How to value a Pest Control Business

Understand how to value a pest control business using key strategies like multiplying Seller's Discretionary Earnings (SDE), a common method in the industry where businesses trade between 2.00x and 7.40x. Learn industry trends and actionable insights to maximize your return on investment, whether you're buying or selling.

George Wellmer
George Wellmer

Pest Control

Industry: Pest Control

Naics: 561710


Introduction: Understanding Your Pest Control Business's True Worth


Valuing a pest control business is more than just crunching numbers; it's about understanding the core drivers of its worth. Whether you're a seasoned owner, a potential buyer, or a business broker, grasping these valuation principles is crucial.


Two Primary Valuation Approaches

At the heart of valuing any business, including pest control, lie two fundamental approaches:



Income Approach: Projecting Future Earnings

  • This method, at its core, predicts your business's future cash flow and translates it into today's value. Think of it as forecasting the profit your business will generate over time and understanding its present-day equivalent.
  • Why it matters: It provides a forward-looking view, ideal for businesses with stable, predictable revenue streams.


Market Approach: Comparing to Similar Sales

  • This approach benchmarks your business against recently sold pest control companies. We look at key metrics like revenue, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), adjusted EBITDA, or Seller's Discretionary Earnings (SDE).
  • Why it matters: It gives you a real-world perspective on what similar businesses are fetching in the current market.


Mastering the Market Approach: A Step-by-Step Guide

For many pest control businesses, the market approach is the most practical. Here's how to navigate it:


Step 1: Calculating Seller's Discretionary Earnings (SDE)

  • SDE is your baseline. Start with EBITDA and then add back expenses that are personal or one-time in nature.
  • Common Add-Backs:
    • Family member salaries (if not directly contributing)
    • Personal vehicle use
    • Non-business meals and entertainment
    • Above-market rent
    • Personal health insurance and memberships
    • Personal phone bills
    • Non-recurring legal fees
  • Why it Matters: SDE provides a clearer picture of the business's true earning potential for a new owner.


Step 2: Selecting the Right Valuation Multiple

  • The multiple you choose significantly impacts your valuation. Key factors include:
    • Business Size: Larger, higher-margin businesses command higher multiples.
    • Recurring Revenue: Subscription-based models are highly valued.
    • Revenue Concentration: Diversified revenue is less risky.
    • Customer Type: Commercial clients often offer more stability.
  • Why it Matters: The multiple reflects the perceived risk and growth potential of your business.


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Step 3: Applying the Multiple to SDE

  • Multiply your SDE by the chosen multiple.
  • Important Note: This is an estimate. Use multiple methods and consider historical trends for a well-rounded valuation.
  • Why it Matters: This calculation provides a tangible starting point for your valuation.


Pest Control Industry Insights: Trends and Opportunities


The pest control industry is dynamic, driven by:

  • Steady Growth: The market is expanding, fueled by demand for effective pest management.
  • Technological Advancements: Data analytics and eco-friendly solutions are transforming the industry.
  • Consolidation: Large players are acquiring smaller businesses, but local operators remain vital.
  • Key Market Data:
    • Market Size (2024): $24.2 billion
    • Projected Growth (2029): $26.4 billion (1.7% CAGR)
    • Profit Margins: ~13%


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What Boosts Your Business's Value?


To maximize your valuation:

  • Build a Strong Brand: Positive reviews and referrals are invaluable.
  • Focus on Recurring Revenue: Subscription-based models are highly attractive.
  • Diversify Your Customer Base: Reduce reliance on single large accounts.
  • Improve Operational Efficiency: High margins and low churn are key.
  • Embrace Technology: Utilize software for streamlined operations.
  • Develop an M&A Strategy: Show potential for scalability.


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Strategies for Growth Before Selling


  • Invest in Technology: Automate processes for efficiency.
  • Offer Eco-Friendly Services: Cater to growing consumer demand.
  • Expand Service Offerings: Add services like wildlife control.
  • Build Strong Partnerships: Collaborate with realtors and property managers.
  • Consider Franchising: Scale through proven models.
  • Optimize Marketing: Enhance your online presence.


Final Thoughts: Beyond the Numbers


Valuing a pest control business is more than just calculations. It's about understanding the business's quality, retention, and growth potential. Businesses with stable contracts, diverse revenue, and efficient operations always command higher valuations.


Ready to understand your pest control business's true value? Tupelo offers free business valuations. Contact us today to schedule your consultation.