Tree service business

October 06, 2023

by a searcher from George Mason University - School of Business in San Diego, CA, USA

I am currently reviewing a tree service business and I am a little concerned about the equipment list (or lack thereof) that has been provided. From what I have seen in numerous other tree service businesses for sale this company appears to be running very very lean on equipment owned, especially for the revenue it is generating.

Is there anyone here who has any experience in the tree service industry who might be willing to have a brief conversation about this concern with me?

0 Likes

13 Replies

261 Views

Replies

Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

Great question. I would look closely at their cost of goods or "Other Deductions" and see how much money they spend renting equipment. Some tree service companies do not maintain a lot of equipment and they rent it when they need it. This might be another place where you can come up with future cost savings. If they are spending a lot of money on renting equipment, if you buy the company and eventually buy some of that equipment, you might be able to pick up some savings from owning the equipment versus renting it. It really depends on how much they use certain pieces of equipment. By renting they avoid the capital expenditure and the need to maintain the equipment, and they only pay for it when they need it.

Some companies also have another related company that owns the equipment and they rent the equipment from themselves, in which case you would likely want to buy both companies. In these cases the equipment would be on the balance sheet for the other company they own that rents the equipment. However, if this was the case, I would think they would have disclosed it in the listing.

I hope this helps. Good luck.

Reply by an intermediary
from California State University, San Bernardino in Stratton, CO 80836, USA

Take the type of jobs they do and then call a competitor(s) and ask them what kind of equipment they would use to do a similar job. Then you can ask your seller further questions .... I would find it strange if your seller rents or doesn't have the necessary equipment if their revenue is focused on a lot of the same types of jobs. Renting equipment is used mostly for infrequent niche work or they are just spread thin across many types of tree jobs (usually less stable companies). If they are not using the normal equipment per jobs then I might suggest looking at their safety issues. Also you can always call local competitor and ask their opinion of your sellers work. You may find a fascinating conversation that clears up your question(s). Sometimes sellers only disclose the equipment they want to sell with the company and are holding back (not disclosing) some equipment kept for personal "other" reasons. And some of this "other" equipment was used to build the historical revenue numbers. So make sure you can verify that the numbers came from the disclosed equipment.

+11 more replies.

Join the discussion