Pest Control company valuation

Assuming it's your first, I would view it on profitability / SDE, but many sellers in the pest control space view it on a revenue basis (based on personal experience). I suspect that's because that is how larger roll ups have valued pest control companies in the past - which I think honestly make sense, especially for smaller would-be tuck-ins like this. If I am evaluating two businesses and they both have 425 customers paying $700 / year, revenue is a better anchor than profit when one owner has a office manager to do his bookkeeping and other miscellaneous tasks and one does one. One may have SDE of $150K and work all the time while the other has SDE of $90K but much more balance. Meanwhile, my profit from both would likely be closer to $120K (all theoretical here, of course).

At the same time, valuing off of SDE puts you in a position where you are telling the seller with SDE of $150K that his business is worth 1.2x SDE ($180K) when his buddy just sold his business that he knows is the exact same size for 2.0x SDE ($180K), and he feels ripped off. This is why I think pest control is unique where it makes sense to at least quote it in terms of revenue.

As far as how much to pay. I think the price (and quoted revenue multiple) should be impacted by earnings. Anywhere from 0.6x - 0.9x revenue at this size. May be able to get it for less if it's in a more rural area with fewer potential acquirers.

I try to give sellers multiple options with different structures. E.g. an option that is 0.6x but all cash at close, an option at 0.75x that's 50/50 and one that's 0.9x but 90% seller financed. I highly recommend this approach.

SDE all the way. Revenue multiples are typically reserved for fast growing SaaS businesses. I would also be hesitant of investing in a business that was only a year old -- you will need to factor in investment for infrastructure.