Business Services
Valuation Multiples

How Business Services Companies Are Valued: SDE vs. Adjusted EBITDA

Before any multiple in this article means anything, you need to know which earnings figure it is being applied to, and business services straddles the same divide most owner-operated sectors do. A single-location shop under roughly $500,000 of earnings, where the owner still runs the operation day to day — a two-person marketing agency, a single-route pest control operator, a small staffing desk placing candidates the owner sourced personally — is usually quoted on seller's discretionary earnings. SDE adds the owner's full compensation back to profit, because a buyer stepping into the owner's chair captures that salary along with the business.

Once a company scales past that point and runs on a management layer the owner did not personally staff every day, the convention shifts to adjusted EBITDA, which adds back only the portion of owner compensation above a market rate for the job actually being replaced. The gap between the two conventions is not a technicality. If you pay yourself $200,000 to run a business a general manager could run for $110,000, an SDE presentation adds back the full $200,000 and an EBITDA presentation adds back $90,000. Same business, same honesty, two different earnings bases — and every multiple in this article, including the 7.4x GF Data figure and the vertical-specific ranges below, is quoted against EBITDA unless we say otherwise. Our guide to EBITDA and business valuation basics walks through how adjusted earnings get built and which add-backs survive a buyer's review.

What the Market Data Actually Says

“Business services” is one of the broadest categories tracked in lower middle market M&A, and its width is the first thing to understand before treating any published multiple as a benchmark for your own company. GF Data, the standard source for lower middle market transaction multiples, reported business services multiples at 7.4x EBITDA for full-year 2025, tying the highest level in the firm's database history, per figures compiled by CapitalPad from GF Data's reporting. That is a real number, drawn from real closed transactions, and it is also close to useless to you individually — not because the data is wrong, but because “business services” is not describing one kind of company. It is a filing cabinet.

Open the drawer and you find pest control operators, staffing and recruiting firms, janitorial and facilities contractors, landscaping companies, marketing and creative agencies, security services providers, testing and inspection labs, and dozens of other business models that share little beyond a common spot on an industry classification chart. A pest control platform generating 70% or more of its revenue from recurring route agreements and a commodity staffing shop placing light-industrial workers on ninety-day assignments both get filed under “business services” in a database like GF Data's. Both get averaged into the same 7.4x. Neither one actually trades anywhere near it.

At the top of the range, broker-published figures from CT Acquisitions put premier platform-scale pest control operators at 13x to 17x EBITDA, provided at least 70% of revenue comes from recurring contracts — a threshold the firm treats as gating rather than optional. At the bottom, Auxo Capital's broker-published ranges put entry-scale commodity staffing firms around $2 million of EBITDA at roughly 4x to 5x. That is close to a three-turn gap between two businesses that both call themselves “business services” and would land in the same bucket of a transaction database. On $2 million of EBITDA, the difference between a 5x multiple and a 13x multiple is $16 million of enterprise value. That is not measurement noise. It is the market correctly pricing two different assets that happen to share a filing category.

The gap is not only a feature of broker marketing pages, which is worth establishing before we lean on them further in this article. FISART's transaction-based data, which tracks a broader sample of private deals than any single brokerage's client list, shows the same pattern in narrower but still material terms: pest control ranges 5.0x to 8.5x with a 6.5x median, staffing ranges 3.5x to 7.0x with a 5.0x median. Even using the most conservative, broadest-sample figures available, pest control's median sits roughly 30% above staffing's median before the platform-scale premium the broker data shows even enters the picture. The spread is real in the most reliable dataset we found, not just in the marketing pages built to attract sellers.

The practical consequence is the reason this article exists. If you own a business services company and you benchmark yourself against “business services trades at 7.4x,” you are benchmarking against a filing cabinet, not a business. The average describes the drawer. It does not describe what is in your folder. What actually determines where your company sits is not your NAICS code. It is a narrower question, addressed in the next two sections: does your revenue renew by default, or does it have to be re-won?

Who This Article Is For

This article is for you if you own a business services company, broadly defined, and want to understand where your specific business sits before a published category average misleads you. Business services is one of five sectors Salt Creek covers — see our sector expertise for the others — and this article builds on our guide to M&A advisors for business services, which covers the buyer landscape and process, going deeper on valuation specifically. Most owners we work with run founder-owned or family-owned companies with roughly $2 million to $75 million in revenue and generally at least $500,000 of adjusted EBITDA, spread across pest control, staffing, facilities and janitorial services, landscaping, marketing and creative services, security services, and other operating businesses that fall under the business services umbrella. If your company sits below that range, much of the mechanism below still applies, but your likely buyer is an individual operator or a small regional group rather than a private equity platform, and the top of every range in this article is not your market. Treat what follows as a map of the filing cabinet, not an appraisal of your particular folder.

The Two Verticals That Show the Spread Most Clearly

Rather than attempt a ladder for every subsector business services contains, which the data does not support with any precision, we are going to walk through the two verticals where the spread is best documented and most instructive: pest control, near the top of the range, and staffing, near the bottom. The two are useful together for a reason beyond their multiples. Both are genuinely relationship-driven businesses with real customer loyalty. Both routinely present revenue to buyers as “contracted.” And both illustrate, from opposite ends, that the difference between a premium multiple and a discounted one is not how loyal your customers are. It is whether that loyalty is backed by a mechanism that survives a change of ownership without you having to re-sell it.

Pest Control at the Top of the Range

Pest control is the clearest example in business services of a business earning a premium multiple, and the reason is mechanical rather than aesthetic. FISART's broader transaction data puts the sector at 5.0x to 8.5x EBITDA with a 6.5x median — already a turn or more above staffing's 5.0x median on the same dataset. Broker-published figures from CT Acquisitions show a steeper ladder by scale: tuck-in acquisitions in the $500,000 to $2 million EBITDA range trade at roughly 7x to 10x, mid-to-large operators between $3 million and $10 million of EBITDA trade at 9x to 12x, and premier platform-scale operators above that reach 13x to 17x. We label those broker-published figures deliberately: they come from an M&A advisory firm's own marketing content, not from a transaction database, and should be read as the shape of the market rather than a precise quote for any specific deal.

What earns the premium is not pest control as an industry, or bugs as a category of problem. It is the structure of the revenue. A pest control route agreement, once signed, auto-renews. The technician shows up on a quarterly or monthly schedule whether or not the customer thinks about the business in between visits, and canceling requires the customer to take an affirmative step — call the company, say they want to stop, follow through. Inertia works in the seller's favor. That is the mechanical definition of recurring revenue: it survives a change of ownership without anyone having to re-sell anything.

CT Acquisitions treats 70% recurring contract revenue as a gating threshold rather than a soft preference, and the framing is worth taking at face value. Below that line, a pest control operator is priced more like a general home services business, with volatility discounts applied to the multiple. Above it, the recurring contract book itself becomes the asset a buyer is underwriting, and multiples expand accordingly. The same source notes that pest control, at equivalent revenue and margin, tends to trade one to two turns higher than adjacent home services categories like HVAC or plumbing — businesses that are also relationship-driven and often locally dominant, but that sell project-based work (a new system, an emergency repair) rather than a subscription to recurring visits.

None of this means every pest control business clears the top of the range. A single-route, single-technician operator under roughly $500,000 of SDE is still priced closer to any other small owner-operated service business, because the buyer pool at that size is dominated by individual operators and SBA-financed buyers rather than platforms, and because the business still depends heavily on the owner personally. The premium belongs to the recurring contract book at scale, not to the pest control label by itself. An owner who has not built or documented that recurring book — who is doing meaningful one-time treatment and exclusion work alongside route service without separating the two in the financials — is not automatically entitled to the top of a range built on operators who have.

Buyers underwriting a pest control platform diligence the contract book directly rather than taking a “recurring revenue” label on a CIM at face value. They want auto-renewal language in the actual agreements, historical cancellation and win-back rates by route, and evidence that price increases have stuck without triggering attrition — the same kind of proof-of-durability we describe more generally in our guide to what buyers look for in an acquisition target. A route book with a documented sub-10% annual attrition rate and a history of successful price increases is a materially different asset from a route book that merely says “recurring” on a summary page, even if both show the same current-year revenue.

Platform-scale multiples also reflect what a buyer can do with the business after closing, not only what it earns today. A regional pest control operator with 70%+ recurring revenue and clean route-level data is a base a private equity sponsor can add smaller tuck-ins onto, absorbing their routes into existing technician territories at a marginal cost well below what the platform itself trades for. That arithmetic — buy a tuck-in at 7x to 10x, fold it into a platform valued at 13x to 17x — is a meaningful part of why the top of the pest control range keeps climbing even as most of the underlying route economics stay the same.

Staffing at the Bottom of the Range

Staffing sits at the opposite end of the same filing cabinet, and the mechanism is the mirror image of pest control's. FISART's transaction data puts the sector at 3.5x to 7.0x EBITDA with a 5.0x median. Auxo Capital's broker-published ranges break that down further by scale and specialty: entry-scale commodity staffing around $2 million of EBITDA trades at roughly 4x to 5x, while firms around $15 million of EBITDA reach 8x to 10x. Specialty matters as much as scale — light industrial and clerical placement, the most commoditized end of the business, runs 4x to 5x regardless of size, while healthcare, IT, and finance specialty staffing commands 6x to 8x, and healthcare staffing platforms at real scale reach 9x to 13x. We are labeling these figures broker-published because they are, and because the gap between the specialty bands is itself informative: a staffing firm is not one asset, any more than “business services” is.

The discount relative to pest control is not a reflection of how the business is run. It is a reflection of what the revenue actually is. A staffing engagement, however long-standing the relationship, typically runs on a master service agreement with no minimum volume commitment, re-bid annually or open-ended, according to DealStream's staffing industry guide. A client can stop sending requisitions without penalty and without warning; there is no auto-renewal mechanism working in the seller's favor the way there is on a pest control route. The relationships can be genuinely sticky — a staffing firm that has served a client for eight years has real switching costs on its side — but sticky is not the same as contracted, and a buyer underwriting the business has to price the difference.

That difference shows up directly in concentration risk. Because an MSA carries no volume floor, a single large client can represent a meaningful share of revenue with nothing obligating them to keep sending work. DealStream's rule of thumb puts a specific number on the consequence: when a staffing firm's top five clients represent more than 50% of revenue, buyers commonly apply a 10% to 25% discount to the multiple. Auxo Capital describes the same dynamic in mechanism terms — a single client's departure can remove a large share of EBITDA with essentially no built-in replacement, because there is no contract obligating anyone to backfill the volume, and buyers price that fragility directly into concentration discounts and into how much of the deal gets structured as cash at close versus earnout.

Earnouts and contingent consideration show up more often in staffing deals than almost anywhere else in business services for the same reason. Because the revenue base can move meaningfully within a single client relationship, buyers hedge post-close retention risk by shifting part of the price into an earnout, a seller note, or an escrow tied to client retention, rather than paying the full headline multiple in cash at close. Auxo Capital's guidance to sellers is blunt about the consequence: a higher headline multiple loaded with contingent consideration can produce less actual cash than a lower multiple paid cleanly, and the effect of that hedging on the cash-equivalent multiple commonly runs half a turn to a turn and a half below the number quoted at signing. An owner comparing two competing offers on headline multiple alone, without looking at what fraction is cash at close, is not comparing the offers that matter.

One more variable moves the number inside staffing specifically, and it is large enough to be worth flagging even though we cannot point to one precise published study behind it: the mix between contingent placements — where the staffing firm's own employees are billed out to a client — and direct-hire or retained search, where the firm is paid a placement fee and the relationship ends. The two revenue streams get underwritten very differently, and broker commentary consistently describes the mix as capable of swinging the same firm's multiple by three to six turns depending on how much of the business is fee-based placement versus billed labor. We are flagging that range as directional rather than precisely quantified fact, because no source we found puts a tight confidence interval on it, but the direction is consistent enough across broker commentary to be worth an owner's attention when deciding how to grow the business ahead of a sale.

Vertical Comparison at a Glance

The table below places pest control and staffing side by side, plus the blended GF Data average for context. Every multiple except the GF Data composite is broker-published rather than drawn from a transaction database, and real businesses frequently sit between bands or blend characteristics of more than one row.

Read across the third column and the size of the gap is hard to miss: a platform-scale pest control operator commands roughly the same multiple as a healthcare staffing platform, while a commodity light-industrial staffing shop tops out around a third of that. Read down the fourth column and the reason becomes clear. Every row's ceiling is set by the same underlying question, asked in different language each time: does the revenue in this business renew on its own, or does someone have to keep re-winning it? Pest control's gating factor is a recurring contract share because the contract itself does the renewing. Staffing's ceiling is capped by concentration and contract structure because nothing in an MSA does that work for you. That question, more than the NAICS code either business shares with the other, is the actual driver of where a business services company lands — which is the subject of the next section.

Contracted Is Not Recurring

The distinction underneath everything above deserves to be stated on its own, because it is easy to blur on a CIM and expensive to get wrong in diligence. Contracted revenue and recurring revenue are not the same thing, even though owners, brokers, and even some buyers use the words almost interchangeably. 37th and Moss, in a piece addressed specifically to this confusion, draws the line precisely: contracted revenue may be re-bid annually, while true recurring revenue auto-renews. That single distinction is arguably the largest driver of the spread this article has been describing.

Put the two mechanisms side by side. A pest control route agreement is a contract, and it is also recurring: once signed, it continues without either party having to act, and ending it requires the customer to take a deliberate step. A staffing MSA is also a contract — often a more heavily negotiated one, with indemnification language, insurance requirements, and payment terms spelled out in detail — but it is not recurring in the same sense. It typically carries no minimum volume commitment, per DealStream's staffing guide, and it is commonly re-bid annually or can simply go quiet as a client's requisitions dry up without any breach of the agreement. Both businesses can present a client relationship as “under contract” on a summary page. Only one of those contracts is doing the work of retaining revenue without the seller having to re-sell it.

This is not a distinction specific to pest control and staffing; it recurs across business services generally, and it is worth an owner in any subsector checking their own contract book against it directly rather than assuming the label “recurring” on an internal report is accurate. The test is mechanical, not rhetorical, and it comes down to three questions any actual agreement will answer: Does the contract auto-renew, or does it require an affirmative renewal action by the customer? Is there a minimum volume or spend commitment, or can the client's usage go to zero without breaching the agreement? What does the customer have to do to exit — nothing, a notice period, or an active cancellation? A contract that auto-renews, carries a volume floor, and requires active cancellation to exit is recurring in the sense buyers price a premium for. A contract that must be actively renewed, carries no volume floor, and can simply lapse is contracted in name only.

The reason this matters more than almost any other single fact in this article is that it is the thing a seller can, at least at the margin, control well before a sale process starts. You cannot retroactively make a staffing MSA behave like a pest control route agreement — the contract law and the client relationship dynamics are what they are — but you can, over a multi-year planning window, shift the mix of your business toward structures that behave more like the recurring end of the spectrum: RPO and MSP-style embedded staffing arrangements that carry longer terms and deeper workflow integration than a standard temp placement MSA, subscription or retainer-based pricing in a marketing or facilities business instead of pure project billing, or multi-year service agreements with volume commitments in a janitorial or landscaping contract instead of annual renewals with none. None of that is free, and none of it happens quickly, which is exactly why it belongs in the planning window we describe in our guide on when to start exit planning rather than in the twelve months before a sale.

It is also the first thing a buyer's diligence team checks once a letter of intent is signed, and the gap between what a CIM claims and what the underlying contracts show is one of the more common sources of repriced deals in business services specifically, because the vocabulary is so easy to blur in good faith. An owner who can hand a buyer the actual contract terms — auto-renewal clauses, volume floors, cancellation notice periods, documented history of both — rather than a summary characterization is not just making diligence faster. They are giving the buyer less reason to discount for uncertainty they cannot verify, which is a meaningful part of what a clean sell-side quality of earnings report and organized contract documentation are actually for.

What Actually Moves the Number Inside Any Vertical

The vertical sets the outer band. Inside it, several factors decide where a specific business lands, and some of them can move value more than climbing from one vertical's band to a higher one.

Revenue mix between recurring, contracted, and pure project work is the largest lever, and it is quantifiable in broad strokes. CT Acquisitions' broker-published comparison puts recurring-revenue businesses at 1.5x to 2x the multiple of otherwise-comparable project-based businesses. That is a wide range because “otherwise comparable” is doing real work in the sentence — margin, size, and customer quality all move independently — but the direction and the rough magnitude are consistent enough to plan around. Within that shift, broker commentary describes a roughly 20-percentage-point increase in recurring revenue share as moving the multiple by about half a turn; we flag that figure as directional rather than precisely established, because no single source puts a tight confidence interval on it, but it is a reasonable planning assumption rather than a guess.

Customer concentration is priced explicitly in staffing and, by extension, plausibly matters everywhere else, even though only staffing has quantified data behind it. DealStream's 10% to 25% discount for staffing firms with more than 50% of revenue in their top five clients is the only sector-specific concentration discount we found with a specific number attached. We have not found comparable published figures for pest control, landscaping, or facilities services specifically, and we are not going to invent one. The underlying logic — that a buyer discounts for revenue they cannot verify will survive a change of ownership — plainly applies beyond staffing, and our general guide on what buyers look for in an acquisition target covers concentration as a cross-sector concern. Treat the staffing number as an illustration of the size of the effect, not as a figure you can import directly into a pest control or facilities valuation.

Margin durability against wage inflation is a real risk across nearly every labor-intensive business services vertical, and we are not going to attach a number to it. Staffing, pest control, janitorial, landscaping, and security services all run on labor as the largest cost line, and minimum wage increases, competitive labor markets, and payroll tax changes compress margin in ways that are broadly understood but that we could not verify with sector-specific percentages from a credible source. A buyer will ask how much of your recent margin has come from wage suppression that cannot continue versus genuine operating leverage, and the honest answer to that question matters more than a borrowed statistic would.

Management depth and owner dependence move value the same way here as everywhere else in the lower middle market. A business services company where the owner personally holds the key client relationships, prices every large job, or is the only person who can run payroll and scheduling is priced as a business that transfers with risk attached, regardless of vertical, and buyers respond with earnouts, extended transition requirements, and rollover expectations. Our guide on how a sell-side process compares to working with a business broker covers how that dependence gets structured around.

Documentation quality — the difference between a contract summary and the actual contracts — is worth more at close than most owners expect, and it costs nothing but time to build ahead of a process. One data point is worth flagging here even though it applies to the whole lower middle market rather than business services specifically, because the coincidence is easy to misread: GF Data's broader reporting on quality of earnings finds that sellers across all industries who ran a sell-side QoE realized average multiples of 7.4x, against 7.0x for those who did not. That happens to be the same 7.4x figure this article opened with as the blended business services average, but the two numbers describe different things — one is a category average, the other is the premium a specific seller-side practice produces regardless of category — and conflating them would be exactly the kind of category-level thinking this article is arguing against. The mechanism, not the coincidence, is what matters: uncertainty a buyer cannot resolve gets priced as a discount, and a clean sell-side quality of earnings report, backed by a contract file that documents the auto-renewal and volume language discussed above, removes exactly the kind of uncertainty a buyer would otherwise price in as risk.

The Rest of the Filing Cabinet: Where the Data Runs Thin

Pest control and staffing are the two verticals inside business services where we found data specific and reliable enough to build a case study around. Most of the rest of the filing cabinet does not have that. Being direct about where the data runs out is part of the point of this article, so here is an honest accounting of the other verticals owners in this space most often ask about.

Janitorial, facilities, and landscaping services share staffing's basic structure — labor-intensive, relationship-driven, typically running on service agreements that get re-bid rather than agreements that auto-renew the way a pest control route does — but we have not found sector-specific published multiple ranges for them with the same reliability as FISART's pest control and staffing figures, and we have not found a customer-concentration discount specific to any of these three verticals the way DealStream publishes one for staffing. The mechanism almost certainly transfers: a facilities contract that gets re-bid annually behaves more like a staffing MSA than a pest control route, and a landscaping account concentrated in a handful of commercial properties carries the same fragility a concentrated staffing client base does. But we are not going to attach a specific discount percentage to landscaping or facilities services when no source we found actually publishes one for those verticals. If you operate in one of these categories, treat the staffing section above as the closest available analog for how concentration and contract structure get priced, not as a direct substitute for data on your specific vertical.

Marketing, creative, and other professional services agencies present a different problem: revenue there is often retainer-based, which looks recurring on a summary page, but retainers in agency work are frequently cancelable on short notice and tied closely to the agency's key creative or account personnel — closer in character to a staffing relationship than a pest control contract despite the retainer label. We did not locate reliable transaction-multiple data specific to this vertical for this article and are not going to publish a range we cannot support.

Testing, inspection, and certification (TIC) businesses are a case where the data genuinely splits by ownership structure. Public TIC comparables trade at healthy multiples — figures near 14x EBITDA show up in public-market comparisons — but that reflects large, diversified, publicly traded testing and certification companies, not the private lower middle market. We were not able to find credible private-transaction data for TIC businesses at the scale most of our clients operate, and we would rather say the private data is thin than dress up a public-company multiple as a private one. If you run a TIC business and are trying to size a range, the honest starting point is that published data for your specific situation does not really exist yet, and a conversation about your actual numbers will tell you more than any range we could publish here.

Security services sits somewhere between pest control and staffing in character — often contract-based with real switching costs, sometimes unionized, frequently bundled with equipment and monitoring revenue that behaves differently from the guard-labor portion of the business — and we did not find data specific enough to place it confidently on the ladder above. The general framework in this article — ask whether the revenue renews by default or has to be re-won, and ask what a buyer would actually find if they read the contracts rather than the summary — applies regardless of which drawer in the filing cabinet your business sits in, even where we cannot hand you a published number to go with it.

How Business Services Multiples Compare Across the Lower Middle Market

Business services as a category sits at or above the middle of the lower middle market on multiples, though as this article has argued at length, that category-level fact tells you less than almost anything else in this piece.

• Against the broader lower middle market. GF Data's 7.4x composite for business services in 2025 sits at the higher end of the mid-5x to low-7x range the same source reports across all industries at comparable deal sizes, with a pronounced size premium as deal value rises. Our guide to EBITDA and valuation basics covers those cross-industry brackets in more detail.
• Against childcare. Business services' internal spread and childcare's are structured similarly, but the ceilings differ. Childcare's broker-published ladder runs roughly 2x at single-site owner-operated centers to 6x to 9x at institutional platform scale — a wide range, but one that tops out well below pest control's 13x to 17x platform ceiling. The difference again comes down to contract mechanics: no childcare center operates on an auto-renewing contract the way a pest control route does, so even at platform scale, childcare's ceiling sits closer to staffing's platform premium than to pest control's.
• Against recurring-revenue services outside business services. The contrast with managed IT services is the cleanest illustration of the mechanism this whole article is built around. An MSP's revenue is typically governed by multi-year contracts with defined minimums and auto-renewal terms — closer to a pest control route than to almost anything inside business services other than pest control itself — and that structure is a meaningful part of why MSPs command a premium most of business services does not reach. Our MSP valuation multiples guide covers that premium directly.
• Against other consolidating sectors. Business services, and pest control and staffing specifically, are active roll-up categories, with private equity sponsors building platforms and pursuing tuck-ins in both verticals for the reasons described above. Negotiating against a serial acquirer with a defined model and an active pipeline is a different exercise from negotiating against a first-time buyer, a dynamic we cover in our guide on why roll-ups are heating up and in our comparison of strategic buyers versus private equity buyers.

Getting a Range Specific to Your Business

The ranges above tell you roughly where business services companies trade, sorted by the two verticals where the data is strong enough to be useful. They cannot tell you where your company would land, because that depends on details a buyer examines directly: what your actual contracts say about renewal and minimum volume, how concentrated your top five clients are, how much of your margin depends on labor costs that may not stay where they are, and how much of the business runs without you.

A preliminary valuation conversation is how a category range becomes an estimate that reflects your actual business rather than a filing-cabinet average. Jack and Connor handle these directly. We work on a success-fee basis with no upfront retainer for standard M&A engagements, so an early conversation carries no cost and no obligation to sell.

If you want to understand your options, start with our guide to M&A advisors for business services, then review how Salt Creek approaches business valuation and how a lower middle market sale process actually unfolds.