[2004 State of the Industry Report] Industry Forecast: Looking On The Bright Side

Our nation’s economic picture changes from day to day. However, the majority of pest management professionals are looking on the bright side, with 93 percent characterizing themselves as either very or somewhat optimistic about the future of the industry. That’s up significantly from 2001, when only 84 percent characterized themselves as optimistic.

In virtually all cases, PCOs say, the structural pest control industry is a growth industry. Pests are not going away and more consumers are in the market for professional services every day.

ON THE RISE. In line with this belief, about 80 percent of PCOs expect an increase in 2004 sales at their location over 2003. That’s up significantly from both last year (63 percent) and 2001 (68 percent). Only about 2 percent of PCOs are expecting a decrease in 2004 sales. On average, PCOs who anticipate an increase expect to see about 13 percent growth. Those who anticipate a decrease said they expected to see sales fall by 17 percent.

Ned Ewart, owner and president of Bug Master Exterminating in Austin, Texas, said he believes that all of the industry’s markets are expanding. He referred to such positive bellwethers as increased home sales and rising incomes, both of which are fueling demand for pest control services. What’s more, "I don’t think we’ve really scratched the surface of our potential market. I think our potential market is much greater than our actual market," Ewart said, explaining that today’s generation of customers is more willing to request services at their homes than the last generation. "That portion of the population that’s willing to pay for this kind of service is growing," he said.

Phillip Cooper, president of Cooper Pest Solutions in Lawrenceville, N.J., is optimistic because he believes there’s been no better time to be in the pest control industry. "We’re in the golden age of the pest management industry right now," he said. "It’s a great time to be in this industry and it’s always been a great industry to be in. There are more bright stars than I can ever remember." Cooper points to a cadre of bright business minds now in the industry who share a common vision and who are inspiring to their colleagues.

And Bryan Houtchens, vice president and general manager of Team Too Termite and Pest Control in Corona, Calif., said the industry has made some excellent changes in recent years. "The industry as a whole I think cares a lot more than they did 10 years ago," he said. "Our industry cares a lot more about how they’re seen by the public."

WHAT’S IN STORE? Regarding the most common future concerns for the industry, most PCOs (62 percent) said they believed that government regulation represents the most serious threat to the future of the pest control industry. A lack of qualified labor was cited as the most serious threat by 18 percent of pest management professionals. Meanwhile, 8 percent said industry apathy was the most serious threat. And industry consolidation, whether it be at the PCO level or manufacturer level, was cited as the most serious threat by about 6 percent of PCOs.

Houtchens is among the PCOs who believe government regulation is the industry’s biggest threat. "Here in California the regulatory agencies change their minds day to day," he said. "One day you can be doing everything the way you’re supposed to and the next day that’s changed." He also cited a lack of on-the-job experience among regulatory employees. "Unfortunately, because of the size of our industry, they’re not always able to keep up," he said. He explained that some agencies may not always be accepting of new methods or technologies in pest control. For example, his company is one of the few that offers heat treatments as an alternative to fumigation for drywood termites. Houtchens points out that studies show this method is as effective as fumigation. However, he said state regulators often don’t promote heat treatment as an alternative.

Greg Augustine, president of Harbor Pest Control in San Diego, also believes that government regulation — most notably what he calls dual-regulation — is a top concern. He said implementation of certain federal laws, namely the Clean Air Act and the Clean Water Act, has led a few county-level agencies to exert new authority over the industry’s pesticide use, in addition to the state agencies that already had jurisdiction over the industry. These agencies are creating some headaches, he said, by requiring more permits and imposing additional fees. "Also, I’ve found that those agencies don’t really understand what we do like the agencies that have been regulating us a long time," Augustine added.

Another form of regulation that may be challenging to some businesses, said Gary Rottler, president of Rottler Pest Control & Lawn Care in St. Louis, Mo., is increased licensing fees. Rottler said fewer federal dollars for municipalities means those communities will increasingly look to businesses to make up the difference. His own municipality plans to raise its licensing fees from its current level of $125 to $6,000 in the next several years. In addition, Rottler recently was told by one of the many municipalities he services that he must buy a business license in that area and he believes other townships will follow suit. He’s concerned about the potential cost, since he serves at least 100 municipalities throughout the St. Louis metro area. "It’s just an additional thing that we didn’t anticipate," Rottler said. "We see it hitting the financials and we’re trying to find ways to overcome that problem."

Meanwhile, Ray Street, general manager of Turner Pest Control based in Jacksonville, Fla., said industry apathy may be pest control’s own worst enemy. "You go to the meetings and there are a few people that continually participate to push the industry forward. It’s always a select few." Street explained that if most PCOs aren’t getting involved, the industry will miss out on making progressive strides in professionalism and outshining its adversaries. "If you have that type of apathy, if you don’t participate, the industry can’t change," he said.

For Bug Master Exterminating’s Ned Ewart, the most serious threat is the reluctance of some pest management professionals to seek constant improvement, even when the current pest control methods seem to work well. "I think that the greatest threats to the industry probably lie in complacency, a natural tendency of everybody to want to figure out the best way to do it and do it that way for the rest of our lives," he said. But he notes, that’s not going to be possible in this industry. "We’re going to have to learn how to change without it being traumatic and terribly disruptive," he said. Furthermore, Ewart said, the industry must also learn to listen to its critics. "We wouldn’t be getting criticism if there wasn’t some kernel of truth in it," he explained.

Bill Mashek, co-owner of Northwest Termite and Pest Control based in Santa Rosa, Calif., said he believes the two most serious threats are the cost of fuel and the high cost of insurance, such as workers’ compensation, liability coverage and health care, all of which he notes have increased precipitously in the last few years. "The cost of doing business is getting more and more expensive," Mashek said. "You can only pass so much of that on."

Herb Field, chief operating officer at Lloyd Pest Control based in San Diego, agrees that the high cost of workers’ compensation insurance in his state is a major concern. With many insurers leaving California, the few that are left have raised their rates accordingly. Hence, Lloyd’s insurance costs in this area have doubled in the last year, to the tune of $350,000, Field said. "How do you absorb $350,000 of new costs in a year?" he asked. "That’s a lot of pest control to produce that much more profit and that’s typical of what’s happening in California."

EMPLOYEES. Recruiting qualified employees remains a top concern for many pest management professionals, even though many have become much more sophisticated in their hiring practices.

"I think one of the biggest problems facing our industry is labor," said Michael Warren, branch manager with Arrow Exterminators in Boca Raton, Fla. "Where is the new leadership going to come from?" Warren said he believes the industry needs to work on securing people from the college ranks.

But Stuart Herman, president of Brandon Pest Control, Jacksonville, Fla., points out that while a lack of qualified labor is concerning, various checks and balances in the economy, such as wage changes and the supply of jobs, will help. "I think one of the biggest problems we have is that people may not perceive the pest control industry as a great industry where they can make money and provide for their families," he said. However, he notes, it is a recession-proof business that provides many opportunities and people always love to share their own "bug stories," he said. "What other business could you be in where everybody you meet is a potential client?" He admits, though, that the labor issue is likely especially frustrating for smaller companies that don’t have as many benefits to offer.

And some pest management professionals, like Phillip Cooper, don’t see any serious threats for the industry. "I think that with every challenge comes an opportunity and I think the wise companies will take each of those challenges and turn them into opportunities that will make their companies grow," he said.

The author is a contributing editor to PCT magazine.