Paul Giannamore on what your pest control company is actually worth

When Paul Giannamore sat in on his first pest control deal, he didn’t know pest control was even a business. He pictured “Stan the Exterminator in a truck.” Two decades later, his firm, The Potomac Company, handles more sell-side pest control deals than every other advisor in the world combined.

So when Paul came on Pest Control Legends, I asked what every owner eventually wants to know: what is my company actually worth?

He gave real numbers. He also got into what happens the day after you sign, which I wasn’t expecting at all.

Who is Paul Giannamore?

Paul Giannamore is the managing director of The Potomac Company. When I introduced him on the show, I said that institutional investors, Wall Street analysts and the largest companies in the industry see him as the top global authority on pest control valuation and M&A. His firm has advised on hundreds of transactions and more than $10 billion in volume, and it only represents sellers.

Paul started as a tech banker at Lehman Brothers and Credit Suisse, then moved to the buy side at American Capital, which at the time was the largest publicly traded buyout shop in the US. At about 25 he started his own firm with a college roommate.

Pest control found him by accident in the early 2000s, when a banker he knew asked him to sit in on due diligence for a pest control deal about an hour from his home. The seller became a friend and started referring his friends. Some clients work with Paul for years before a sale (Jim McHale for a decade), and he’s often the one saying a client isn’t ready yet.

Buyers are paying for your cash flow

Everyone talks about pest control companies selling for a multiple of revenue. To Paul, that’s a resultant number. Deals are driven by cash flow, because cash flow is what a buyer can actually spend. EBITDA (earnings before interest, taxes, depreciation and amortization) is just a proxy for it. A buyer wants to know how much cash your business generates.

Take a business with a 20% margin that sells for 10 times cash flow. It has sold for 2 times revenue. People call that a 2x deal, but revenue didn’t set the price. By that logic, sell a company with one pencil on the desk for $1 million and it sold for a million times pencils.

“It is a non-meaningful number that doesn’t drive a transaction. It describes the transaction, and that’s what a revenue multiple is.”

Owners sold for 4 to 5 times EBITDA because nobody made buyers compete

When Paul got into pest control, it was a duopoly. Terminix and Orkin were the only buyers, and it’s hard to run a competitive process with 2 acquirers. Competition doesn’t happen on its own. Like an auction, a sale needs a process with rules, and back then sellers weren’t running them.

So 20 years ago, a pest control business typically sold for around 4 to 5 times EBITDA, roughly 80% of revenue to 1.2 times revenue. After cost cuts and synergies, Paul says buyers were sometimes effectively paying 2 or 3 times. He used to say he hoped the FTC would one day come after him for price fixing the pest control M&A market.

He always believed these should be 7 to 10 times EBITDA deals. Over the last 7 or 8 years, to his surprise, the market shot past that. Right now, a lot of scarce companies that draw multiple buyers go for 12, 13, 14, 15 and sometimes 20 times EBITDA.

Premium companies still get premium prices

From 2010 to 2016, as Rentokil pushed into North America and Anticimex entered the US, typical multiples went from 5 or 6 times EBITDA (about 1 times revenue) to between 8 and 12 times (2 to 3 times revenue). Paul says September 2020 through the end of 2021 was the best time in his lifetime to own and sell a pest control business. Multiples hit an all-time high, acquirers did virtually no diligence, and Potomac averaged $100 million in transaction volume globally every month.

He says the market has been remarkably stable over the last few years, and some companies still sell at multiples similar to 2021. Back then, though, buyers took almost anything. Today, Paul describes a premium business like this:

• Top-line growth of at least double the rate of inflation: 6% or more, ideally around 10%
• Roughly 80% recurring revenue
• Gross margins in the high 50s to high 60s
• A decent size: $5 million or above

Do all of that and Paul says you might get 15, 16, even 17 times. In 2021, a $4 million company with 52% recurring revenue or weak pricing sold easily. A weaker business is still sellable today, he says, but not at nearly the same multiple.

Getting bigger doesn’t raise your multiple the way it should

In a healthy market, bigger companies are less risky and earn higher multiples. As a loose example, Paul put a $1 million business at 5 times, a $20 million business at 10 times and a $100 million business at 15 times.

In pest control, that expansion has flattened. Companies doing $500,000 to $2 million typically see lower multiples, but a $5 million company’s multiple isn’t dramatically different from a $25 million company’s.

Paul thinks part of it is scarcity. North America may have 20,000 pest control companies, the mean doing maybe $700,000 a year, and only a couple thousand above $2 or $3 million. Platform deals play into it too. Say a buyer pays 18 times for a platform and plans 20 add-ons to blend that multiple down. All that buying tends to push prices up. Still, Paul says he’s now seeing more multiple expansion than in a long time.

You’re in the recurring revenue business, contract or not

Last week a one-time-service operator told Paul he doesn’t believe in service contracts. Paul defines recurring revenue like this:

“I define recurring revenue simply as an expectation on the part of the customer as well as a provider for continued service on an ongoing frequency.”

To a buyer, you don’t need a written contract. An agreement spells out what’s included, but the ongoing relationship is what makes revenue recurring.

Paul’s bar is at least 80% recurring, because it dramatically impacts value. Getting there takes hard trade-offs, and sometimes, he says, it’s better to skip one-time work unless you can convert it. I’ve interviewed 12 or so Pest Control Millionaires program members, and one of the biggest takeaways from those conversations is that they switched to recurring services. Dave Bradford of Certus Pest made a similar point when he broke down what buyers value.

Your team is not your family

When Jeremy and Jason Julio interviewed Paul on The Boardroom Buzz, he said his job has turned into psychology, so I asked him about it. These days he spends most of his time helping sellers figure out what they want, and why a routine buyer question can set them off.

A lot of it comes back to the team. Owners build companies that feel like family, then make decisions that aren’t right for themselves to protect that team. In Paul’s example, you take $5 million less to go with the buyer that promised you all sorts of things, and the buyer keeps its word. Then Sharon, who you’ve known for 15 years, and Joey greet you like a visitor: great to see you, let’s have lunch sometime. You’re not signing the checks anymore.

“For them, it was a job. Now, they liked you. They respected you. But Dan, they were putting food on the table for their family.”

If you’re not prepared, Paul says, it can make you throw up. He compares selling to a divorce. You’re leaving a business with your name on it and a team you think of as family, and often you haven’t had a hobby in years. So he asks clients what they like to do. If they used to play guitar, he tells them to start again now. If they like golf, he tells them to play now.

Paul does a version of this himself. At a recent dinner with about 25 of his team members, he asked himself how it will feel to never be invited again, since he’s at that table because he’s the CEO. Nobody does that, he says, until they’re in it.

The best operators stay curious

I asked what the biggest operators do differently, and Paul said humility. He told me that last month he had lunch with Jerry Gahlhoff, the CEO of Rollins, and breakfast the next morning with the owner of a $5 million pest control business. His point was that when an owner wants to grow and stays small, it’s usually because he believes he knows far more than he does.

He pointed to Jarl Dahlfors, Anticimex’s former CEO and now chairman, as someone with an ego who stayed curious, humble and willing to listen, even to the guy mopping the floor. To stay curious, he says, form a hypothesis and then test it.

Design your company on purpose

For 2026, Paul wants owners to be deliberate. He says you have the privilege of designing an organization, so think about your standards and principles, and how your team treats each other and your customers. A lot of the time, he says, companies just grow, from 1 employee to 20 to 50, until a former technician is running a $20 million business and wondering how it happened. He suggests getting away, even for 3 days on your own, to decide what you’re building.

The same thing came up when I asked about the biggest mistakes owners make. He has spent much of his career with owners aged 60 to 85, and more often than not they tell him they’re proud of what they built but don’t know if it was worth it.

My take

If I ran a pest control company, I’d tape Paul’s premium checklist to the wall, because every item on it takes years of work before you sell.

Growth is the item on that checklist I can actually help with. Paul pointed out that as capital pours into pest control, customer acquisition costs climb and new tools become table stakes. That’s why I push owners to build lead flow they own, like a Google Business Profile and website that keep ranking, so their growth doesn’t rise and fall with ad costs.

Plenty of owners I’ve interviewed build family cultures on purpose. Until Paul brought it up, I’d never thought about what happens to that culture after closing. For the deal-process side, my partner Jonas wrote up what Paul taught him about selling your company, and PCM’s guide to selling a pest control company covers the steps.

Where to find Paul

Paul likes being a resource for the industry. You can find him here:

• Website: potomaccompany.com
• LinkedIn: Paul Giannamore
• YouTube: Potomac TV