How to Value and Sell a Pest Control Business
Selling a pest control business can be very rewarding. While pest control is a 17 billion dollar industry, according to IBIS World, it is very challenging for newcomers to enter the market due to regulatory burden and small profit margins. Plus, there are some major players in the space, Orkin and Rentokill, that are always looking to purchase smaller companies in the space. So, how do you value your pest control business to make the most of this opportunity? Here’s a quick overview.
Consider the Value of Your Assets
The simplest way to start valuing your business is to look at the overall value of your assets. There are two types of assets you might have: tangible and intangible. Tangible assets include things you can touch, such as safety equipment, spraying equipment, vehicles, technology, etc. Pest control businesses may not have as many tangible assets as other contractors, but they can still add a sizable chunk to your valuation.
Your intangible assets may be even more valuable. These are things that add to your value but can’t be physically touched, such as your brand recognition, trademarks and patents.
Of course, you must balance your assets with your liabilities or your debt.
Reflect on Your Revenue
How much does your business make? Your annual profit and revenue should be a big part of your valuation, although they are not the only important metric. It would help if you considered how much of your revenue is recurring revenue through long-term contracts. You should also consider whether your profit margin is comparable to the competition.
According to Peak Business Valuation, there are currently about 25,000 pest control companies operating in the US, and profit margins for pest control companies range from 7-20%. But while there is a lot of competition, there is also a lot of growth potential if you can grow for a few years before selling. According to Grand View Research, the whole US pest control industry is expected to grow at 4.5% per year, for most of the decade. So there are plenty of pest control business opportunities, even in a crowded market.
How Much Does Pest Control Business Profit Margin Matter?
While a bad profit margin will make it harder to improve your earnings, your bottom line is the most important part.
There are two more concrete ways to estimate overall pest control company value with hard numbers. These are seller discretionary earnings (SDE) and earnings before depreciation and amortization (EBITDA). If you have a small business that you are heavily involved in, SDE is likely the best for you. It’s the net income before subtracting your own salary, which means it includes non-operating expenses. EBITA is usually used for larger businesses and is literally what the name suggests.
Consider What Matters to Your Buyer
Does your buyer care if you have mostly residential or commercial clients? Do they care about your reputation? The right buyer may pay more depending on the specific of your business. For example, if you are selling to a larger chain pest control business, then your location and how established you are will matter.
Valuing your pest control business is not a matter of putting a price tag on it, and then shopping around. There are only going to be so many potential buyers for any pest control business, and each buyer will have their own criteria to determine what your business is worth.
A synergistic business will also value your business higher. For example, restoration specialists may value your business as it will bringing a large client base that may use their other services, not just pest control. In addition, they can better serve their current clients who might need pest control services along with whatever they are currently offering.
How to Sell Your Pest Control Business
As you’d sell anything, be sure you consider multiple buyers. Reach out to the big name pest control businesses, and even medium-sized businesses that might be looking to make an acquisition. Also, consider synergistic local businesses, especially those that you already have a good relationship with.
There are also several online marketplaces where you can buy and sell a pest control business, and it’s worth going through them. BizBuySell.com is one of the larger ones, regularly listing companies in the upper six digits. It’s also worth going through the listings of other owners who are trying to sell their businesses, so you can get a better feel for what selling points they’re using.
If this article has made you reconsider selling your pest control business, check out our pest control answering services to streamline your workday.
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