Pool Service Business Valuation & Worth

If it is time for you to decide if now is a good time to sell your pool service business, then the valuation of a pool service company must be the first thing you determine. In today’s topsy-turvy world, it seems like there would be too many variables to even take a stab at this prospect.

But valuing a pool service business is really quite simple.

If you are interested in learning “How much is my pool service business worth,” you only need to determine the cash flow and this number will give you all the information that you need.

When it comes to the valuation of a pool service business, you need to calculate it based on the cash flow, as well as the multiple of the cash flow that the buyer is willing to pay. With a pool service valuation, the buyer will pay two times, four times, six times, etc. of the given 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 you may or may not know, cash flow is related to how long it will take to pay off the purchase price of the business. If a buyer purchases it for two times the cash flow, it will take two years, four times the cash flow will take four years, and so on. This is important information when it comes time to sell. When it comes to multiples, buyers will go higher if they feel that the business is more stable. Smaller businesses can be more volatile because they cannot diversify as much or have a variety of revenue streams. Bigger businesses tend to have a bigger base of customers as well as more of a geographic reach. And a bigger business would have more cash flow, increasing the multiple.

• 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. )

So, how much is my Pool Service Business worth?

All you need to do is multiply the free cash flow by the multiples to determine your pool service valuation. And don’t forget the other elements of selling a business. The sale will be debt free, so you will need to take care of any debts before the transaction is completed. You and the buyer will also decide how much cash should be left in the business account.

Take careful note of that. Another important idea is that usually businesses are sold with anything used to make the business run, such as trucks and equipment. And don’t think that the large asking price is all going in your pocket.

You will generally clear 70-80% of the asking price after the fees and taxes are paid, any in the clear before it is sold. You will also need to establish an agreed upon amount of capital in the business before you close. And don’t forget that fees will definitely eat up some of your profits.