Navigating due diligence checklist for selling lawn business

Before stepping into my role as president of Vito’s Lawn Care & Landscaping, I worked as a mergers and acquisitions attorney. I saw firsthand how overlooked risks, ranging from incomplete financial records to contract disputes, could derail transactions. Now, from the operational side, I have an even deeper appreciation for how legal, financial and contractual pitfalls can make or break a deal.

If you’re considering selling your landscaping business, taking a proactive approach to these risks will put you in a stronger position when it’s time to negotiate. Below is a due diligence checklist for selling a business.

Legal Risks: Compliance, litigation and intellectual property

Legal issues should top your due diligence checklist. Landscaping companies operate under strict regulations, including environmental laws, licensing requirements and labor standards. Buyers will want assurance that your business is fully compliant.

For example, I’ve seen deals stall because a company lacked the proper pesticide application licenses or had unresolved environmental violations. Compliance failures regarding chemical use, water runoff and waste disposal can lead to fines and penalties, deterring buyers.

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Litigation exposure is another concern. Unresolved lawsuits be it from employees, customers or vendors will be closely examined. Even past lawsuits that were settled can be red flags if they suggest operational issues. Buyers will want a full history of claims against your company and their resolutions.

Intellectual property (IP) might not seem relevant in the landscaping industry, but it plays a larger role than many business owners realize. Your company name, branding and proprietary processes should be legally protected. I’ve seen deals become complicated when a business didn’t actually own the rights to its logo or when another company had a similar name in a key market. Now is the time to ensure your trademarks, domain names and any unique business processes are documented and properly owned.

Financial Risks: Accuracy, debt and tax compliance

Financial issues frequently derail deals and should be a big part of your due diligence checklist for selling a business. Landscaping businesses, like any service-based company, must maintain clear and accurate financial records. Buyers will closely examine everything from profit margins to cash flow stability. If your financial records are incomplete or disorganized, expect buyers to either lower their offer or walk away entirely.

Debt obligations are another major factor. Many landscaping companies finance their equipment, trucks and even payroll during slower seasons. If these debts aren’t well-documented or create a significant burden on future cash flow, buyers will take that into account. Some sellers try to minimize or obscure liabilities, assuming they won’t be uncovered — but due diligence is thorough. Any undisclosed debts will eventually surface, potentially eroding trust and killing the deal.

Tax compliance is another common stumbling block. If your company has a history of late or incorrect tax filings or owes back taxes, this can create serious problems. Buyers don’t want to inherit tax liabilities or deal with the fallout of improper filings. Before starting the sale process, work with an accountant to review your financial records and resolve any outstanding tax issues.

Contractual Risks: Customers, suppliers and employees

A landscaping company’s value during a sale often hinges on its contracts — agreements with customers, suppliers and employees all play a critical role in your due diligence checklist for selling a business.

Many landscaping businesses rely on long-term maintenance agreements to provide predictable revenue. However, if those contracts contain unfavorable terms, they can quickly become liabilities. I’ve seen contracts that allow customers to cancel services upon a change in ownership, which makes the business far less attractive to buyers. In other cases, contracts included anti-assignment clauses, meaning they couldn’t automatically transfer to a new owner. Reviewing these agreements before putting your business on the market can help avoid surprises during due diligence.

Supplier agreements can also pose risks. If your business depends on key relationships with nurseries, equipment vendors or subcontractors, buyers will want assurance that those relationships are secure. Long-term contracts with restrictive terms — such as high-minimum purchase requirements — can be red flags.

Employee agreements are another area of scrutiny. Buyers will closely examine how employees are classified, looking for any misclassification of workers as independent contractors when they should be employees. Misclassification can lead to significant back taxes and penalties. Additionally, if your key employees aren’t under non-compete or non-solicitation agreements, there’s a risk that they could leave and take clients with them after the sale. Buyers want to know that the workforce will remain stable post-transaction.

Operational Risks: Ensuring stability and scalability

Beyond legal and financial risks, buyers want to know that your business can operate smoothly after the sale. One of their biggest concerns is whether the company is too dependent on the owner. If a business relies heavily on a single person — whether for customer relationships, sales or day-to-day operations — buyers will worry about what happens when that person leaves.

I’ve seen deals where the seller was the face of the company, handling everything from client relationships to operational decisions. In those cases, buyers often required an extended transition period or adjusted the purchase price to account for the additional risk. To make your business more attractive, start delegating responsibilities and developing a management team that can operate independently.

Revenue concentration is another potential issue. If a large portion of your company’s revenue comes from just a few clients, buyers will see this as a risk. Losing one or two key customers could significantly impact profitability. Diversifying your client base before entering the sales process can improve your company’s value.

Final Thoughts: Be proactive, not reactive, with your due diligence checklist

Selling a landscaping business is a complex process, and the most successful transactions happen when the seller is prepared. If you’re considering selling in the future, addressing these risks now will put you in a much stronger position when the time comes.

• Ensure your legal compliance is solid, from licensing to environmental regulations.
• Keep financial records clean, accurate and well-documented.
• Review customer, supplier and employee contracts to eliminate potential roadblocks.
• Build a company that can operate without heavy reliance on the owner.

Buyers are looking for stability, transparency and reduced risk. By tackling these issues in advance with a due diligence checklist for selling a business, you can ensure a smoother process, maintain leverage in negotiations and ultimately secure the best possible outcome for your business.

Dealmakers educates readers on all aspects of mergers and acquisitions in the green industry. Frank C. Vito is the President of Vito’s Lawn Care & Landscaping, Inc., with a background in mergers and acquisitions law. Before leading the company his father founded in 1981, he spent years advising businesses on legal and financial risks in transactions. He can be reached at frank@vitoslawncare.com.