Thursday, May 20, 2010

Pest Control in Challenging Times

This first appeared in the spring issue of The Standard, the quarterly newsletter of the Ohio Pest Management Association.

By Michelle Crawley

The past two years have posed many economic challenges to families and businesses, and the methods of coping are as varied as the businesses and individuals themselves. Recently, several OPMA member companies shared how they are navigating their businesses through these rough waters, and just when they expect to see recovery.

The verdict? These companies are faring well, despite the challenges that a recession can bring upon small businesses.

Todd Anderson has owned A-Best Termite and Pest Control since 1992. It is located in the Akron and Ravenna areas, employing eight people. In addition to running his business, Anderson is vice president of the Summit County Pest Control Association. Anderson says that while 2009 was the toughest year that any small business could go through, A-Best managed to meet all of their budget projections and even do a little better than the year before. The recession did not affect them as much as it could have, and he credits several adjustments that his company made in controlling costs for that success.

“We have not had to cut employees,” said Anderson. “In fact, we have brought an additional employee on, and have added a part-time office person to help with phones.”

Similarly, Mike Grace, owner of TNT Exterminating in Akron and past president of the OPMA said that, like most companies, they buckled down when the recession hit. His company employs 14, and he also has not had to cut anyone. Last year, despite a decline in sales, TNT’s profits were up.

“We really took a look at expenses in 2008 and got them under control,” said Grace. “So last year ended up being a banner year for us, due to the adjustments we made as the recession began.”

Gotcha! Pest Control Specialists in Akron is a three person operation, and specializes in the residential market. Owner Gregg Lang is past president of the Summit County Pest Control Association and is its current chairman of the board. He said that for his company, last year was slow and servicing for new businesses did not increase.

“We are not losing accounts; we are just not growing as fast as we used to be,” he said. “However, we stayed busy all year long, and because we are a small company we even sometimes push business to other companies in those busy times.”

Bob Caldwell is owner of Acme Exterminating Co. in Cleveland, and was the first president of the Greater Cleveland Pest Control Association. His company employs nine people. He says that in an economy like this, it’s a matter of tightening your belt and getting rid of superfluous overhead. “Analyze your market, find your niche and adjust accordingly.”

“Controlling costs is a huge thing,” agreed Lang. He said that at Gotcha!, they have not had to do any major cost cutting, but are keeping their eye on things.

Commercial versus residential markets

Caldwell pointed out that commercial and residential markets must be approached differently, especially in these times.

“The commercial market is really getting hit by the recession,” he said, “so they may find that they have to cut pest control. It’s still a high priority in homes, though – they will not live with pests.”

Grace agreed, “We’re seeing our residential contract accounts rebound at TNT – and these are not only the people who call up once a year. We are finding that people are spending money quicker than before. Much of this is weather driven.”

However, Lang said that Gotcha! saw a lot of people trying to spray themselves before calling their company to come out. He says his company is also feeling the effects the poor real estate market. “People are not moving into new homes like they used to. So there are fewer wood destroying insect (WDI) inspections these days. In the past, we did about 1,300 of those per year. Now we’re doing less than half that number.”

But one thing that Lang said has helped is that, unlike a lot of the businesses that are out there, years ago his company got away from spraying once a season and they are instead doing quarterly service for residential clients and monthly service for commercial properties. This makes it easier for residential clients to spread out the payments, instead of getting hit with a large yearly charge. These accounts also tend to be more long-term.

Fuel costs

Lang said the diesel costs are killing them.

Similarly, Grace recognizes that fuel costs are key. He said that in 2008, TNT adjusted prices when gas hit $4 a gallon. Last year, the gas prices went back down, and that contributed to his increased profits. However, he expects fuel costs to skyrocket again this year.

“The dynamics of this industry really change with the gas prices,” says Grace. “It’s very difficult to raise prices as fast as gas goes up. Sometimes it happens so fast companies can’t recover. I see fuel prices as a huge indicator of the health of the industry. The price of gas can make or break us.”

Marketing costs

These companies are taking different approaches to marketing for 2010, but all agree that that advertising costs must be examined.

Like many companies we talked to, Caldwell has adjusted his marketing. He realizes that marketing today is different than in the past – especially with the electronic opportunities that the Internet brings. “Younger consumers are using the Web to find pest control companies, versus looking at the Yellow Pages like the older generation does.”

Lang has cut advertising costs at his business. Grace, too, has cut ad costs by backing out of some of the Yellow Page ads they had done for a long time. Instead, he is shifting dollars by doing some cable television ads for the first time. “By not having the 12-month commitment of a Yellow Pages ad, we have the flexibility to spend the money elsewhere,” he said.

Conversely, instead of cutting or shifting ad dollars, Anderson increased A-Best’s exposure as much as possible for 2010. He increased yellow page advertising, labeled his fleet and is paying his technicians a commission for add-on services.

“We always ran unmarked vehicles before,” said Anderson. “I realized that they could be an advertisement on the highway, so we labeled our entire service fleet to get that free advertising. We need people to know we are here.

“We also started doing direct mailings to customers we have seen in the past three years. Carpenter ants and bees and wasps are big problems in the Akron area. We sent out over 1,200 post cards targeting these pests. This reminds customers that they have had us out in the past, and that they should schedule with us again.”

“Our technicians are also keeping their eyes open for add-on items,” said Anderson. “We don’t want to nickel and dime the customer, but sometimes a technician may notice that someone needs a chimney cap, or they will offer a free termite inspection. These can pay off for customer and for us, adding some revenue.”

Anderson also runs a retail store. He finds that a lot of customers are do-it-yourselfers, so they come in and buy their chemicals.

Other strategies

One company said that carrying no debt and having a few dollars is their secret to weathering the storm. Having no creditors makes a company flexible.

Grace says that people are the key to TNT’s success. “That is where success comes from,” he said. “We’re fortunate that we have really good customers that have supported us over the years, and we’ve been around long enough to have good, solid technicians that have decided to stay with us, rather than work for a national company. So much of our success comes down to those people.”

Anderson says A-Best is doing several things to control costs. Like Grace, his people are key. “Our technicians are now cross trained – while we used to have an insect technician, termite technician and sales technician – now everyone in the company has the ability to talk to the customer and offer a solution.”

Lang agreed, “We build our business on having no recalls, and by having no recalls the cost for doing the service work is lower. This is a result of managing and training people correctly, which is key.”

Another of Anderson’s strategies is recognizing when pesticides go off their patent and are being made for a lower price. He tries to use such broad spectrum products, instead of the insect specific pesticides that were high cost. These work very well and can help save money.

Anderson also keeps his fleet longer than in years past. “We always ran a brand new fleet, but now we wait until the vehicles are paid off – so we are running them for one more year and are saving money monthly in our fleet costs by making that slight adjustment.”

He also tightens routes to save on mileage and fuel costs. 

Sunny days (and swarms of bugs) ahead! 

The consensus is that while the economy is still rocky, things are looking up.

“We’re going through changing times,” said Caldwell, “and I don’t know that we’ll ever get back to where we were in the boom years of the 80s – not soon, anyway. One has to figure out how to ride out this kind of economy – some will make it and some will not. A lot will depend on the type of operation they have. If they have one that has very little room for adjusting they will find it very difficult.”

Lang does not predict a slow season in 2010, but he does not expect the economy to change for several years. He again expects to see less new business coming in from Yellow Pages shoppers, but instead depends on referrals to bring in new business. “If you offer a quality service to people, they will always use you,” he says.

Anderson believes that having a snowy winter and early spring has created the perfect storm for 2010, and that all pest control companies could have a banner year. “The three feet of snow that we had for most of the winter kept the ground from completely freezing – so all the insects survived. The high level of moisture also helped. And with the early warm weather, we expect it to be a great spring.”

Grace agreed. “All indications are that 2010 will be a good year. A lot of this will be weather-driven on the residential side. Time will tell how other things like fuel prices affect the industry.

Here’s hoping for a great 2010!



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9 comments:

  1. We have found that business has been pretty steady, even though our area has been hard hit my the recession. I guess people hate bugs enough to consider it a necessity around here.

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  2. Patrick,

    Yes...especially where you are located. If there ever was a recession proof business it is pest control. and all of the "old timers" I have known over the years all say the same thing. The concern that I have is that none of them lived through the Great Depression.

    Harry Katz is the only person I know from the pest control industry that did and I never talked to him about that. I will have to e-mail him and ask what it was like in pest control during those days.

    Best wishes and I hope you have a great season.

    Rich K.

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  3. I had actually never given much thought to pest control until I started seeing silver fish every time I turned around. I can handle the occasional spider, but this was getting to be too much, so I called Kilter Termite & Pest Control. I haven't had to look at any kind of pest in a long time thanks to the regular maintenance they do, and it's much nicer.

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  4. I dont' know if this is a clever way of getting a plug in for their company or not. But if it is, I like it. Good for them!

    Rich K.

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  5. In fact, less than 1 percent of all species are pests that negatively affect our lives by invading our space, damaging our property and threatening our health.
    -Pest Control

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  6. This appears to be another clever way to promote a company. Check out the web site by clicking "Pest Control" in the previous comment. Nice site. Best wishes!

    Rich K.

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  7. Dear All,

    This article has been hit a great deal lately. Michelle really is an excellent interviewer and organizes the answers in such a way the article really works to convey what is going on. However, as I said this article has been hit a lot and from all over the world, so I thought I might update you all on what actually did happen in 2010.
    The year started out with a bang. Then the weather turned hot and dry. I was up quite a bit until the “hot” season. Then my phone died. A number of people called me who were also having this problem and asked me if I was. I called our state association president and he told me that if it wasn’t for bed bugs there would have been a number of companies in the Columbus, Ohio area that would have been in trouble. 2010 wasn’t that great of a year after all!

    Best wishes,
    Rich K.

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  8. This is a very good idea. I have a couple of other pests that I remove manually.
    Termites Honolulu

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  9. An interesting dialogue is price I feel that it is best to write more on this matter, it may not be a taboo topic however usually individuals are not enough to talk on such topics. To the next. Cheers.
    pest control san antonio

    ReplyDelete