[Cover Story] Has your company sprung a revenue leak?

Faced with tough competition and market conditions, pest professionals are taking extra pains to squeeze revenue from every opportunity. Yet many say areas exist where revenue continues to fall through the cracks. “You’ll never get to your benchmark of 20 percent profitability or $12,000 in production per month because you have these revenue leaks,” said Kevin Pass, president, Action Pest Control, Evansville, Ind. “They’re not always obvious.” What are these revenue losers? And what steps can you take to tighten up the ship?

SEE YOU LATER. Cancellations are the most painful revenue leak. “It costs a lot more to get a new customer and it costs very little to keep an existing one,” said Pestex President Dan Fleischer, Newtonville, Mass. “When you lose a customer, it kills you.”

The move to quarterly and exterior-only services has compounded the problem, said Pass. Companies have lost the face-to-face relationship with clients, who now only see the bill. Clients may file away leave-behind documents that detail technicians’ extra service steps without reading them, said Fleischer.

To improve communications, Pass equipped technicians with cell phones so they can leave a detailed message before leaving the property if they don’t see the customer in person. Technicians have individual cell numbers so customers can call them directly with questions or concerns. “It’s a personal touch” that reduces the red tape of going through the main office number, Pass said.
Buffalo Exterminating Company General Manger John Zimmerman, Buffalo, N.Y., began using an automated pre-notification call system earlier this year. “It’s made a huge difference with customers,” especially when scheduling interior visits during winter, said Zimmerman. “We’ve gotten into a lot more places and customers have said they appreciate the time to get ready for the service.”

Zimmerman is considering using the system to thank customers for their business. “At first we were just trying to help the efficiency of the scheduling, but we also realize those additional touches help with customer retention.” Never overlook the power of “thank you,” agreed Fleischer.

Not only do happy customers stay longer, they’re more tolerant of scheduling and service hiccups, Zimmerman explained. “They’re just easier to deal with, and therefore they’re more profitable.”

Having a follow-up mechanism to learn why customers cancel is vital, said Rose Pest Solutions President Russ Ives, Troy, Mich. Often customers won’t tell the truth. They may want to spare the technician or feel uncomfortable explaining how the service fails their perception of need or value, said Ives. He suggests managers or owners follow up. They may acquire more information or be able to salvage the account.

Sometimes personality conflicts result in the “unintentional culling of accounts” by technicians, who feel their route would be easier without difficult Mrs. Jones, Ives added. Management may need to help customers set realistic expectations, and relay the impact they have on the program’s success. Technicians may benefit from additional customer service training and support. The key is open communication, because lost technicians are just as crippling as cancellations, Ives said.

SKIPPED SERVICE, SKIPPED REVENUE. Another top revenue loser is skipped or missed appointments. “If you missed the opportunity to service, it is missed revenue you don’t make up next month,” said Ives. It’s a problem most companies experience, agreed Cook’s Pest Control President Jim Aycock, Decatur, Ala.

Sometimes customers postpone service if they haven’t seen pests. When contacted to schedule the service, the customer might hear, ‘We’re calling to give you another bill,’” said Action Pest Control’s Pass. Lead with the benefits of the service, he said. “It’s constant reselling.” Customers won’t see pests if preventive treatment is successful, he reminded, so explain what pests could become an issue if the service is not performed.

A client might skip service because her specific needs are not being met, she has a scheduling conflict, or perhaps the reminder postcard didn’t get sent or phone call didn’t get made. Whatever the reason, employ systems to follow up and reschedule so you don’t see an erosion of the account, said Rose Pest Solutions’ Ives. “(A missed stop) can get forgotten,” he said.

On the service side, routing issues, inexperience and a technician who has “already quit but hasn’t told you” contribute to missed services, said Ives. Keep current on the status of jobs, and intervene immediately if a technician is running behind. You may need to step in with extra help, reevaluate the job load, or provide counseling if skipped services are due to personal issues, he said.

Accountability for missed service begins with management and should be part of the company culture, Aycock said. His employees work hard to get ‘no services’ to zero every month, he explained. “If we’re willing to do a ‘no service,’ then we are sending a message to the customer that they can do without it.”

SALES GONE AWRY. Failing to turn paid leads into appointments or sales is a big revenue leak, agreed many pest management professionals. The cause may be one of a number of reasons:

Ineffective Phone Handling — Customer service representatives offer your first chance to convert leads or to lose them, said Ives. Well-trained CSRs can make the difference. Pest management professionals suggest recording and playing back phone calls and role playing different approaches to close the sale. Scheduling software can help track the ratio of calls to appointments or sales, and help identify which representatives need targeted training.

Phone leads are not only painful to lose, they’re expensive: Each costs Action Pest Control $10 to $30, which makes turning them into revenue imperative, said Pass. He invests in pre-employment screening and profiling to help find the right fit.

Non-Selling Technicians — Many pest management professionals rely on technicians to sell and service jobs, so when some technicians just don’t like to sell, lost revenue can be significant. Selling is not the best skill of 30 percent of Plunkett’s Pest Control technicians, admitted President Stacy O’Reilly, Fridley, Minn. These technicians never increase their routes, which potentially could become tighter, more efficient and more profitable. “Every day I’m driving past people who’d like to buy from me, but my technician never stops,” she said. Since finding good employees is hard enough, she won’t pass on an honest, hardworking technician who dislikes selling. Instead, O’Reilly will have him focus on service and open his territory to one of the “sellers” in a neighboring route. When this technician sells a job in his coworker’s territory, he can service it for one year, or turn it over for the commission. “I try to give the selling technician more authority and power to choose how his route develops,” O’Reilly said.

Deferred Proposals — Prospects defer proposals to comparison shop, discuss it with spouses and countless other reasons, but lost proposals will remain lost unless you take action, said Rose Pest Solutions’ Ives. “If you rely on the prospect to call you back, there will be some business you won’t get,” he said. Many pest management professionals let deferred proposals drop, but a simple follow-up call can make a huge difference. “Some people are very influenced by the last person they talked to,” he said. A follow-up call lets customers know you value their business.

Passing Up Add-Ons — “It’s a real disappointment when a customer you’ve had for many years uses another company for a service you’re capable of delivering,” said Ives. Failing to identify a customer’s needs or cross-selling other services opens the door to others. Do you look for termites at your general pest customers’ sites and vice-versa? How about pest proofing, bird management and fumigation opportunities at commercial accounts? Even if you don’t offer those services, pest management professionals can acquire revenue just by referring the business to an industry partner, Ives explained. “Money is left on the table by passing up the opportunity to refer (business).”

Lead Diversion — Occasionally, a lead given to a technician won’t get sold because he did the job on the side. “I suspect every (pest professional) has experienced this at one point or another,” said Ives. Diversion is more likely to occur if no mechanisms are in place to track leads. Although most people are honest, “having systems in place can help people to be honest.”

Administrative Minutiae — A common complaint of salespeople in any industry, besides the competition, is the time they spend performing non-selling activities. Accounting, administration, reports, making appointments, travel, quality control and other duties pull them from their core responsibility: sales. Technicians who both sell and service may face an even greater time crunch. Evaluating and improving office processes, from automating functions to realigning administrative support, can help inspectors, technicians and sales staff increase face-time with prospects.

INATTENTION TO PRICING. Those who under-price service or never adjust prices miss out on revenue. “You’ve got to know what you’re worth” and price accordingly, said Clark Pest Control CFO Mike Clark, Bakersfield, Calif. Pest management professionals who cut prices to get accounts may fear raising prices later. Others may neglect this task. It’s best to make regular, minor price adjustments, rather than infrequent, bigger adjustments that jolt the relationship, said Ives. “Some accounts are not worth keeping if you’re so afraid of losing them you don’t make price adjustments.”

Pricing sometimes requires a novel approach. Plunkett’s O’Reilly uses a variable pricing program for apartment complexes. Maintenance of an infestation-free complex comes in at a lower price, but by-the-unit charges kick in once a problem appears. Property managers pay for the treatment program up front, “so there’s no argument two weeks later when we need to do follow-up visits.”

Paying up front also helps with collections. Keep accounts current, said Clark. “If the balances get higher, it’s easier to cancel services, lose the account.”

EMPLOYEE TURNOVER. A costly expense, turnover also causes lost productivity and cancellations. “If you’re turning over your employee base a lot of money disappears,” said Pass. Losing a technician costs Action Pest Control $11,000, he said. “And that doesn’t even take into account the customers you lose because this is the third technician you’ve sent to their house that year.”

“(Turnover) is upsetting to the clients,” agreed O’Reilly, who cited the importance of convincing the right people to work for you. Most good hires come from employee referrals, because employees can dispel preconceived notions of pest control. But before hiring, O’Reilly sends potential employees on a half-day ride-along with a technician “so they really can see what it’s like.” This usually occurs during a challenging job. “We don’t want to show them a piece-of-cake day,” she explained. “We let them ride with the tech and envision themselves in this role and see if it’s going to fit for them.” Once on board, new hires divide their time between the classroom and assisting technicians in the field. “If they’re going to quit, I’d rather them quit before I introduce them to my clients,” said O’Reilly. A supervisor then rides the routes with new technicians for the first month. If the technician quits then, the supervisor can provide continuity so the customer doesn’t feel whipsawed. “Nothing angers home service clients more than that.”

Buffalo Exterminating Company’s Zimmerman has increased company functions and social events to keep his staff happier and more satisfied. “Happy people do better service,” he said. “We started seeing that all of our staff started taking a more personal ownership in that relationship with their customers.” As a result, customer satisfaction improved, he said. Customers who complete satisfaction surveys get timely feedback by phone. Better communication helps the firm address issues before they became too big. Fixing mistakes has a strong impact on customers, said Zimmerman. “Mistakes really create an opportunity.”

INEFFICIENT ROUTING. More time spent on the road means less time selling and servicing, as well as higher vehicle and gasoline costs. Some firms have turned to GPS-based route optimization software to boost productivity. Buffalo Exterminating Company has seen a “20 percent increase in efficiency in the day,” said Zimmerman. “We’re making more money on the day, we’re driving less.” Although pricey, the software has saved enough money to pay for itself, Zimmerman said. When not driving, technicians can earn money rather than spend it. “There are only so many hours in the day and using them productively helps.”

CONCLUSION. Obvious or not, revenue leaks are an ongoing challenge, agreed professionals. “You can never be satisfied,” said Clark Pest Control’s Mike Clark. “If we’re not successful, it won’t be because of our competitors. We have to constantly try to improve.”

The author is a frequent contributor to PCT magazine.

3 Keys to Plug the Leaks in Your Cash Flow

Companies across the country face the same challenge: Their cash flow leaks like a sieve and they have no idea how to fix it. Sure, the executive team and managers may have an idea where the leak is occurring, but unfortunately their hunches and gut feelings about the source of the leak are usually wrong.

As a result, companies invariably hit a “profit plateau,” meaning they get to a certain level of profit and performance and can’t seem to advance any further. So they resort to doing the same things they’ve always done to “fix” their company, but to no avail. When the usual approaches don’t work, they ask employees for suggestions, they let people sell them “quick fixes” and solutions, and they invest in training for themselves and their staff.

But again, nothing seems to work. That’s when many companies go into crisis management mode and rely on heroic efforts and endless overtime to save the day and meet their customers’ expectations. Sound familiar? Don’t worry; you’re not alone. Leaders and managers from companies in every industry echo the same sentiments. They hit a certain level, run out of gas and don’t know what to do. Fortunately, the following guidelines will help you discover the cash flow leaks in your company and better understand how to plug them for good.

1. Mind the gaps between process to eliminate delays.
Most products and services suffer from the 3-60 Rule, meaning they are only worked on for three minutes out of every 60. And for many companies, this one rule causes a lot of leaks. Here’s why: If you hold up your hand in front of you and spread out all five of your fingers, you’d have a good replica of how work flows in a typical company. You see the individuals (the fingers) and each has a distinct job to do in relation to the product. What you don’t see, however, is where or how long the product sits between fingers, or between John, Mary, Susan and Joe.

In other words, your people are working on the product or service and they’re all busy, but they only touch it for a short period of time and then the product sits…and sits…and sits before it reaches the next person. All that sitting time costs you money in terms of delays and inventory shortages.

If you can bring the fingers together and squeeze down that other 57 minutes, you’ll be able to take advantage of the 15-2-20 Rule, which states that anytime you reduce delays by 15 minutes per hour you double productivity and increase profits by 20 percent. Therefore, keep an eye out for customer problems. See where the problem gets “stuck” and ask why it’s sitting there. Time how long it sits with no activity. You’ll likely discover that your company suffers from Lazy Product Syndrome. Often, people are trying to do work in big batches rather than employing the principle of one-piece flow, where they never set something down until it’s done.

Once you start this analysis, you’ll find that the 4-50 Rule likely applies to your firm. This rule states that 4 percent of the gaps cause 50 percent of the delays and lost profit. In other words, all gaps are not created equal and you really don’t have to fix a lot to see a big improvement. So instead of trying to make your people faster and produce more, make your “product” (e.g., your pest control services, customer service, etc.) faster. When you make your product faster you don’t need as many people, or your people will have more time to do more things that positively impact the bottom line.

2. Count and categorize your mistakes, errors and defects to find the biggest pain point.
Face it — your company makes mistakes. Unfortunately, most people are reluctant to track errors and systematically under-report them. Why? Because it makes us feel bad. Many people are afraid that if they keep track of mistakes, management will come down hard on them. In reality, keeping track of mistakes, errors and defects is a useful thing. It helps you see where you can improve.

Therefore, look at all the errors that you and your team have made and find the pattern in them. Where are the mistakes happening? Does a certain department have more mistakes than others? How much are these mistakes costing you in terms of time, product waste and rework? What’s the biggest error or defect that’s occurring? Once you find the pattern, start with the worst or biggest or most frequent mistake first and fix the process, not your people. By doing this analysis, you’ll find that the 4-50 Rule once again holds true: 4 percent of the process produces 50 percent of the defects and lost profit.

Before you start pointing fingers and blaming certain people for the mistake, realize that mistakes are almost always due to the process, not a certain person. The process lets the person make the mistake. Your goal is to mistake-proof the process. For example, in many manufacturing situations, parts only fit one way, much like how your electrical plugs fit into wall outlets. There’s a fat end and a narrow end, which prevents you from plugging in your appliances incorrectly. You need to think of your process the same way. When the process is mistake-proof, your people will be too.

Remember, no amount of training will make your people better until you fix the process. And when you fix the process, you plug a huge cash flow leak.

3. Measure deviation from customer requirements.
When it comes to producing their products and services, most companies have a “goalpost” mentality. This means they have an upper end and a lower end for their product’s specifications. Whether they’re making a shirt or a microchip, or offering a service like pest control, they have tolerances for it being a little bigger, smaller, longer, shorter, faster, slower, etc. As long as the product or service falls somewhere in between goalposts, they consider the product “good.”

Instead of having this goalpost mentality, your company needs to adopt a bull’s-eye mentality where they hit the target every time. Why? Because size and performance matter! If a product or service is too big, too small, too short, too tall, too fast, too slow, etc., it costs you and your customer money.

Hitting the target dead center costs you no additional time or money, but as you move away from the center target, the costs get higher and higher. And if you miss altogether, you obviously lose. Then you have to throw the product away or you have to rework it — all of which costs money.

Every company has cash flow leaks. When you analyze your gaps, track your errors and watch your product deviations, you can see that your leaks are confined to a small part of your company. Once you fix that small piece, everything smooths out and your company’s cash flow improves. With these suggestions, you can increase profit without selling one additional item. That’s when you’ll attain the profit, growth and productivity numbers your company deserves. — Jay Arthur

The author helps companies plug leaks in their cash flow. Contact him via www.qimacros.com.