Pest Control Business Valuation & Worth

When the phone rings and a customer is in a full panic about what to do with the ants in her kitchen, it is safe to say that you understand the value of your business: priceless.

But considering the fact that you may want to sell it someday, a pest control valuation is imperative to find out what your business is truly worth, beyond the peace of mind to your customers who are battling pests.

In valuing a pest control business, cash flow is king, so you need to determine how lucrative the company would be from day one of a sale. Along with cash flow, look into the multiples of cash flow that your prospective buyer is willing to pay. These two values are at the heart of determining what your business is worth.

If you think it might be time to sell your business, then you need to dive into understanding the value of your business. In order to do this, calculate both the cash flow and then the multiples the buyer might be willing to pay. If you are considering the sale of your business and want to more deeply understand the value of your business, you need to calculate the cash flow and then determine what multiple of the cash flow the buyer is willing to pay. In this scenario, discover if the buyer will pay two times, four times, six times, etc. of the designated cash flow.

• Under $500k free cash flow – 2x-4x / Valuation range $500k – $2m
• $500k-$1m free cash flow – 3x-5x / Valuation range $1.5m – $5m
• $1m-$2.5m free cash flow – 4x-6x / Valuation range $4m – $15m
• $2.5-$10m free cash flow – 6x-10x / Valuation range $15m – $100m
• $10m-$25m free cash flow- 10x-20x / Valuation range $100m – $250m
• $25m+ free cash flow – 25x+ / Valuation range $600m+

As a business owner, you might not realize that the cash flow is tied to the amount of time it would take your prospective buyer to pay off the business. If they bid two times the cash flow it would take two years, four times would take four years, and so on. Valuation of a pest control company is closely linked with stability. When you have a larger customer base, a diversified revenue program, and a larger geographic reach, then you are more likely to see increased cash flow, increased multiples, and a larger pool of interested buyers.

• New Construction (the lower the better – aim for less than 20%)
• Maintenance Contracts (the more contracts the better – 20% increase is strong)
• Growth of the Revenue (number grows each year- 20% increase is strong)
• Reputation Management via Marketing (based on star rating and Google reviews)
• Generation of Leads (sustainable and frequent lead generation desired)
• Technician Crew (the more crew the better, with more than ten being advisable)
• Integration of Technology for Workflow (ServiceTitan or HouseCall Pro is a plus)
• Ability to Work Independently From Owner (Less owner involvement is good. If the owner can step away for a few weeks it is great. )

If you have been trying to decide “How much is my pest control business worth,” doing the math is quite simple.

Multiply the free cash flow by the multiples to determine your pest control valuation. There are a few additional core elements to consider.

The owner will likely want to buy all of the inventory, trucks, etc. that are needed to run the business. This will be part of the pest control valuation.

Secondly, your sale must be debt free, so you will need to pay off any debts before sale time. You and the buyer will determine the amount of cash in the till at sale time, and stick to that.

Finally, don’t discount the taxes and fees involved in the sale of a company. Expect to pay between 25-30% of the sale price in fees.