How Landon Mance acquired a $600k SDE tree service biz

Welcome to another edition of BUY x BUILD, where I write about buying and building cash flow businesses.

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I had a conversation with Landon Mance recently. In 2023, Landon partnered with an operator to acquire Nevada Tree Service, which provides tree trimming and removal services in the greater Las Vegas Valley.

It was a fascinating conversation that covered:

• Buying an existing business vs. franchising

• How Landon convinced his friend over a game of pickle ball to partner with him and operate the business

• The one piece of diligence Landon and his partner regretted not doing during the process

• And more

Below is a summary of my discussion with Landon.

What’s your background?

I started out as a financial advisor at Waddell & Reed in 2009 in Orange County, CA, which is where I grew up. I moved to Las Vegas in 2013 to be close to my fiancé and ended up working for J.P. Morgan in wealth management for a few years, before ultimately starting my own wealth management practice called Backbone Planning Partners.

Why did you decide to acquire a business?

In 2017/2018, I started advising small business owners and learning a lot about all types of service businesses as a result. I saw the massive opportunity in these businesses first hand. Additionally, I had saved really well. Each year, I would save 30-50% of my income and invest in the public equity markets. In 2020, I decided to branch out from public equities as a way to enhance my returns and started doing a lot of private investing (GP/LP deals, commercial real estate, late stage VC funds, etc.). I also decided to explore small business ownership as a way to achieve that. So I approached SMB acquisition largely from an investment lens, ideally as a passive owner.

You considered franchising a pet care business at one point. Why did you decide against that?

I looked at opening up a Dogtopia. I liked the pet care industry because it has strong tailwinds. I signed an agreement to open up a single location in Las Vegas but Dogtopia pulled out because someone else agreed to build out multiple locations across the entire region. They turned around and offered me an opportunity in Southern Utah, but when I looked more closely at the model and investment involved ($500-800k), I decided that buying a business was a better investment. I could put down less money and start with something that cash flows from day one.

Was partnering with an operator always part of the plan?

Yes, although if that didn’t work out, I was open to operating the business myself at a capacity of 20 hours or so per week. Luckily, I had known Luke on a personal level (we went to the same church and he lived two doors down from me) so I broached the subject over a game of pickle ball one day and he was interested. Luke and I spent a lot of time after that discussing what a partnership would look like, and what each of us was bringing to the table. I had full confidence in Luke, and his ability to do everything possible to ensure that the business is a success.

What did your search process look like?

I started searching in 2020 and it was extremely informal. I looked at a handful of businesses in the first year and often weeks would go by without looking at a single business. Given my process was informal, I didn’t speak with operators in the beginning stages as I didn’t want to lead anyone on. My strategy was to find a business and then find an operator.

My criteria was pretty open ended in terms of size and industry, but it was important to me to find a business in the Las Vegas area. Even though I was going to be a passive owner, I had to look at things based on worst case outcomes. What if I had to step in for whatever reason? It’s a lot easier to do that here than somewhere else.

I didn’t do anything fancy in terms of sourcing. I looked at listings online and networked with a few brokers in my area. I had gotten to know Trent Lee from First Choice Business Brokers and he was known to be one of the most prolific brokers in the entire country. I think he sells 100-150 businesses each year, and he happened to be the broker on Nevada Tree Service.

The deal initially hit the market in November/December 2022 but it got a lot of interest and was under LOI two weeks later. A couple of months later, we happened to be doing diligence on a guided kayak tour business when Nevada Tree Service came back to the market, so we decided to submit a LOI quickly.

Business at a glance

• Location: Las Vegas, NV

• Industry: Tree Service

• Description: Provides comprehensive tree service, removal, and care across the greater Las Vegas Valley

• Established: 1962

• FTE/Contractors: 6

• Acquired Revenue: $1.1m

• Acquired SDE / EBITDA: $400k

Why Nevada Tree Service?

There were a lot of things to like about this business. For instance:

• Great reputation – the business has a lot more Google reviews than the closest competitor (~200 more), with an average rating of 4.9 stars

• Long history – it’s been around for 60+ years, and transitioned ownership to a husband and wife team in 2000

• Steady growth – growing consistently at 5-10% per year

• Solid financials – $1.1m of revenue at a healthy 50%+ EBITDA margin, even though we knew that was inflated because they owned the real estate and most of the vehicles/equipment outright

• Potential to expand services – business currently only does trimming, pruning, removal, and stump grinding. There is potential to add general tree care and other associated services

How did you go about structuring the deal?

It was a fairly straightforward deal structure. We contributed $550k in equity, with the remainder financed via a SBA loan. We had a small seller note which was structured more like a 12-month hold back than a true seller note.

For the SBA loan, we worked with a broker and ended up closing with Centerstone. They were the first to put in a term sheet and were quick to act.

We also worked with Matt Remuzzi at Cap Forge for a light weight QoE analysis.

Would you have done anything differently?

In hindsight, we would have done a lot more diligence on the vehicles and equipment. We learned the hard way after closing that many of the trucks were old and needed to be repaired or replaced. We’ve had to spend a lot of money doing that. For example, we are about to buy a new bucket truck for $180k, and have had to incur additional expenses for repair of other equipment.

Given the equipment heavy nature of the business, we should have also structured the seller note to be contingent on quality of assets (i.e., sellers get paid the $150k only if the trucks are still operational at the end of 12 months).

This would be my biggest piece of advice for others looking to acquire businesses that rely on heavy equipment or machinery. Spend the appropriate time and money getting them inspected by experts.

What are some current challenges you are facing in the business?

This is not a recurring business, so the biggest challenge has been bringing in more work to justify hiring a second crew. There are a lot of competitors in Vegas so getting enough leads is a challenge. We’re also working towards getting recurring work by targeting HOAs, property managers, and government.

Overall though, the operations of the business are really solid and we have streamlined things with the use of Arborgold, our ERP/CRM software.

Is there any advice you want to share with other searchers?

Running an SMB is extremely hard. Even though your plan may go totally sideways, make sure you at least have one. Draw it out on a piece of paper or pay someone a couple grand to do it for you but have a plan.

Looking to…?

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