Business for Sale: Nebraska Christmas Tree Farm
The Business A 56-acre forest of 25,000 cultivated Scotch, Austrian, and white pines. Every year as many as 18 townsfolk tend to and harvest nearly 2,000 trees. Sales of these yuletide essentials, of which 80% are retail -- to the 1,000 families who shop, chop, and pay on the spot -- and 20% are to a dozen regional wholesalers, produce 67% of revenues. Seasonal accessories such as tree stands and wreaths yield 26%, and purveyors of live trees for landscape design chip in the rest. After 30 years of tilling the soil, the owners plan to retire.
|Recast earnings before interest, taxes, depreciation, and owner compensation||$27,100||$39,730||$45,430|
Outlook For the past six years the domestic market for real Christmas trees has been dormant, at $1.4 billion. A glut of pines has forced many of the nation's 15,000 growers to burn grade-A inventory or cease planting altogether. Meanwhile, the demand for artificial trees grows -- keeping pace with consumers' affection for synthetically everlasting evergreens. But the nursery industry should revive as inefficient growers fall out and the survivors lobby to ease the harsh mandates of regulatory agencies and local fire marshals. Until that time, insiders say, you'll have to promote like crazy to maintain what's been a loyal customer base (70% are repeat buyers) and to saturate your 20,000-square-mile competitor-free zone.
Price Rationale To take into account goodwill, such as the sellers' expertise and willingness to shepherd you through a year's cycle, we'll use the assets-plus-earnings approach to valuation. Hard assets include a cozy house valued at $85,000 and a rustic office at $5,000. Three tractors, two pickup trucks, some tilling and shearing equipment, and fixtures and furnishings might be worth $30,000. Add the land at $50,000 and a dash of cash flow, and you're up to only $215,400. So where's the balance? Your tree inventory, valued at $110,000. Still, the business should fetch no more than five times earnings -- $227,150 -- not the seven-plus the asking price suggests. And, you'll have to finance trees that haven't matured. So hold on to your day job.
Pros Work only 9 months of 12 to cultivate a renewable resource that shelters wildlife and stabilizes erosion.
Cons Christmas arrives but once a year. So does your paycheck. -- Karen E. Carney* * *
Inc. has no stake in the sale of the business featured. The magazine cannot confirm the accuracy of financial or other information offered by the seller. Inquiries should be directed to Affiliated Business Consultants, at 719-540-2200. n