Valuation Multiples for a Pest Control Business
Pest control businesses provide bird, rodent, and insect management services. This may include fumigation, applying sprays and baits, placing traps, etc… The pest control industry has retained steady demand from residential homes and commercial establishments. As such, the industry has experienced healthy growth. In recent years, the pest control industry generated over $26 billion dollars. We can expect this number to grow in the years to come. However, industry growth is slowing down due to extreme competition, environmental concerns, and declining housing starts. This may present challenges for those looking to buy, grow, or sell a pest control business. To succeed in this competitive industry, it is important to understand the value of a pest control business. You can start by learning about valuation multiples for a pest control company.
Valuing a Pest Control Business
Whether you are buying or selling a pest control company, it is beneficial to know how to value a pest control business. The best way to learn the principles of valuing a pest control company is to receive a business valuation. If you are buying a pest control company, receiving a business valuation for a pest control business can help you learn about effective negotiation strategies. In addition, a business appraiser can help you understand a fair purchase price for a pest control business. If you are looking to sell a pest control business, a business appraisal can help you understand a reasonable listing price for a pest control business.
When valuing a pest control business, valuation experts may use various business valuation approaches. Often, business appraisers use the market approach which uses valuation multiples. In this article, we discuss valuation multiples for a pest control business. However, this article is only a guide and the information we provide may not be suitable for your business. For more specific information, receive a business valuation for a pest control business. Be sure to also check out Valuing a Pest Control Company, Value Drivers for a Pest Control Company, and How to Value a Pest Control Company.
Peak Business Valuation is a professional business appraiser. At Peak, we frequently work with pest control companies. We are happy to provide you with a business valuation for a pest control business. Any questions about valuation multiples for pest control businesses are also welcome! Get started today with a free consultation with Peak Business Valuation, business appraiser!
Valuation Multiples for a Pest Control Business
Below, a diagram displays common market multiples for a pest control company. Keep in mind, these values are only averages. For specific valuation multiples for your pest control business, obtain a business appraisal. Peak Business Valuation is here to assist! Schedule your free consultation with Peak Business Valuation, business appraiser, today.
Disclaimer: These multiples are for educational purposes only. As such, the information provided does not constitute valuation advice. These multiples do not represent the valuation opinion of Peak Business Valuation or its valuation professionals. Instead, seek the guidance and advice of a qualified business valuation professional about any matter in this article.
What is a Valuation Multiple?
Valuation multiples are values that compare a pest control company’s value to a financial metric. This can include cash flow, earnings, or sales. For example, the SDE multiple is common when valuing a pest control business. The SDE multiple compares the seller’s discretionary earnings of a pest control business to its implied value. Business appraisers consider the multiples of similar companies that recently sold to get a range of fair market value for a pest control business.
For instance, a pest control company has $270,000 in seller’s discretionary earnings and transacts at a 2.50x SDE multiple. Here, the pest control business would have an implied value of $675,000. ($270,000 times 2.50x) On the other hand, if the business receives a 2.84x multiple, the value of the pest control business would be approximately $766,800. ($270,000 times 2.84x).
Peak Business Valuation, business appraiser, often works with individuals who are buying or selling a pest control business. In many cases, the valuation process involves valuation multiples for a pest control business. The following sections share a range of valuation multiples that pest control businesses often transact at. Please note that the range of value can vary since each company is different. Below, we highlight SDE, EBITDA, and REV multiples for pest control companies.
SDE Multiples for a Pest Control Business
Average SDE Multiple range: 2.34x – 2.90x
According to Peak’s data, the average SDE multiples for pest control companies range from 2.34x – 2.90x. To derive an implied value of a pest control business, apply the multiple to the seller’s discretionary earnings. The calculation is as follows.
SDE X Multiple = Value of the Business
For example, a pest control business generates $290,000 in seller’s discretionary earnings and transacts at a 2.69x multiple. In this case, the pest control company is worth about $780,100.
$290,000 X 2.69x = $780,100
The SDE multiple is popular when valuing a pest control business. When using the SDE multiple, a valuation analyst adds back expenses the new owner may not incur to the pest control business’s operating profit. Some common add-backs include non-recurring or non-related business items, personal expenses, and a fair owners compensation. This allows the valuation analyst to determine the cash flow potential of a pest control business. Then, the valuation expert can determine the fair market value of a pest control business.
EBITDA Multiples for Pest Control Companies
Average EBITDA Multiple range: 3.26x – 4.07x
Pest control businesses typically transact at an EBITDA multiple range of 3.26x – 4.07x. To derive an implied value of a pest control business, apply this multiple to its EBITDA. Refer to the equation below.
EBITDA X Multiple = Value of the Business
For example, a pest control business has an EBITDA of $225,000. If it transacts at an EBITDA multiple of 3.80x, the pest control business is worth about $855,000.
$225,000 X 3.80x = $855,000
Valuation analysts use EBITDA multiples to measure a pest control business’s return on investment (ROI). Peak Business Valuation may use the EBITDA multiple because it helps normalize differences. This allows for comparisons to be made between similar pest control businesses. Normalized ratios provide accurate estimates of the future earnings a buyer can expect from a pest control business
REV Multiples for a Pest Control Business
Average REV Multiple range: 0.85x – 1.06x
On average, pest control businesses sell between 0.85x – 1.06x of revenue. Business appraisers can determine the implied value of the pest control business by multiplying the amount of revenue or sales the business makes by the REV multiple. See the following calculation.
Revenue X Multiple = Value of the Business
For example, a pest control business generates $895,000 in revenue. If the pest control business transacts at a 0.91x multiple, it is worth approximately $814,450.
$895,000 X 0.91x = $814,450
REV multiples for pest control companies measure the total revenue a pest control business generates. When valuing a pest control business, valuation experts analyze REV multiples of similar businesses that recently sold. This helps them determine applicable multiples for your pest control business. Keep in mind, experts tend to value pest control businesses using the cash flow multiples – SDE and EBITDA.
Summary
To determine the value of a pest control business, valuation experts often work with valuation multiples. This helps them gain important insights into a pest control business’s performance and financial health. There are various valuation multiples for a pest control company. To know which multiples are most applicable to your pest control business, receive a business valuation. As part of a business appraisal, you will learn about the strengths and weaknesses of your pest control business. In addition, receiving a business appraisal can help understand how to maximize the value of a pest control business.
Peak Business Valuation, business appraiser, is happy to help whether you are buying, growing, or selling a pest control company. We work with many pest control businesses across the country. Peak can provide you with a business valuation for a pest control company. We can also answer any questions you may have about valuation multiples for a pest control business. Schedule a free consultation with Peak Business Valuation today!
