How to Grow Your Landscaping Business Through Acquisitions Using SBA 7(a) Loans

Are you a landscaping business owner in Texas, particularly in the thriving North Texas region, looking to expand your operations? Acquiring other landscaping businesses can be a strategic way to grow your company, and using an SBA 7(a) loan can make this process more accessible with a minimal down payment. This comprehensive guide explores how to leverage SBA 7(a) loans to acquire landscaping businesses, understand their valuation, manage cash flow post-acquisition, and plan for exponential growth over 20 years. With the right strategy, you can transform your landscaping company into a dominant player in the Texas market.

 

To grow a landscape business, a business owner must transition from hands-on work to strategic leadership by developing a range of critical skills. Strategic planning is essential, enabling the owner to set long-term goals, such as doubling revenue or entering commercial markets, and create actionable plans to achieve them. This can be learned through business planning frameworks like SMART goals, reading books like The E-Myth Revisited by Michael Gerber, or working with a mentor to draft a growth plan. Financial management is equally important. Understanding budgeting, cash flow, pricing, and profit analysis ensures profitability and funds expansion, such as investing in new equipment or marketing. Owners can develop this skill through online courses on platforms like Coursera or Udemy, using tools like QuickBooks, and consulting an accountant.

 

To Grow a Business, the Owner Must Grow First

Before you can grow your business, you must first grow your abilities to become an owner-executive of the company you want to own. You must move from being a technician to a crew leader, to a leader of leaders. Until your skills and ability to inspire, lead, and delegate, you will be the limiting factor of your business’s growth.

 

Delegation and leadership skills are vital for empowering employees, setting clear expectations, and fostering a strong team culture, which frees the owner from daily operations to focus on strategy. These can be honed by reading Leaders Eat Last by Simon Sinek, attending leadership workshops, or practicing delegation with small tasks. Marketing and sales skills, including branding, digital marketing, and closing deals, drive customer acquisition through methods like SEO or social media ads, and can be learned via Google’s Skillshop, HubSpot Academy, or by hiring a marketing consultant. Process optimization, through creating efficient systems and leveraging technology like Jobber for automated scheduling, reduces errors and saves time, and can be developed by researching landscape-specific software and testing workflows like quoting. Customer relationship management, focused on building loyalty and handling feedback, ensures client retention and referrals, which can be improved using CRM tools like ServiceTitan and studying customer service principles from books like Delivering Happiness by Tony Hsieh.

 

 

Hiring and talent management skills are crucial for recruiting, training, and retaining skilled employees to support scalability, and can be learned through LinkedIn Learning courses, networking at trade shows, and creating clear job descriptions. Data analysis, involving tracking and interpreting Key Performance Indicators (KPI’s) like job profitability or customer retention, informs strategic decisions and can be developed using software dashboards, basic Excel courses, and focusing on key metrics. Networking and industry knowledge, gained by joining groups like the National Association of Landscape Professionals (NALP), attending events like LANDSCAPES, or following industry leaders on X, open opportunities for partnerships and keep owners updated on trends like sustainable landscaping.

 

Finally, time management and prioritization ensure focus on high-impact tasks, allowing the owner to work on the business, and can be improved using tools like Trello, reading Deep Work by Cal Newport, and blocking time for strategic tasks. To start, owners should prioritize one or two skills, such as delegation and financial management, combine reading, courses, and hands-on practice, leverage experts like consultants, and set small milestones, like creating a hiring process in 30 days, to track progress effectively.

 

Most successful business people continue to learn throughout their careers. It is not important for you to have all of your skills at your first acquisition; you will develop and improve your skills through each additional acquisition. When you feel confident in your management abilities, it is time to take the next step.

 

Understanding SBA 7(a) Loans

The SBA 7(a) loan program, administered by the U.S. Small Business Administration, is designed to help small businesses secure financing that might not be available through traditional lenders. For landscaping business owners looking to acquire another company, SBA 7(a) loans offer several advantages, particularly for acquisitions.

• Low Down Payment: SBA 7(a) loans can finance up to 90% of the purchase price, meaning you may only need a 10% down payment. This reduces the upfront capital required, making acquisitions more feasible for business owners with limited cash reserves.
• Repayment Terms: For business acquisitions, repayment terms can extend up to 10 years. If the acquisition includes commercial real estate, terms can reach up to 25 years, further easing monthly payments.
• Interest Rates: Rates are negotiated between the borrower and lender but are subject to SBA maximums (Prime +2.75%), currently ranging from 9% to 10.5% as of 2025.
• Eligibility: To qualify, the business must be a U.S.-based, for-profit small business, and the borrower must demonstrate the ability to repay the loan. The SBA also requires that borrowers have attempted other financing options, such as personal funds or equity.

These features make SBA 7(a) loans an attractive option for landscaping business owners in Texas looking to grow through acquisitions without tying up significant capital.

 

Valuing Landscaping Businesses

Before acquiring a landscaping business, it’s critical to understand its fair market value. Landscaping businesses are typically valued using multiples of their earnings, with two common metrics:

• EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): This measures the core profitability of the business and is often used for larger companies with revenues exceeding $3 million. EBITDA multiples for landscaping businesses typically range from 3 to 5, depending on factors like location, owner dependency, customer concentration, and service type.
• SDE (Seller’s Discretionary Earnings): This includes the owner’s salary and discretionary expenses, providing a comprehensive view of the business’s earning potential for smaller, owner-operated businesses. SDE multiples generally range from 2 to 4.

 

The significant difference between SDE and EBITDA is that EBITDA assumes that the owner/manager is paid a fair market wage and assumes that the business only pays business expenses and not personal expenses.

 

Several factors influence these multiples:

• Location: Businesses in high-demand areas like North Texas, with its growing population and longer landscaping seasons, may command higher multiples due to increased revenue potential.
• Size: Larger businesses with established operations and higher revenues often have higher multiples.
• Type of Services: Maintenance-based landscaping companies (e.g., lawn care, commercial contracts) are valued more highly than construction-based ones (e.g., hardscaping, tree removal) due to their recurring revenue streams.

 

For example, a North Texas landscaping business with $800,000 in annual revenue and $240,000 in SDE might be valued at $480,000 to $960,000 (2-4x SDE). A larger business with $3 million in revenue and $800,000 in SDE might be valued at $2.4 million to $4 million (3-5x EBITDA).

 

Valuation Metric	Typical Multiple Range	Example Business	Estimated Value
SDE	2-4x	$240,000 SDE	$480,000-$960,000
EBITDA	3-5x	$800,000 EBITDA	$2.4M-$4.0M

 

Financing the Acquisition

Using an SBA 7(a) loan to acquire a landscaping business offers several financial benefits:

 

• Minimal Down Payment: With financing up to 90% of the purchase price, you can acquire a business with a down payment as low as 10%. A $720,000 business means an upfront investment of just $72,000.
• Extended Repayment Terms: The 10-year repayment term for business acquisitions (or 25 years with real estate) reduces monthly payments, making it easier to manage cash flow. Usually, there is no prepayment penalty for these loans; when there are prepayment penalties, they normally expire in three years after loan origination.
• Cash Flow Focus: SBA loans prioritize the business’s ability to generate cash flow over collateral, which is ideal for service-based businesses like landscaping that may have limited tangible assets.

 

To illustrate, consider acquiring a landscaping business valued at $720,000:

• Down Payment: $72,000 (10%).
• Loan Amount: $648,000 (90%).
• Repayment Term: 10 years at an interest rate of 9.5%.
• Monthly Payment: Approximately $8,385 (calculated using a standard loan amortization formula).

 

If the acquired business generates $240,000 in annual SDE, it can cover the loan payments ($8,385 x 12 = $100,620) while leaving additional cash flow for reinvestment, contingencies, or paying the loan off early.

 

If you live conservatively on your existing business profits and use most of your profits from your new acquisition to pay off your loan as soon as possible, you will have your acquisition paid off in less than 5 years. When your first business is paid off, contact Gateway Mergers and Acquisitions to find an additional company, doubling the size of your first acquisition. Keep doing this until you’ve reached your desired goals.

 

Managing Cash Flow Post-Acquisition

A key advantage of acquiring another landscaping business is that it can operate independently, generating its own revenue. By structuring the acquisition properly, you can use the profits from the acquired business to pay back the SBA loan while continuing to draw compensation from your existing business.

• Cash Flow Allocation:
  • Acquired Business: Its cash flow covers the loan payments, ensuring the acquisition is self-sustaining.
  • Existing Business: Continues to provide your primary income, maintaining financial stability.

 

For example, if your existing business generates $100,000 annually for your salary, and the acquired business produces $240,000 in SDE, the latter can cover the $95,400 in annual loan payments, leaving $54,600 for reinvestment or reserves. This separation allows you to grow without overextending your personal finances.

 

Long-Term Growth Strategy

The true power of using SBA 7(a) loans for acquisitions lies in the potential for exponential growth. Once the loan for the first acquisition is paid off, typically within 5 to 10 years, the profits from that business can be used as equity to acquire another business. This process can be repeated, doubling your business size with each acquisition.

• 20-Year Growth Plan:
  • Purchase one new landscaping business every five years use the profits from that company to pay the loan off. When the loan is paid off purchase another landscaping company that is similar size to the one you already own. Repeat this four more times.
  • Result: Over 20 years, you could complete 4 acquisitions, each doubling your business’s revenue and market presence.

 

This compounding effect can transform your landscaping company into a major player in the Texas market, where the landscaping industry is projected to grow due to population growth and commercial development.

 

If you take a conservative growth path and only use the profits of the company you are acquiring to pay off the loans, you should be able to pay off each loan in less than five years. If you want to grow more aggressively, you can use your existing company’s profits to pay down the loans quicker. The scenario below assumes that you have no organic growth and that you’re only growing by acquisition. Companies that grow by acquisition also have substantial organic growth in their existing operations.

 

Year	Action	Business Size (Revenue)
This Year	Existing Business	$800,000
1-5	Acquire Business A	$1.6M ($800K + $800K)
5-10	Acquire Business B	$3.2M ($1.6M + $1.6M)
10-15	Acquire Business C	$6.4M ($3.2 + $3.2)
15-20	Acquire Business D	$12.8M ($6.4 + $6.4M)

 

In this example you started with the company that $800,000 in revenue and profits (SDE) of $240,000 with a rough estimated value of about $720,000.

 

After 20 years and making five acquisitions without calculating any organic growth or inflation, you have built a company with revenue of $12.8 million, profits of $1,920,000 per year, which will be valued at over $10 million. In addition to building a $10 million company during this 20-year time period, you would’ve earned over $15 million in profits after expenses, including loan expenses.

 

Why North Texas?

North Texas, including cities like Dallas, Fort Worth, Richardson, Rockwall, Rowlett, Frisco, McKinney, Keller, Southlake, Justin, and Plano, any area that is growing which is most of Texas, is an ideal region for landscaping business acquisitions due to:

• Population Growth: The region’s rapid population increase drives demand for residential and commercial landscaping services.
• Longer Seasons: The warm climate extends the landscaping season, boosting revenue potential.
• Economic Development: Ongoing commercial and residential construction creates opportunities for landscaping contracts.

These factors make North Texas a hotspot for acquiring landscaping businesses with strong growth potential.

 

Conclusion

For landscaping business owners in Texas, acquiring other businesses using SBA 7(a) loans offers a strategic path to growth. By leveraging the low down payment and favorable terms of these loans, understanding how to value potential acquisitions, and planning for long-term expansion, you can build a robust and profitable enterprise. The ability to use the acquired business’s cash flow to pay off the loan while maintaining income from your existing business makes this strategy both practical and scalable.

 

If you’re ready to take your landscaping business to the next level, GatewayMA.com is here to help. Our team can assist with every step of the acquisition process, from business valuation to securing SBA financing and beyond. Contact us today at (972) 219-6961 to explore how we can support your growth ambitions in the Texas landscaping industry.