The owner wanted six figures for his business. My analysis said it would likely sell for about a third of that. Our minimum fee would have eaten a significant share of the sale.

I told him he’d be better off pitching it himself to his favorite big competitors in the region. They’d take his calls. He asked me to take the listing anyway and said he’d be fine paying my fee. I said no.

This business is small, but there are lessons here for companies ten times its size.

The business

Over about three years, the seller started and grew a fuel clearing business in a California fire-country market.

Every spring, counties and fire districts send notices to property owners: create “defensible space” by a deadline or face a fine and, in some places, a bill for the county crew to do it.

After the summer of 2026, even our most libertarian brothers and sisters might soften their stance (a little) about government-mandated fuel load management on personal property. Thank God for Watch Duty, though I’m sick of hearing those alert tones go off on windy summer afternoons.

Plenty of his customers were locals who physically couldn’t (or simply didn’t want to) do the work themselves. Many others didn’t live there at all. They owned a second home or an essentially vacant lot with a barn or shed, and they couldn’t spare a weekend away from travel ball or swim meets back in the East Bay to spend the day running a brush hog and checking themselves for ticks in the foothills.

He did have an advantage due to a strong customer service background. He’d developed a very efficient, inexpensive onboarding and dispatch process for absentee landowners. The local “Chuck in a Truck” guys did good work, but their sales were limited by how long it took them to deliver. His onboarding process provided him with an opportunity to charge a premium price and fill the calendars of several workers. In just a few seasons, he’d served several hundred customers and, by his account, had good year-over-year retention.

His workers were “independent contractors” running his mowers, brush cutters and trailers. (Anybody who’s done business in California just winced. Hold that thought.)

He wanted to sell the brand, his IP (his onboarding systems), the customer accounts and a list of several hundred additional prospect properties he’d identified that would need these services every year. He didn’t want to sell the equipment, and there were no employees to transfer.

On paper, that’s a tidy package. The right buyer (someone already in the business) gets a proven onboarding system and dispatch system that will likely improve their existing business, a book of past buyers and a mailing list of prospects.

Great! Show me your numbers…

No tax returns(!)

The seller had never filed a tax return for any year the business existed, and his personal returns had fallen behind years before he started it. The entire operating history of the business had never been reported. He did have a deposit summary pulled from his payment processors. It wasn’t completely undocumented.

Unfortunately, when buyers hear “no tax returns,” they start getting antsy (and their lenders get downright cold). An honest person can absolutely produce an accurate deposit summary, but the message is an implicit “Trust Me!” A filed tax return carries legal consequences if it’s wrong, which is exactly why buyers and their bankers trust it.

Recurring revenue(?)

The seller initially referred to his revenue as “recurring.” After a more in-depth conversation, I corrected the terminology to “reoccurring.” Big difference.

Recurring revenue has a mechanism that binds the client to the business: a multi-year contract, an auto-renewal, equipment on the customer’s property, a cancellation fee. Alarm monitoring companies sell for big multiples because the customer has a panel on the wall and a contract with an early termination fee. Inertia is your friend. If you stay competent at delivering your service and don’t get greedy on your fees, it’s usually more trouble to switch vendors than to keep paying.

Buyers will pay a premium for businesses with these characteristics. So much so that people write books about them. Check out The Automatic Customer by John Warrillow for recurring revenue models that you can “try on” for your own business.

This customer had none of that. Every spring, the clients and the business need to sign a new agreement. Changing vendors costs nothing. If a competitor invests in a direct mail campaign to the owners of non-owner occupied properties in his market area, his customers might vanish with the scan of a QR code because anyone with a weed whacker can bid the job.

A reasonable analogue to this business model would be a business that sells without a subscription. In those models, published estimates put typical repeat-purchase rates somewhere around 20 to 40 percent. By his account, his business beat that stat so far. But even if his retention was stellar, any buyer and his advisors would ask, “For how long?” Nothing tied those customers to the business.

The work was mandated by the government, and it will absolutely continue to be mandated. But if his customers can make a fresh buying decision every year and there is no cost for walking, it’s a matter of who gets them to sign first next season. The incumbent has an advantage. It just isn’t worth as much to a buyer paying up front for future business as you’d hope.

No good comps.

The transaction databases we use turned up deals involving this kind of seasonal work, but not one was a standalone business. They were all landscaping, excavation or maintenance companies that did it on the side. The smallest comp had about twice the revenue.

They were all sold as “going concerns” (equipment, personnel and clients) as well. This seller wanted to sell a system and a list of past clients.

Applying the low end of those multiples to his revenue landed at about a third of his asking price. The median came out near two-thirds of it, which I treated as a ceiling nobody was likely to reach (the median company in the set was nine times his size and came with the equipment to generate that volume).

Who’s our buyer?

Every buyer I could picture had about as many reasons to walk away as to buy.

An obvious buyer is an operator already in the business. If he has the capacity, he can immediately improve the utilization of his existing trucks, mowers and crews, and the onboarding and dispatch model might make his whole operation more efficient. This buyer doesn’t care much what the seller’s costs are, because the additional volume will be folded into his existing business (with, perhaps, some incremental capital expenditures and hires). What matters to him is what each account brings in, what it costs him to serve and (most importantly) whether it will renew next spring. By that math, his cost to take on a few hundred more customers is low (IF they come back).

But it’s also not crazy for him to do…nothing. The work is still mandated, so it still has to get done whether he buys this new business or not. If it winds down, the customers are still getting hate mail from the local fire district, and a good number are going to call him anyway. He gets that incremental growth without paying a dime. He’s not a villain. He’s playing the odds.

And plenty of these operators only do this work as a side line to keep crews busy anyway, it’s not because they love it. A wet winter means the fuel load grows fast and heavy, and the vast majority of calls come the week after the fire district letters go out. The workload spikes and they have a labor problem again. Growth rarely comes without some pain.

More than one business owner has told me they dropped these seasonal gigs (fuel reduction, snow removal, holiday lights) the moment they didn’t have to do it to make payroll anymore.

The smaller buyer, someone not yet doing this work, is increasing his revenue by adding a new service. Good for him. He gets an early season revenue bump and an onboarding and dispatch process he can’t afford to build himself (and likely didn’t know he needed). But he’s also spreading himself thinner, growing his crew and purchasing equipment in hopes that these customers (with no annual contract) come back next year so he can pay off his capital and HR investments.

There’s also the matter of those “independent contractors,” in California. Describe that setup to a California HR consultant and watch them back away from you to create their own defensible space. It’s very likely that those workers should be on payroll, so the smaller buyer doesn’t really know what he’s going to net.

It’s unlikely that anyone who buys this business will get bank financing with no tax returns, so the deal is likely to involve seller financing with payment tied to renewals and a healthy discount for the associated risks.

The part he was proudest of

The seller believed the real value was in his onboarding process, and he had a point. He’d built a method to onboard absentee property owners and turn them into paying customers who seemed likely to come back every season.

The problem was assigning a number to it.

If he’d run the business in a more “traditional” manner (and for longer), the value of the process would have shown up in the company’s financial performance. Clean financials would address a buyer’s main concerns: Can I charge more, and is the revenue more stable because customers book before the notices arrive? Innovation only shows up in a valuation through its effect on the numbers, and this business hadn’t been around long enough for that (yet).

What it’s worth also depends on who’s buying. A small landscaper with no good way to reach absentee owners might get the most out of it, but he’s the least able to pay. An established operator who can afford it likely has an onboarding and dispatch system that works. It may not look as good as the seller’s on paper, but at least it’s proven.

The only honest way to value the process was by what it produced: how many prospects became customers and how many of those customers came back. Given a few more years, it might prove to be extraordinary, but so far it has grown a very small business.

Why I said no

Like a lot of industries (especially those in rural areas), this one is tight. He was friends with, or at least on good terms with, most of his competitors. They borrowed each other’s equipment and sent each other the jobs that were too far away, too big or too small. They would all pick up when he called, and a friend is less likely to sit back and wait for the business to die.

A broker calling the same people is just a stranger, only calling with a pitch. If I got through, they’d spend the call trying to guess who I was representing, whether they’re interested or not.

The only way this deal was going to get done was for the seller (very smart and charismatic) to convince a buyer, face to face, that the upside of taking a flyer on an interesting (and unproven) model far outweighed the downsides.

So I suggested he call them himself, starting with the ones he liked best. Life’s too short to deal with people you don’t like (if you have the choice).

Had the seller been willing to stay around for another three or four years to prove the model (and file his freaking taxes), I think he’d have had a decent chance of changing that industry.

But he chose not to, and I couldn’t see a clear path to a transaction where my fee wouldn’t take a quarter to a third of the sale price. There was simply no room for me in this transaction.

Cautionary tale

There are some parts of this deal that are worth calling out due to the price the seller might have to pay in heartache someday:

To make his numbers believable, the seller needs to file returns for every year the business has operated. That’s the single most useful thing he can do for his sale. It’s also the first time any taxing authority will see that income, which means the first time he’ll owe tax on it. Possibly a meaningful amount, possibly with penalties, and almost certainly due before any sale proceeds show up. Maybe he’ll even get to stand an audit. He’s in California, so he might get two: one with the IRS and one with the Franchise Tax Board. Huzzah!

The “contractor” relationship in this business is similar. In an asset sale where the buyer brings his own crews and equipment, whatever exposure comes from how those contractors were classified would likely stay with the seller. If one of his contractors decides that a nagging injury was caused by his work for the seller, and someone in authority decides that the contractor was misclassified and should have been an employee all along, life could become very difficult for the seller for a long time after the sale.

In a business with contracts worth keeping, that same history can also rule out an entity sale (where the buyer purchases the corporation or LLC itself, contracts and all). But that’s a column for another month.

So the work it takes to sell his business creates costs he hasn’t planned for. Skip the work, and he’s asking a buyer to pay for “Trust Me!”

As of this writing, I don’t know whether he’s filed those returns.