a “seller’s-market” anymore, at least at this point in time. We need to let the pandemic dust settle and get our economy healthy again before we will know for sure.