What is my Pest Control business valuation?
Are you the owner of a Pest Control Company? You’ve probably wondered about the monetary value of your business. Would you like to know your Pest Control Business valuation?
Business valuation is a tricky proposition. Every business is different; therefore, every valuation is different, but there is a solution. There are some “rules of thumb” that will allow you to estimate your pest control business valuation. I discuss these “rules of thumb” and ways to increase the valuation of your business below.
Recurring revenue under written contract is key.
Exterminating and Pest Control Company revenue streams are built around recurring revenue. As a result, this makes them extremely popular with Buyers. Buyers prefer recurring revenue streams over one-time revenue. Recurring revenue businesses provide a more secure revenue stream after completion of the purchase. Recurring revenue gives the buyer a high level of confidence they are not over-paying for the business. If you’d like more information on Recurring Revenue, please read my recent article on that subject.
The Pest Control industry segment is growing.
The Pest Control industry market segment (SIC 4953) is growing locally and nationally. However, licensing requirements and industry knowledge are a barrier to entry for start-ups. This combination of recurring revenue, market segment growth and barriers to entry make for a healthy market. Consequently, owners of exterminating and pest control businesses are in a favorable seller’s market.
National, regional and local pest control companies are all growing their businesses today via acquisition. As a result, if you are considering the sale of your business, now is a good time to put it on the market. Pest control business valuations are strong.
Valuation of your exterminating and pest control business can be increased by concentrating on a few ideas. I show a few of those below.
Ways to increase Pest Control business valuation.
- Revenue generated from customers who are under a written service contract is very important. Monthly, quarterly and bi-annual revenue streams are more valuable than 1x treatment revenue. So revenue secured by written contracts is worth as much as 1.5x in valuation while unsecured revenue is worth 0.50x in valuation. As a result, a company with high levels of recurring revenue under contract is worth more than one that has a high level of one-time revenue. Agreements should be in writing and for a minimum one year term. They should contain an evergreen auto renewal feature and be assignable to a buyer.
- Your online marketing efforts should be fresh and up to date. Most customers look online to find reputable providers for this type of service. So if you don’t have a company website or it is outdated, you should consider an upgrade. Social media is another effective means to a more professional online presence. If you take these steps, they will increase both revenue and valuation of your business when it comes time to sell.
- Increasing the number of treatment offerings you provide increases revenue and, as a result, increases valuation. Make sure new service offerings are secured by contracts.
Implementation of these factors can have a positive impact and hence, increase valuation of your exterminating and pest control business. If you are planning to sell your business, these changes and other exit strategy considerations should be implemented 12-18 months before a sale to maximize their impact on valuation.
Estimate your Pest Control business valuation.
You can get a pretty good estimate of the valuation of your pest control business by using the formulas show below.
- 1.0 x annual sales (includes normal inventory).
- 3.5x Sellers Discretionary Income (SDE) + dollar amount of normal inventory.
- 4.5x Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA).
If you’d like to get a more definitive idea on valuation, please contact me for a free, no obligation valuation analysis.
If you have any questions regarding how to estimate your company valuation or to discuss any of the ideas in this article, feel free to contact me via phone, email or thru our website.