Subject: Green Merger News - The Value of Your Business
In this issue:
GIE Wrap-up
Understanding the Value of Your Business
Market Value Assessment Promotion
Value Builder Score
About The Principium Group
Understanding the Value of Your Business
To our clients and friends:

As usual, the GIE+EXPO and Landscapes were  highlights of the year.  We enjoyed meeting with clients, prospective clients, buyers, investors and others.  It is encouraging to see new buyers emerging in various sectors of the lawn and landscape industry. You can feel the energy.

When we meet with people at events, the number one question is about what we are seeing in terms of industry valuation. They are typically looking for a simple answer to a complicated question.  In this issue, we have included an article on valuation, Understanding the Value of Your Business:  EBITDA is Just a Start.

We are continuing our valuation promotion through the end of the month.  If you are ready to understand the value of your business, we recommend a market value assessment.  Click here to get started.

Next month, we will also be releasing an updated version of our report on Valuation Trends in the Landscape Industry.

If you are considering selling or buying a lawn or landscape business or would like to discuss your options, we would welcome the opportunity to speak with you.

Ron Edmonds
901-351-1510 (cell)

Understanding the Value of Your Business: 
EBITDA is Just a Start  

We are frequently asked about what we are seeing in terms of typical industry valuation. That js actually a complicated question. It is not as conducive to the quick, simple answer that people may be seeking.
Valuation is usually seen as a function of future expected cash flows and the risk that those future cash flows will materialize. In its simplest sense, that model explains why maintenance companies or fertilization and weed control companies with recurring revenue contracts are generally more highly valued than construction-oriented businesses.
People tend to speak of valuation in terms of multiples of EBITDA (earnings before interest, taxes, depreciation and amortization). Some of these "rules of thumb"may be helpful as a starting point.  However, EBITDA does not completely address future cash flows. The two other principal factors are capital expenditures and working capital requirements.  EBITDA adjusted for capital expenditures and working capital changes is called "free cash flows," which is an important datapoint in valuation.
Capital expenditures will affect valuation because a buyer will consider the capital expenditure requirements of a seller in developing a value. They will look at historical capital expenditures and will also look for factors such as deferred maintenance or the prospect of replacing an aging fleet which may cause capital expenditures to increase.
Working capital is defined as current assets less current liabilities. Different businesses within an industry sector may have very different working capital requirements. Some of those factors are driven by business operations. Construction-oriented businesses usually have higher accounts receivable because services are typically mostly billed after they are rendered and because contracts often have retention provisions holding a portion of billings until projects are completed. Some maintenance companies bill for services monthly in advance which will results in much lower accounts receivable (and working capital than billing at the end of the month. The impact of working capital is further complicated by business owner actions that are driven by tax planning at year-end, which may include delaying collections and accelerating payments. The impact of working capital requirements may dramatically affect the value of a business, so this area needs special attention if you are contemplating a sale.
Determining the value of your business is more complicated than simply applying some industry rule of thumb to your business’s EBITDA. Most business owners need professional assistance to understand the value of their businesses.
Principium offers a market value assessment service to help you understand the value of your business.  Thus is an important step in both longer-term exit planning and considering the sale of your business in the shorter-term.  We have performed many if these market assessments in recent years.  We have a special promotion through the end of the month, so if you have been considering a valuation, this may be a good time to make a move. Click here for more information.
We also recommend getting your Value Builder Score to help you understand the drivers of value in your business.
Market Value Assessment - Promotion
The Principium Group has developed an economical approach to delivering the information you need to know about the value of your business. We call it the Market Value Assessment. We will calculate the value of your business using established valuation methodologies, including the market and discounted cash flows methods.
Through October 31, we are offering a market value assessment at special pricing.  Get started now.

Get Your Value Builder Score:  
Understand the Value Drivers in your Business
Find out by taking a brief online questionnaire to receive an immediate Value Builder Score of between 1 and 100 for your business. You will also receive a 26 page report full of charts and graphs that will give you insights into the value drivers of your business - how buyers evaluate your business. Get your Value Builder Score now.

Private Equity Investment in the Landscape Industry-2019
The Principium Group provides merger & acquisition and advisory services  to lawn, landscape, and other service businesses.
Our professionals have assisted business owners in hundreds of transactions. For buyers, Principium provides assistance and counsel in strategic planning, identifying potential acquisition targets, due diligence and planning for successful integration of acquisitions. For sellers, Principium provides assistance and counsel in evaluating strategic alternatives, identifying and negotiating with potential acquirers and assisting with transactions from due diligence through the closing process. In order to provide the highest quality service, we maintain relationships with other professionals serving the green industry and can access those professionals to supplement our internal resources. No matter how large or small your business may be, we have the resources to serve you well. We understand that the decision to buy or sell your business is a profound one, and we pledge to work with you in a professional and confidential manner while we help you navigate this often confusing process.
Whether you have immediate plans to buy or sell a business or may sometime in the future as part of an exit planning strategy, we would welcome the opportunity to talk with you about your business.
The Principium Group

P.O. Box 414
Cordova, TN 38088
Ron Edmonds

Chris Martin
888-229-5740, ext 103


The information included in this newsletter is derived from publicly available sources. Our intent is to give a perspective on the industry taken as a whole. The inclusion of a transaction in this newsletter does not imply that The Principium Group acted as an advisor to either of the parties to the transaction. It is the policy of The Principium Group always to maintain the confidentiality of its client relationships. For those transactions in which The Principium Group did play a role, the information included herein is still limited to that available through public sources.
Principium Group, PO BOX 414, 38088, Cordova, United States
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