How Nick Sanchez Bought Trees Plus, an Atlanta Tree Service, and Nearly Doubled Its Revenue

Why did Nick Sanchez buy a tree service instead of starting one?

Nick Sanchez bought Trees Plus because a business partner convinced him there was no sense starting from scratch when he could buy a company with a long track record.

Sanchez, 28 when the episode was recorded, got into tree work roughly nine years earlier while studying civil engineering at UGA in Athens, Georgia. A family friend of his father’s owned a tree service, and the part-time hours fit around classes. He was climbing about six months in, and selling work within nine months to a year.

That owner later offered to let him take the company over. Sanchez said a 19 or 20 year old asking a bank for $500,000 to $700,000 gets declined quickly. He kept working, got into real estate, and met an investor at a meetup who had been buying businesses since the late 1980s. Years later the investor suggested they buy a tree service together.

How did he find a tree service business to buy?

He cold called. Sanchez downloaded a spreadsheet of about 800 tree services around Atlanta and reached out to 10 a day, marking each one red (not interested), yellow (thinking about it) or green (would sell).

His pitch was that he and his partner were local, bought home service businesses, and were not a private equity firm or a hedge fund. He led with his own years in the trade so owners knew they were talking to a tree guy. He said he probably signed 50 NDAs.

Two lessons came out of those conversations:

• Most owners have never sold a company. Many owners in their 60s never planned an exit and did not know what the business was worth. One walked into the first meeting and said his CPA told him he was owed a check for $2 million.
• Motivation decides everything. One negotiation ran about a year before the owner admitted he did not really want to sell.

At Trees Plus, the owner’s wife answered the phone and said five or six buyers had already tried. Three or four meetings later they had a price and terms. From the first call to closing took three or four months.

How was the Trees Plus deal valued and structured?

Sanchez bought Trees Plus at a 4x EBITDA multiple, with the seller financing the whole purchase and no bank involved.

He said small service businesses netting under $1 million in EBITDA typically sell for around 3x to 4x, and that the first thing he checks is whether management is in place. If everything depends on one person, “you’re kind of buying a job.”

Trees Plus passed that test. The company had been established for about 22 years, the staff had been there around 15 years with almost no turnover, and the owner could be hands-off when he wanted to be.

Terms mattered as much as the multiple. Sanchez said a buyer will pay more, even 5x to 7x, when the seller finances the deal over a long period. He also told the seller that a large share of a $1 million lump sum would go to capital gains tax, something a first-time seller may not have thought about.

The previous owner asked to stay on under a three-year employment agreement. He worked every day for the first 30 days, spent a couple of months at the beach, and now comes in two or three days a week when he wants to.

What did he change after the acquisition?

Software and culture, and nothing else in the day-to-day.

The owner’s wife had tracked the business in 16 spreadsheets, plus one more that tied them together. Sanchez credited her for how clean the records were, then moved every client into Jobber on day one and trained the crew leaders and sales staff to treat it as home base.

He left the crews alone. He told them to keep doing what they did and offered to haul equipment between jobs. He said he does not believe in micromanaging and dislikes being called “boss”: when he sells a job, he greets the customer, walks the crew through it and leaves so they can work.

Going off the prior year’s tax returns, he said revenue is right under double, about 1.85x. Commercial contracts carry the company through December and January, when he said some local competitors work two or three days a week and Trees Plus was booked almost a month out. Plant health care and preventative maintenance packages add some recurring revenue.

How did Trees Plus go from 30 Google reviews to nearly 300?

Trees Plus had 5,200 clients on file and 30 Google reviews when Sanchez bought it.

He said he was burned by three or four SEO companies before researching local ranking himself. His conclusion: a fast, clear website, photos of real work on the Google Business Profile, and reviews. He set up Jobber’s automations for current customers. He added that none of it works unless the work is good.

Later he added Review Harvest to reach the past customers Jobber’s automations did not cover.

What makes a tree service business sellable?

Sanchez named three pillars: clean books, software, and management in place.

• Clean books. Past $200,000 in revenue, pay a professional to do the bookkeeping and taxes.
• Software. Load the whole customer base into one system, even if you pay someone $500 to set it up and teach you.
• Management. Hiring a key person will cost some profit in the first year. He said that is part of it, because it frees the owner to go get more work.

He targets a 20% margin and cited the saying “Revenue is vanity, and profit is sanity.” He has talked to companies doing $4 million a year that profit only $300,000.