Making the Grass Always Greener

Here's an entrepreneur who boasts both the Midas (NYSE:MDS) touch and a green thumb. In 2002, she bought a 30-year-old landscaping company in Fort Worth that cultivates grass alongside highways, at airports, and at municipal developments. Over the next five years, she expanded the business at a rapid pace, leading a fivefold increase in sales to $4.6 million last year, up from $800,000 in 2001.

The company handles only commercial work and specializes in large government contracts. Hydro seeding, which involves applying grass seed, fertilizer, mulch, and water in a single liquefied application, is a major driver of business. The company also provides services such as sodding, erosion control, irrigation, and fencing. The business has, sitting in its files, $12 million worth of signed contracts from customers, representing two years' worth of work. The owner put the company on the market in July. Her husband, the company operations manager, is a farmer and rancher at heart. Rather than supervising the company's 35-employee work force, he says, "I'm happiest when I'm in a tractor by myself." The couple now hopes to get back to tending cattle and raising wheat.

Price: $4.9 million, including $400,000 in inventory, $1.35 million in receivables, and $1.1 million in equipment. The owner will lease an office, shop, and pole barn for $4,500 a month. The price includes transitional services for 60 days.

Price rationale: Landscaping companies tend to sell for 50 percent of revenue, plus inventory and, in some cases, receivables. That comes to $5 million in this case, based on sales booked for 2007.

Pros: Environmental regulations have created demand for hydro seeding and erosion control. Plus, the Dallas-Fort Worth area's rapid growth has led to a round of road building that should last for a while.

Cons: The company has hit a sweet spot in terms of size. Increasing sales by just a little will require new trucks and tractors and, eventually, hiring a project manager at an annual salary of up to $80,000.

Outlook: Earnings are down thanks to costly fuel and a long drought. If these trends subside, however, look for profits to rebound, because the company has raised prices on the rolling contracts it has recently signed.

*Earnings before interest, taxes, depreciation, and amortization.

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 Alan Larsh at the Vant Group (972-458-8989 or Alan@thevantgroup.com).