Deal Flow: Pest Control Franchisor
Explore a High-Growth, Eco-Conscious Pest Control Business with a Proven Track Record
This pest control franchisor represents an exceptional opportunity in a rapidly expanding industry, offering an impressive cash flow of $610,000. With a robust and recurring revenue stream from an extensive customer base, the business is well-positioned for continued growth, particularly in the Southern U.S. Its cost-effective operational structure, coupled with a strong franchise model and environmentally-friendly services, provides it with a competitive edge in the marketplace.
At a 4.8x cash flow multiple, this business offers attractive valuation metrics, supported by its stable revenue base and considerable growth potential. However, you should assess several key factors: the level of owner involvement, the management processes across its franchise network, and the competitive dynamics within the pest control industry.
The seller’s comprehensive training and ongoing support, alongside significant opportunities for market expansion, make this business an appealing option for a go-getting ETA.
Business Overview
Asking Price: $2,950,000
Cash Flow (SDE): $610,000
Gross Revenue: $2,175,000
EBITDA: $610,000
FF&E (Furniture, Fixtures, and Equipment): N/A
Inventory: N/A
Employees: 12
Established: 2012 (Franchising since 2016)
Location: Houston, TX
Reason for Selling: Retirement (Owner has been in the industry for 20 years)
Franchise Model: Franchisor with 28 city service areas and 3 corporate-owned franchises
Key Metrics & Valuation
Cash Flow to Asking Price Ratio: The business generates $610,000 in cash flow (SDE) on an asking price of $2,950,000, which results in a cash flow multiple of 4.8x. This multiple is within the typical range for franchisors, especially those with strong recurring revenue and growth potential. Typically, franchisor businesses with strong growth prospects and recurring revenue can command a multiple in the range of 4x to 6x.
Revenue and Profitability: The business has $2,175,000 in gross revenue with an impressive 36% SDE margin. This margin indicates strong profitability for a franchise model, as many franchises operate on thinner margins due to their dependence on franchisees. The recurring revenue of over $1M (from 10,000+ customers) is a key highlight, ensuring consistent cash flow.
Business Model and Operations
Service Offering: The company provides affordable pest control services for both residential and commercial clients, specializing in insects and wildlife control. The company uses integrated pest management (IPM) techniques, which are environmentally friendly and non-toxic for children, pets, and wildlife. The business has achieved GreenPro and QualityPro certifications, making it appealing to eco-conscious consumers.
Franchise Model: The company operates as a franchisor, with 28 city service areas and 3 corporate-owned franchises. The franchisor's revenue comes from franchise fees, royalty fees, and selling supplies (e.g., chemicals) to franchisees. The business also has a call center and operations/dispatch systems to support franchisees and customers, adding operational efficiency.
Customer Base and Retention: The company has 10,000+ customers, with 768 of the original 800 customers from 2012 still with the company. This indicates strong customer retention, which is crucial for a service business. The low 1.8% re-treatment rate under warranty also suggests high-quality service and customer satisfaction.
Recurring Revenue: Over $1M of the company’s revenue is from recurring revenue streams, which adds significant stability and predictability to the business. Recurring revenue is especially attractive as it reduces the volatility often seen in service industries.
Growth Potential: The company has substantial growth potential, both as a franchisor and with its corporate-owned franchises. The Southern U.S. is identified as a key area for expansion, and there is room for significant growth in the number of franchises, as new franchisees are launching regularly. The $11 billion pest control industry is expected to continue growing, driven by both residential and commercial demand.
Competitive Advantage: The company has several competitive advantages:
Lowest cost of goods sold: The business purchases chemicals at bulk rates and supplies them to franchisees at lower costs than competitors.
Eco-friendly services: The use of IPM and non-toxic methods positions the company well in the growing eco-conscious market.
Franchise model: The company has a proven business model with significant barriers to entry for competitors, including the need for master licenses.
Strengths
Strong Profitability and Recurring Revenue: The business generates $610,000 in cash flow on $2,175,000 in revenue, with a 36% SDE margin. The business also has over $1M in recurring revenue, which provides consistent cash flow and reduces risk.
Large, Loyal Customer Base: The company has a large customer base (10,000+ customers) with a high retention rate. The company’s low re-treatment rate (1.8%) suggests high-quality service and strong customer satisfaction, which is vital for the long-term success of a pest control business.
Franchise Model with High Growth Potential: The company is well-positioned for growth, both in terms of expanding its corporate-owned locations and adding new franchisees. The Southern U.S. has been identified as an area for expansion, and there is significant potential for more franchises and service areas.
Eco-Friendly Services: The company’s focus on non-toxic and environmentally friendly pest control services appeals to modern consumers who prioritize sustainability. The GreenPro and QualityPro certifications add credibility and differentiate the company from competitors.
Low Overhead: The company operates with a home-based model and has a small team, which keeps overhead costs low and increases profitability. The business model is scalable with additional franchisees and corporate locations.
Seller Financing Available: The seller is offering seller financing, which makes the acquisition more accessible for qualified buyers who may not have the full capital available upfront.
Training and Support: The seller is willing to provide training and support for up to one year, ensuring a smooth transition and continuity in operations.
Risks and Considerations
Dependence on the Owner: While the business has a solid team in place, it is still heavily dependent on the owner’s involvement in overseeing operations, developing new franchisees, and managing key relationships. You will need to assess the strength of the management team and their ability to transition effectively.
Competition: The pest control industry is competitive, with major players like Terminix, Orkin, and smaller local businesses. While the company has a competitive advantage with its low cost of goods sold and eco-friendly services, it will still face competition, especially as it grows and expands into new territories.
Regulatory Environment: The pest control industry is subject to various regulations at the federal, state, and local levels. Changes in pesticide regulations or the introduction of new environmental laws could impact the business’s operations or increase costs. You will need to ensure compliance with industry standards and keep abreast of any regulatory changes.
Franchisee Management: As a franchisor, the company relies on its franchisees for growth and success. Maintaining strong relationships with franchisees and ensuring that they adhere to company standards is crucial. You will need to have experience in franchise management or be prepared to hire the right team to support and manage franchisee relationships.
Owner Transition: While the seller is offering significant training and support, the transition will depend on the new owner’s ability to manage the franchise network and continue the company’s growth trajectory. The seller’s experience and knowledge will be invaluable during this period, but you must be prepared to take on the responsibilities of running both the franchisor operations and corporate franchises.
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About: Silverwave Deal Flow combs through and analyzes thousands of businesses available for sale that may be of interest to entrepreneurs looking to acquire an existing business. We are not affiliated with the business listed for sale unless otherwise disclosed.