A STATE OF THE INDUSTRY REPORT

Pioneering The Future 

The business of pest control is more challenging today than ever before. More and more chemical tools are being phased out as homeowners continue to demand healthy, pest-free environments. Today’s pest management professional (PMP) must keep pace with industry regulations and requirements, Integrated Pest Management methods, new products and practices, homeowner concerns, and of course, the need for profitability.

This year’s survey reinforces the change that is taking place in the pest control market. Companies are streamlining their services, yet increasing their revenues. New and improved termite controls have impacted PMPs as well. These changes are even forcing PMPs to review the way they advertise their business and services.

Aventis Environmental Science is proud to be leading the development, supply, and stewardship of innovative, responsible and effective control methods. In other words…pioneering the science of pest control.

In the next year, we will be meeting the challenges of an ever-changing industry through the expansion of applications for active ingredients like fipronil and deltamethrin. We’re also creating new products that address public health threats posed by fire ants and deer ticks. We’ll be expanding our Termidor and DeltaGard Partnerships with the formation of our new Pioneer Partnership Program. And, we’re in the process of updating our Web site – designing it to give PMPs like you access to the latest and most up-to-date news and information on cutting-edge solutions and promotional opportunities.

Everyone at Aventis Environmental Science thanks you for your continued support. We’re looking forward to working with you in the years ahead as we prepare to meet the future of pest control together.

Sincerely,

Michael McDermott

Vice President, Professional Products

Aventis Environmental Services

Montvale, N.J.

ABOUT THIS REPORT In April and May of this year, PCT commissioned a random mail survey of 1,000 of its readers by Research USA, a research firm located in Arlington Heights, Ill. There was no indication given in the mailings to show for whom the survey was being conducted. We received 428 responses to the survey, for a response rate of 44 percent (this takes into account undelivered surveys, damaged surveys, etc.). The data were analyzed over the summer and are featured throughout this report. About 89 percent of the survey respondents were male, and 47.4 years was the average age of all who responded. Respondents represented states from all areas of the country, with the largest number being located in the states of Texas, Florida, and California. The largest percentage of respondents (44 percent) said they were the owner of their business, and 11 percent more were presidents. Most others held various management positions. Editor’s note: All of the stories in this State of the Industry report were written by Lisa McKenna, former managing editor of PCT. She can be reached at lmckenna@pctonline.com.

A BOOMING BUSINESS

An industry of leaner, meaner, larger pest control companies is finding that higher revenues and greater opportunities abound.

By: Lisa McKenna

Pest control companies are larger, are bringing in more revenue and are doing so with an apparently tighter range of service offerings. What’s more, the outlook for the industry continues to look bright, in spite of the recent economic challenges in wake of the terrorist attacks on New York City and Washington, D.C.  These and many other interesting findings were highlighted by an independent survey commissioned by PCT and conducted earlier this year (see related story).

INDUSTRY SNAPSHOT. Nearly all businesses surveyed were founded during the 20th century, with the majority (67 percent) being founded since 1970. Just more than three-fourths of those surveyed are independent, privately held businesses, while the remainder are chain operations, franchises or some other type of organization. These figures indicate that the number of independent businesses has dropped: In the previous survey, conducted in 1999, just more than 90 percent of the respondents were independent, privately owned businesses. Also, in that survey, only about 3 percent of respondents classified their businesses in the “other” category, compared to 15 percent in the 2001 survey. So it appears that more businesses don’t classify themselves as franchises, independents or chains, but as some other type of business entity.

Pest management professionals interviewed about the survey results said they believed the decrease in privately owned businesses could result from a number of factors. Ongoing industry consolidation of the industry was one factor named, as was frustration on the part of more business owners with today’s tougher regulatory environment, causing more people to exit the industry.

Chuck Russell, director of operations for the pest services division of Eradico Services, Southfield, Mich., says acquisitions likely account for some of the decrease in privately owned companies. A former president of the Michigan Pest Control Association, Russell said in recent years he has noticed “a direct decrease in the number of companies in the association,” largely due to acquisitions. In addition, Russell said, a more stringent regulatory environment has created more barriers to entry into the pest control business. “It doesn’t appear to me that there are as many people getting into this business as there have been in the past,” Russell said.

Thomas Pollard, president of Best Control Pest Control, St. Louis, Mo., says the decrease in independent companies is understandable because it has become more difficult for smaller, privately owned businesses to compete in today’s marketplace. “Realistically I think you’re going to be seeing more and more big companies gobbling up little companies,” Pollard said. One reason for this, he notes, is that owners stand to earn a pretty penny for selling their businesses. Furthermore, larger companies with deeper pockets can make it increasingly difficult for smaller businesses to compete. However, he notes, “there will always be room for small companies.”

And it appears there is still plenty of room for smaller operations, although the number of them appears to be shrinking. According to the survey, the majority of companies (65 percent) have just one office. In the previous survey, close to three-fourths of respondents said they had one office.

Besides being larger in size, it also appears that today’s pest control companies are earning higher revenues. According to the survey, in 2000, the average gross sales for respondents’ companies was $682,000, compared to $605,200 in 1998, an increase of 13 percent. The median level of gross sales was $279,200, an increase of 34 percent from the previous survey.

A number of factors are likely responsible for the increases in revenue. Hal Stein, president of Crane Pest Control, San Francisco, Calif., says the increases in average gross sales aren’t at all surprising. “Besides increased acquisitions,” he said, “it’s also due to the fact that every single year the dollar inflates.” Furthermore, he said, since there has been greater public awareness of the industry, more and more consumers are using professional pest control services, leading to increased revenues overall.

Eradico’s Russell holds a similar view about the industry attracting new customers. He says growth, particularly on the residential side of the business, may account for the industry’s increased revenues. “I think there’s a larger focus on residential business,” Russell said. “Across the country, we’re seeing general consolidation in practically every industry, so commercial accounts are shrinking, yet the residential side of the business continues to expand.” The new home growth being seen all over the country also may have something to do with this expansion, he explained. “Residential business continues to grow and boom and it’s an untapped market.”

Ian Robinson, vice president of technical operations for Sears Termite & Pest Control, Orlando, Fla., said one factor that may partially account for the increases in revenues could even be the burgeoning ant control market, which brings more and more homeowners to professional pest control operators. “[Ants] are not as easily controllable by the homeowner as they are by the PCO,” he said. “As ants become a bigger issue, homeowners need professional assistance. They are not going to do it by themselves.”

While the survey indicated rising revenues among pest control companies, it also indicated there are fewer firms in the lower revenue brackets. Specifically, the survey showed a decrease in the number of PCOs grossing less than $250,000 in annual sales, from 59 percent in the 1999 survey to 49 percent in the 2001 survey. About 19 percent of PCOs now gross between $100,000 and $249,999, compared to about 25 percent in the previous survey. Along with that was an increase in the number of respondents classifying their businesses in the more than $250,000 gross sales range. This percentage increased from 41 percent to 51 percent.

PCOs interviewed about the results surmised that this change in revenues is likely due to recent industry consolidation, as well as competitive factors. “Some of the growth has been because consolidation still continues to be a major thrust for a lot of the major players,” said Larry Treleven, co-president of Sprague Pest Solutions, Tacoma, Wash. Furthermore, Treleven said the decrease in companies generating between $100,000 and $250,000 is not at all surprising. “With the costs of operating a branch,” he said, “we could never survive if a branch only made $250,000. You have to make over that to make the percentages fall into place. When that doesn’t happen,” he added, “people get discouraged and don’t make enough to survive or live very well.”

NPMA EFFORTS DRAW PRAISE Survey respondents were generally very happy with the services provided by the National Pest Management Association (NPMA) and have expressed increased satisfaction with the organization. More than three-fourths of respondents (77 percent) rated NPMA’s performance in the past year as either “good” or “excellent,” compared to 72 percent of respondents in the previous survey. And about one out of five respondents (21 percent) have donated to the NPMA’s Professional Pest Management Alliance Program, which is working to provide an ongoing public relations campaign for the industry. Two NPMA objectives frequently praised by PCOs include its legislative affairs initiatives, as well as its consumer awareness efforts. “I think they are doing a nice job for us,” said Will Bennett, president of Bill’s Home Service Company, Green Valley, Ariz. “They are fighting a good battle for us on key issues they are involved in and I think they represent us well.” Chuck Russell, director of operations for the pest services division of Eradico Services, Southfield, Mich., agrees. “Their lobbying efforts are first-rate,” he noted, “and they’re efforts that individual PCOs can’t do on their own.” Legislatively speaking, the PCT survey indicated that one-third of PCOs have participated in one or more legislative-related activities, conducted on behalf of the industry, during the past 12 months. The number one activity cited, writing a letter to their Congressman, was listed by 24 percent of respondents. Meanwhile, about 15 percent made a donation to the NPMA’s Political Action Committee and about 4 percent participated in the association’s Legislative Day.

Chuck Russell of Eradico agrees that consolidation in the industry probably accounts for the decrease in PCOs in the $100,000 to $250,000 sales level. Furthermore, he adds, companies at that level can be attractive takeover targets for organizations looking to acquire companies. “In most cases, those are companies where the owner-operator has grown his business to a decent size, has a couple of employees and is at a point in time where either they don’t want to grow any larger or can’t grow any further and it makes good economic sense to sell.” At that sales level, Russell added, business owners find themselves at a turning point where they will need to put more of an investment into the business to grow it to the next level. While some owners do take the necessary steps to do this, he said, “our experience has been that the vast majority are choosing to sell.”

Crane’s Stein says the decrease in PCOs in this revenue range simply reflects the normal evolution of an industry. “There has been one blow after another against the small PCO,” Stein said. “Living up to the new laws has driven a lot of people out of business.” The increase in technical knowledge required and demanded of this industry has also been a factor, Stein said. “This is indeed becoming a technical profession,” he added.

Steve Altarescu, general manager of Bliss Exterminator Co., New York, N.Y., notes it can be difficult for PCOs in the $100,000 to $250,000 range to support an ongoing staff. “We’ve seen people who start their own business and then want to come back to work for us, because it’s hard for them to stay in business,” he said.

While revenues appear to be increasing for pest control companies, the average number of accounts served each year looks to be decreasing. In the 2001 survey, companies served an average of 4,000 accounts, compared to 4,524 accounts in 1999, a decline of almost 12 percent. Some of the decline may be explained by the relatively large number of respondents who said they service fewer than 100 accounts per year. (About 15 percent of respondents were in this category, compared to 5 percent in 1999.) In addition, fewer PCOs said they served 25,000 or more accounts each year. This proportion dropped from 5 percent of PCOs in 1999 to 3 percent this year.

The 2001 survey also indicated that PCOs saw a slightly larger percentage of their work going to commercial accounts. On average, 64 percent of companies’ accounts are residential and 36 percent are commercial. This compares to a 70/30 split in 1999.

HIGHER PRICES. Perhaps one reason for the increase in company revenues may be that prices for pest control work have gone up. Pest management professionals are charging more for their services these days, according to the PCT survey. In the residential market, the average price for service increased by $10, to $72. On the commercial side, the average price went up by $7, to $110. Higher fuel prices during the last two years likely have something to do with this trend (see related story).

Some PCOs say, however, that price increases must be a recurring part of the business, since they help the industry keep up with higher employee wages and other expenses. Stein says price increases have always been part of the business. “Since 1970 there’s been no year in which we have not made some adjustment.” Further, he said, “since 1970 there’s been no employee here who has not received a raise.”

Other companies are more selective about making price increases. Pollard of Best Control Pest Control said he does whatever he can to hold prices stable for repeat customers as long as possible. He recalled a recent situation involving a long-time customer. “Just this past year, for the first time since 1988, I told her we had to bump her price up,” Pollard said. “She said, ‘It’s about time.’”

And some companies haven’t made price changes at all recently, citing increased cost control measures as the reason. For example, Sears’ Robinson said that while gasoline prices have increased, the company’s new service strategy has decreased its overall cost per contract. “We have not seen a need to take a price increase,” Robinson said. He explained that Sears’ lower costs resulted from such factors as the strategic selection of products and application techniques combined with a better quality control program.

Industry giant Terminix International, headquartered in Memphis, Tenn., hasn’t raised its prices this year either, according to Norman Goldenberg, vice president of government affairs and technical services. “Through greater route density, higher customer loyalty and other operational efficiencies, we have been able to hold the line on prices to our customers,” Goldenberg explained.

SERVICE VARIETY. As has always been the case, companies offer a broad range of control services. The survey indicated that a majority of the industry offers ant control (80 percent), rodent control (74 percent), perimeter pest control (66 percent), flea control (64 percent), termite control (63 percent) and flying insect control (51 percent). Many other types of services, such as ornamental work, odor control, mosquito control and wildlife management, are also offered by smaller percentages of companies.

However, the survey also indicated that more PCOs are taking a closer look at their range of services, perhaps focusing on more profitable business segments while eliminating less profitable ones. Rodent control, for example, is apparently offered by fewer companies these days. In 1999, close to 95 percent of companies offered this service. Today, that percentage has dropped to about 75 percent.

PCOs interviewed about these results said rodent control practices have changed in recent years. “It’s definitely costing more but it’s still a very profitable business,” said Bruce McCown, technical director of Florida Pest Control & Chemical Company, Gainesville, Fla. McCown said today’s rodent control work is more labor-intensive since pest control professionals must repeatedly return to accounts to check glueboards and snaptraps and to remove rodent carcasses. “In the older days, if you had a rodent on a glueboard, the customer would take care of it,” McCown said. “Nowadays, they expect the company to take care of it.” He said, however, that Florida Pest Control has increased its prices for rodent control work to make up for these increased labor costs.

Corey Chantry, president of All Seasons Pest Control, Spanaway, Wash., said he has also adjusted the company’s pricing structure for rodent work in recent years, based on increased costs. He said he increased prices in these areas three or four years ago, after watching most of his competitors do so. Like McCown, Chantry cited increased labor costs, along with increased liability as the main factors behind the change. “Fifteen years ago you could put out bait stations and that solved the problem,” he said. “Now with current liabilities, we want those stations back and we also look for ways to help prevent rodent problems in the future.” In addition to a higher initial set-up cost, said Chantry, the company offers more follow-up on rodent control work that includes exclusion practices.

But not all PCOs have witnessed price increases in rodent control work. Terminix’s Goldenberg said the opposite may in fact be true, at least for some businesses. “Rodent control, commercially, may be a bit less profitable as pricing remains the same or decreases due to competitive efforts,” he said.

Along with rodent control, it also appears that fewer PCOs are offering perimeter pest control services. The number of PCOs offering this segment dropped from about 77 percent in the 1999 survey to just more than 66 percent. Fewer PCOs also say they offer termite work. In the current survey, about 62 percent reported being involved in the termite control market, compared to 73 percent in 1999. (Major factors affecting the termite market are discussed in the related story “Termite Market Shake-Up.” )

Bird control is another business segment that is apparently offered by fewer PCOs. About 36 percent of the industry is now involved in the bird control market, compared to 41 percent of the industry in 1999. The favored methods and/or products used for bird control have also shown somewhat of a shift, according to the survey, towards more deterrent-type products and away from pesticidal and repellant products.

In the 1999 survey, the majority of respondents offering bird control services said they used repellents most often. In the current survey, just under half said they used repellents most often. Instead, 52 percent of respondents said they used netting most often, compared to 48 percent in 1999. The use of avicides also apparently declined, with 39 percent saying they used avicides most often, compared to almost half in 1999.

A few service areas posted increases. More PCOs are apparently offering ornamental, tree and turf spraying services: this sector went from about 25 percent in 1999 to 33 percent in 2001. Industrial weed control is another area now offered by more PCOs: 26 percent compared to about 16 percent. And about one-fourth of the respondents said they now offer mosquito control, compared to about 18 percent in 1999.

The survey also identified a number of areas that represent significant business growth for the industry. Just more than 30 percent of PCOs surveyed reported that ant control was the service representing the largest single growth market in 2000. PCOs in all parts of the country seem to agree that ant problems have been prompting more and more requests for service, often from customers that haven’t hired a pest control company before. (For more information on this trend, see related story “Ant Invasion ,”)

Termite control was also selected a top-growth area for the industry, with 28 percent of respondents naming this as the largest growth market. It’s an interesting result, considering that other survey statistics indicated that fewer PCOs are involved in this line of business today. A number of other growth areas for the industry were also mentioned, however, including ornamental, tree and turf spraying (10 percent), perimeter pest control (7 percent) and mosquito control (3 percent).

All of these growth areas aside, however, almost half of respondents (46 percent) said the most important factor limiting their companies’ ability to grow was a lack of qualified labor. In 1999, 40 percent of respondents said the same. Other factors named as limits to growth included insufficient capital (10 percent), competition (10 percent) and poor marketing (8 percent); however fewer PCOs named these factors in 2001 than did in 1999.

ECONOMIC CONCERNS. Regardless of the increased revenues in the industry, it appears that PCOs are slightly less optimistic this year in terms of expected annual sales. More than two-thirds of respondents (68 percent) expect their firms’ sales to increase in 2001. No change was expected by 28 percent and 4 percent expect a decrease. In the 1999 survey, almost three-quarters of respondents expected sales to increase, 24 percent expected no change and 3 percent expected a decrease. The average increase in revenues expected, at about 18 percent, did not change significantly from the 1999 survey. However the average decrease expected increased from 12 percent to 19 percent.

The survey also indicated that PCOs expect a slight decrease in profitability in 2001. Respondents’ expectations for net profit on sales averaged 17 percent in 2001. In the previous survey, respondents expected an average net profit of 20 percent.

Will Bennett, president of Bill’s Home Service Company, Green Valley, Ariz., said this apparent decrease in optimism may be more of a “psychological situation” reflecting the negative press about the economy and the stock market and not what’s actually happening in the industry.

Tom Walters, general manager for Western Pest Services, Parsippany, N.J., agrees. “Businesses as a whole are probably less optimistic than they were two years ago,” he said. Back then, he explained, the economy was booming and since then, economists have warned of a slowdown. “I think it’s only natural that people are heeding that warning,” he added.

But not all PCOs are less optimistic about sales and profits this year. “We refuse to participate in any downturn,” said Sprague’s Larry Treleven.

Stock market fluctuations aside, Treleven remains cautiously optimistic about his company’s growth. “We have had about 17.8 percent growth in the first six months of the year,” he said. “We consider that to be pretty good.”

Chuck Russell of Eradico expressed similar sentiments. “I’m an optimist,” he said. “Every year is a good year.” Granted the economy has been slower, he said, “we’ve just chose not to partake in the economic slowdown,” he said. “Our sales have increased and we believe they’ll continue to increase.”

Regardless of today’s uncertain economic situation, most PCOs are optimistic about the long-term prospects for the industry. In the survey, 84 percent of respondents said they were optimistic about the industry’s future. And PCOs interviewed about these results expressed similar views.

“We’re very encouraged,” said Western’s Walters. “We’ve been around a long time and we’ve been through the ups and downs of the economy. We’ve had some very good years in downturns and we expect that trend to continue if the economy sours next year.”

Robinson agreed, citing the industry’s changing image and higher technical standards, as important factors. “Certainly the regulations we’re starting to see, particularly as they relate to schools and other such types of institutions certainly provide for added opportunities for the pest control industry,” he said.

MONTHLY SERVICES DECLINE IN POPULARITY Frequency of service also appears to have changed somewhat from previous years, with pest control companies implementing programs and techniques that allow them fewer visits to each account. The survey indicated that more PCOs are providing annual services (18.5 percent, up from 14 percent in 1999). Along with this, fewer PCOs are apparently providing monthly service (43 percent down from 47 percent in 1999). Quarterly service posted a moderate decline of 1.4 percentage points, to 25.5 percent. But by no means are PCOs are abandoning monthly service, nor does it appear that quarterly services are declining in popularity. In fact, quite the opposite may be true for some companies. Denis Chretien, pest control manager at Hydrex Pest Control of the North Bay, Petaluma, Calif., said the company’s services have gone from quarterly to bimonthly and in some cases to monthly, largely because of the newer chemicals being used. “They don’t have the residual they used to,” he notes. Therefore, more frequent treatments are often required. But other PCOs are finding that less frequent visits are more appropriate, both for companies and their customers. Terminix’s Norm Goldenberg, for example, believes the trend for residential services seems to be settling on quarterly services, because this frequency seems to fit in well with today’s busy, time-constrained society. “Exterior quarterly services seems to be the most preferred, with interior service available as needed by the homeowner,” Goldenberg explained. He said newer products have assisted in this trend toward quarterly service. Additionally, he said, “customers are strongly indicating that they want service on their terms...at their convenience.”

 

Ant Invasion

New species are arriving daily. Numbers are off the charts. And pest control pros are up to their necks in ant control work. But don’t worry...this is a story with a happy ending.

By: Lisa McKenna

The scourge of the ants continues. But you won’t see this industry complaining. Just more than 30 percent of PCOs surveyed reported that the service representing the largest single growth market for 2000 was ant control. PCOs in all parts of the country seem to agree that ants have been behind more and more requests for service and ants are often the pest that sends in more new customers.

Dr. Roger Gold, professor of entomology and endowed chair in urban entomology at Texas A&M University, College Station, Texas, says a number of factors may be behind ants’ ongoing pestilence. “We get more ant calls than we used to,” said Gold. “It would appear that ants are more of an issue in professional pest control than in the past.” Gold says, however, while there are certainly more complaints these days arising from ants, it’s unclear whether the amount of ant activity is actually up. One factor might be that professionals now have more time to focus on ants, Gold said, since such pests as cockroaches and fleas have declined in economic importance so dramatically. Another factor may be that more consumers are recognizing that professional pest control is effective for managing ants. “They perceive that there are solutions,” said Gold. “Those that can afford it are going that direction.”

However, if ants truly are more numerous these days, there are many factors likely responsible. For one, notes Gold, it’s highly possible that climactic changes have played a role. “The last several years have been warmer than normal,” he said. “Certainly we have gone through a period of hotter temperatures, which has a tendency to move insects into air-conditioned and irrigated spaces.” Gold says in Texas and surrounding areas, there is no question that ants are the most economically important pest for the industry. The top ant pest in his area has been the red imported fire ant, which represents a major income stream for local PCOs. Other common ant pests in the area, he says, are crazy ants, Argentine ants, big-headed ants and Pharaoh ants.

ID IS KEY. Gold notes that there certainly are more species of pest ants than there have been in the past. The transport of foreign trade materials into Texas and other areas, combined with the movement of goods through commerce, has likely brought in and spread many of the newer species, Gold said. And because there are more types of ants afoot, control has become a much more complicated business for professionals.

“Identification is really becoming very, very important,” Gold said. “Ant control takes a very specific approach.” Gold explained that while many of the newer products on the market are effective, pest control professionals should not expect to control ants in a single visit. “It’s going to be a multi-visit thing,” he noted.

Meanwhile, PCOs throughout the country say that whatever the reasons for ants’ ongoing insurgence, they continue to represent good business for the industry. “I think that ants certainly provide the biggest opportunity to enter into markets,” said Ian Robinson, vice president of technical operations for Sears Termite & Pest Control, based in Orlando, Fla. Robinson said that before the increase in ant activity, large groups of consumers didn’t call for professional pest control. General household pests, such as roaches, were often handled by homeowners themselves. But since ant activity has kicked up, that has begun to change. “When people are calling us for pest control, the primary issue they are calling for these days is ant control,” said Robinson. “The rise in ant issues clearly opens the door to get into more entrenched markets.”

Robinson believes one likely culprit for the ant explosion is the industry’s change in control procedures. “As the industry moved toward baits and more specific, targeted pesticides,” he said, “that opened the door for ant populations and other insects.” Another reason for the boom in ant work, he says, has been increased urban development. “There are more houses and less areas for ants to find what they’re looking for, which is predominantly food and water, so we’re seeing more of them.” And finally, he noted, the industry hasn’t yet made the strides in ant control that it has in roach control. But it won’t be long, he adds. “We are moving toward those leaps in ant control,” Robinson said. “Whether you talk about reducing aphids or about having better baits out there for both sugar-ingesting and protein-ingesting ants, we are years ahead of where we were in the past.”

In the South Florida area, Robinson noted, the white-footed ant has become the most challenging ant species to control. Its unique feeding habits shield many colony members from eating pest control baits or coming in contact with residuals. So, Robinson says, traditional and typical ant control treatments “never have enough impact to cause the colony to collapse.”

To help control these pests and other honeydew-ingesting species like them, the company has recently changed its perimeter control program. “We’ve added an immediate and longer-term control for ants through reducing aphids and other honeydew producing insects around the home,” Robinson said. The service is an added step to the company’s Duraguard® treatment and has been provided since about early 2000. The added treatment is designed to reduce the ant population through the reduction of honeydew-producing insects found on shrubbery and foliage around the perimeter of a home, Robinson noted. Furthermore, it has been effective. “Clearly the reduction of aphids on shrubbery and foliage has significantly reduced ant service calls and problems that people are having with ants,” Robinson said. “We are seeing an incredible reduction in retreats and supplemental applications.” This additional treatment step is now offered in most of Sears’ service area. “We use this strategy where there are honeydew producing insects which are causing ant proliferation in and around customers’ homes,” Robinson said.

In California it appears that the Argentine ant is still king of the hill. Denis Chretien, pest control manager for Hydrex Pest Control of the North Bay, Petaluma, Calif., says these ants remain most prolific and problematic. “They breed so fast and are so social,” he explained, “that you can find dozens of separate colonies on the same property.” They are a challenge to control, he says, because they don’t seem to trail like other ants and because it’s very difficult to locate their nests. But Chretien says, newer ant baits have helped greatly. “This way the ants do the work for us as far as finding the colony,” he said.

And in the northwest part of the country, carpenter ants remain a top ant pest, says Corey Chantry, president of All Seasons Pest Control, Spanaway, Wash. Other problematic species include the relatively new odorous house ant, moisture ants and thatch ants, Chantry added. The odorous house ant, which was almost non-existent 10 years ago, says Chantry, is now his most challenging ant species.

“Recently they’ve been really getting a foothold,” he said. “We’re struggling with getting top-end control,” he said. Chantry explained that odorous house ants don’t always accept bait well and are easily repelled by sprays. In about three out of 10 cases, he said, the company must make numerous return visits, since the ants begin showing up in new areas.

ORNAMENTAL ADD-ON WORK SHOWS PROMISE The niche business of ornamental, tree and turf spraying represents a strong growth area for the industry, some say. Ten percent of the respondents in PCT’s recent survey said this service sector represented for them the best growth market in 2000. It was the third popular answer, behind ant and termite control. While PCOs in most states must earn an additional license to offer this type of work, many say the extra efforts are paying off. Darlene Jones, director of operations for Lester Humphrey Pest Control Service, Abilene, Texas, says adding ornamental work to the company’s mix made sense. “I think it’s had a tremendous amount of growth in it, mainly because people have less time to do this themselves,” Jones explained. Lester Humphrey began offering a turf and ornamental (T&O) service in April of 2001 to help grow the business. “We just wanted another avenue for revenue,” she said. Another inducement to entering this line of work, Jones said, is that her company’s service area (West Texas) is rural and there appears to be a shortage of reputable lawn care companies. Furthermore, she said other pest control companies in the area aren’t offering ornamental services. “We’ve always been licensed in it, but we have become a lot more familiar with it,” she said. The company’s service includes all lawn and ornamental care except maintenance, to control insects, weeds and disease. Hydrex Pest Control of the North Bay, Petaluma, Calif., also recently began offering T&O services. Pest control manager Denis Chretien says the company used to offer these services, but discontinued them several years ago due to heavy competition. In recent years, however, Chretien said this line of work has shown some new potential. “It used to be that all pest control companies did ornamental and structural work,” he said. “It sort of dropped off in the last few years and now we are redeveloping it, because as far as I can tell, not a lot of companies are in it now.” Chretien said many companies now view ornamental work as potentially troublesome, due to a spate of newer laws and regulations relating to drift and agriculture. In California, operators need an agricultural license to offer this service and Chretien said obtaining the license requires a thorough understanding of a broad range of trees, plants and shrubs. The large knowledge base required to obtain this license, combined with the perception that ornamental work is characterized by many restrictions and liabilities, has caused some companies to exit this business and has kept others from entering it, Chretien explained. “There is a large demand for it,” he said, “because a lot of companies don’t offer this service anymore.” Hydrex has been offering the service for four years now, Chretien said and the company has seen successive growth in this are each year. Their service is designed to control insect and fungus problems on shrubs and trees, to control overwintering insects and to control weeds. Joe Ippolito, technical director at Liberty Pest Control Company, Middletown, N.Y., agrees that T&O work is a high-growth area. “A lot of people want to get out of it,” he notes, “because there are liabilities with drift.” Another concern is New York’s Neighbor Notification Law (NNL), which requires applicators to notify residents within 150 feet of any pesticide lawn applications that area more than three feet away from a building’s foundation. “I don’t see it as a negative — it looks a lot like an opportunity,” he said. Liberty has offered lawn and ornamental work for years, Ippolito said, but it hasn’t represented a significant amount of work until recently, when the NNL was passed. “Most people find it difficult because of the new restrictions,” he said. Even some people already in the T&O business wanted to exit after the law was passed, Ippolito said. But for him, he adds, “it’s worth the additional effort.” In the past year, the company has hired an experienced turf manager to help grow this side of the business further, Ippolito said. And Bruce McCown, technical director of Florida Pest Control & Chemical Company, Gainesville, Fla., notes that more companies in his area are getting into the ornamental market to help with ant problems. But for his company, this line of work is nothing new. “Ornamentals have been a very big segment of our pest control market for 50+ years,” McCown said. Even so, McCown said ornamental services haven’t typically been coordinated with ant control efforts, nor have they been marketed to that effect. Those efforts have been introduced within the past year at the company.

PCOs PUT MORE PRECISION INTO PERIMETER WORK It appears that the business of perimeter pest control is slowly undergoing some changes. PCOs throughout the country say they’ve made some adjustments to their various perimeter control procedures. For some PCOs this means taking a more focused approach on pests and the outdoor environment around a structure. Chuck Russell of Eradico Services, for example, said his company has, in the last couple of years, put more effort towards exclusion and caulking efforts, as well as in how residual materials are applied. “Primarily it’s focusing on harborage areas around the perimeter of the home and paying attention to special vegetation areas,” Russell said. Besides providing a basic exclusion service, Russell said, “we will rake back mulch materials and apply residuals.” Eradico made these changes, Russell said, after seeing the trends in the marketplace toward more focused control. Not surprisingly, the costs of providing the service have gone up, he said, but the company has adjusted its service prices accordingly. John Gedeon, president of General Pest Control, Cleveland, Ohio, said his company has also taken a more targeted approach when it comes to perimeter work. Instead of “mindless spraying” around the perimeter of a home, Gedeon said, “we focus on problem areas that we’ve identified in and around houses.” One example is its efforts in identifying stinging insect nests, a common pest problem in the area. General’s technicians look for nests in any type of hollow areas around a structure, such as barbecue grills, swing sets, basketball posts and fences. “In our area we’ve identified certain things that keep reoccurring, so we look for those and treat when we find them.” And Will Bennett of Bill’s Home Service Company says he has taken a “less is better approach” with regard to perimeter treatments. “We are doing more outside-only type treatments,” he said, “and inspection on the inside.” This approach has also led to a reduction in the amount of liquid chemical, as well as baits and granules, put down, he said. “The amount of time we spend is equal but certainly the amount of liquid product we put down is not as much,” he said. “We just don’t need to use as much because we do a better job and the effectiveness of the products is better too.”

 

Staffing Secrets

In today’s tight labor market, attracting and keeping quality employees has never been more vital for pest management companies.

By: Lisa McKenna

Retaining employees, as well as attracting qualified staffers, is still a real concern for most PCOs. Almost half of respondents (46 percent) in the PCT survey said the most important factor limiting their company’s ability to grow was a lack of qualified labor.

These days, pest control companies employ an average of 10.8 people, with 9.6 working full time and 1.2 working part time. These numbers appeared to remain constant from 1999. The average annual turnover rate for pest control service technicians, at 6.5 percent, also remained relatively unchanged.

SNAPSHOT: INDUSTRY SALARIES • 60.6 percent of full-time service technicians earn less than $29,999 •Average annual compensation for full-time pest control service technicians: $29,600 • 68.3 percent of full-time residential/commercial sales people earn less than $39,999 • Average annual compensation for full-time residential/commercial sales people: $38,400 • Percent of companies that have increased wages in past 12 months: 48 percent • Average amount of increase: 11 percent

THE BENEFITS OF BENEFITS. Considering the industry’s objective to retain employees, many companies have instituted programs and benefits designed to keep employees happy and therefore, keep them around. Most companies now offer such benefits as paid vacations, medical coverage and sick pay. But the survey indicated that other benefits, such as 401(k) matching programs, dental coverage, disability insurance and vision coverage, are offered by fewer than half of companies. PCOs interviewed about the survey results discussed some of the challenges of providing competitive employee benefits, as well as which benefits are most important to employees.

“The biggest problem we face is trying to maintain the benefits package we have without having to pass on costs to our employees,” said Chuck Russell, director of operations, pest services division, of Eradico Services, based in Southfield, Mich. Russell said the company frequently rethinks its benefits programs and constantly looks for creative ways to reduce expenses while maintaining benefits.

Larry Treleven, president of Sprague Pest Solutions, Tacoma, Wash., said he’s especially proud of the company’s health insurance and 401(k) program. “As expensive as the medical, dental and vision programs are these days, I know that our employees appreciate them,” he said.

Furthermore, said Treleven, the company’s 401(k) guarantees a 50 percent match and in good years, the company provides a dollar for dollar match, which has been the case in most years, Treleven said. “The 401(k) I think is really kind of a hot item at Sprague because we’ve had it for a number of years.” Treleven said the company boasts in excess of 90 percent participation among eligible employees. “We’ve had a number of people that have retired with 20 to 25 years,” Treleven said, “and the 401(k) has made a huge difference in their lives.”

Will Bennett, president of Bill’s Home Service Company, based in Green Valley, Ariz., is especially proud of his company’s tax-deferred profit sharing plan, which employees participate in after three years with the company. The company can put in up to 15 percent of an employee’s annual salary, Bennett said. The company offers annual bonuses as well, as long as annual revenue targets are met.

OTHER OPTIONS. Besides benefits packages, companies are using a number of other programs and techniques to help retain employees. Bruce McCown, technical director of Florida Pest Control & Chemical Company, Gainesville, Fla., believes the most important thing managers can do to retain employees is provide recognition. “Employee recognition is the absolute most important of all,” he said. What’s more, he added, it doesn’t break the bank. The company has a “Wall of Fame,” on which complimentary letters or notes from customers are posted. Florida Pest Control also offers length of service awards on a five-year basis and holds monthly employee appreciation lunches.

Ian Robinson, vice president of technical operations for Sears Termite & Pest Control, headquartered in Orlando, Fla., said his company concentrates on training initiatives. “I think perhaps more important than initial training is the ongoing coaching and development tools that managers have to retain employees and make them successful and make it a compelling place to work.” Those tools, he added, are such things as assistance plans, performance reviews, ridealongs and periodic check-ins. “Those tools are the ones that allow people to understand where they are and how they’re doing and provide the tools for how they can do it better,” he added.

John Gedeon, president of General Pest Control, based in Cleveland, Ohio, said that while labor in his area is still tight, he has had very low turnover for the last few years. But he adds, “recruiting is a continual process. As the president, I don’t know who’s going to leave tomorrow, so I have to continually prospect for new employees and keep an idea of who’s out there, should something occur.”

Gedeon said he also offers ongoing training opportunities to help retain employees. He encourages them to complete the Purdue University Correspondence Course, at the company’s expense. On completion of the courses, employees are rewarded with a pay increase.

Another factor to keep in mind, Gedeon says, is hiring the right kind of person in the first place. “This kind of work appeals to someone who likes to work alone,” he said. “I look for people who have been able to work on their own in whatever job they were doing. If you can find people who enjoy working independently and can work independently, then there’s a lot in this job that may appeal to them.”

 

Termite Market Shake-Up

New products and high costs are causing a stir for pest management professionals in this high-growth business.

By: Lisa McKenna

Some companies are exiting the termite business, while it appears that others are finding new opportunities there. According to the PCT survey, fewer PCOs say they are offering termite work. About 62 percent of the respondents reported being involved in the termite control market, compared to 73 percent in 1999.

But the survey also showed that the termite market is one of the industry’s hottest growth areas. Close to 30 percent of respondents named this as the largest growth market for the industry.

IN OR OUT? So what should the industry make of this apparently conflicting information? Norman Goldenberg, vice president of Terminix International, Memphis, Tenn., said he believes some companies have been exiting the termite business. “They have found that claims are up and with retreats being extremely high, so are their costs for retreatment,” he said. Increased litigation and regulatory pressures have also contributed to this trend, Goldenberg added.

Bruce McCown, technical director of Florida Pest Control & Chemical Co., Gainesville, Fla., says he’s also seen some PCOs exiting the termite business, particularly the pretreat business, where liabilities can be greater and where questionable construction practices continue to hamper control efforts.

And Larry Treleven, president of Sprague Pest Solutions, Tacoma, Wash., said he’s seen frustration on the part of some PCOs when it comes to termite work, especially with the trend toward termite baiting. “For some of these companies, it’s hard for them to switch,” Treleven said. “If they are used to drilling holes, baiting is a whole different process, and some are reluctant to switch to that kind of technology.”

Thomas Pollard, president of Best Control Pest Control, St. Louis, Mo., said he exited the termite business for a couple of reasons. His company used to offer termite control, but phased this segment out about five years ago, mainly due to the high costs of doing business. The new termite baits being introduced at the same time, he said, were yet another inducement for discontinuing the service. Pollard recalls making a strategic business decision not to offer baiting programs, since at the time, companies were required to participate in strict research programs when using the baits. “If customers were dissatisfied with how the program was progressing, then I stood the chance of losing a customer I had for years,” Pollard said. “I didn’t see the value of putting that at risk.”

CONFLICTING OBSERVATIONS. However, not everyone believes that PCOs are exiting the termite market. A few PCOs said while that may have been the case within the last few years, in recent months they’ve actually seen the exact opposite. Chuck Russell, director of operations, pest services division, for Eradico Services, Southfield, Mich., believes that termite baits have actually brought more companies into the market, since they may offer reduced liability, and because control services are easier to perform.

And Ian Robinson, vice president of technical operations for Sears Termite & Pest Control, headquartered in Orlando, Fla., says that newer control products are also giving more PCOs new confidence in termite control. “The continued success of Premise and the introduction of Termidor are giving businesses and owners a reason to get back into that line of business,” Robinson said.

A related issue is the changing cast of products in the termite market. According to the PCT survey, more than half (56 percent) of companies surveyed have changed their termiticide of choice in the past 12 months. In the 1999 survey, only about one out of four companies had changed their termiticide in the prior year.

PCOs interviewed cited two main reasons why more PCOs are switching brands: the voluntary market removal of long-time workhorse Dursban from the market, and the introduction of promising new non-repellent termiticides into the market, along with manufacturers warranties to back these products (see related story on next page).

Terminix’s Goldenberg notes, however, that more market changes are likely to come in the future. “Pyrethrin-based termiticides will come under EPA review in the next couple of years and they will receive increased scrutiny if they survive the EPA review,” he said. What’s more, Goldenberg added, “the baiting technology has caught on pretty well in our industry.”

In the termite market, most (64 percent) respondents offering termite work said they use both liquid and bait treatments, although about one-third of the companies (32 percent) said they use liquid termite treatments and about 4 percent use bait only. These numbers are relatively unchanged from the 1999 survey.

The new non-repellent termite control products on the market, along with termite baits, are adding to the market shake-up. PCOs around the country have generally good reviews of the new termite control products. “Most companies are finding better success with the chemicals like Termidor and Premise that are non-repellent type products,” said Don Bringel, vice president of Hydrex Pest Control of the North Bay, in Petaluma, Calif.

PRODUCT GUARANTEES INSPIRE THE INDUSTRY One trend that has been met with favor among PCOs is the promotion and offering of manufacturers’ guarantees on termite control products. For years termiticide manufacturers have backed their products with guarantees, but this practice has come under the spotlight in recent months with manufacturers increasing the stakes in this area, and putting more marketing efforts toward promoting these programs. Just about all major termiticides on the market are now backed with guarantees covering retreatment costs, should they be needed. While all this attention to guarantees has bolstered PCOs’ confidence in termiticides, it appears that most PCOs haven’t taken advantage of them. In the survey, only 4.4 percent of companies have filed a claim with a manufacturer for compensation via their termiticide warranty program following a termite control failure. PCOs interviewed about the survey results said there may be a couple of reasons for the apparently low use-rate of guarantees. Darlene Jones, director of operations for Lester Humphrey Pest Control, based in Abilene, Texas, said that with most guarantees, filing a claim can be difficult. “You actually have to prove there’s is an infestation, and that’s it’s a new infestation, and I think there’s a lot of hassle to proving it,” she said. Terminix’s Norman Goldenberg said besides the filing process, there also may be a delay in determining whether a failure has actually occurred. “Sometimes seeking reimbursement from a manufacturer for a small claim may be so time consuming that the PCO chooses to pay it and not even turn it over to the manufacturer,” he said. “Also, the PCO may not want to list the job with that manufacturer. It may be a privacy issue.” When it comes to warranties provided by pest control companies, all the attention on manufacturer guarantees is a good thing says industry consultant George Rambo. Rambo, president of George Rambo Consulting Services, Herndon, Va., says he’s concerned about the high percentage of retreat-only warranties still offered by pest control companies. According to the PCT survey, only about half of PCOs offer a full or unlimited termite damage protection guarantee/warranty. Rambo says companies in the termite business should take responsibility for damage that occurs due to faulty control on their part, regardless of their warranty. “I believe that a lot of companies have used the service warranty as a way to get around those problems, and I find that kind of discouraging.” Further, Rambo said, courts have ruled that PCOs with service-only warranties can be held responsible for termite damages. While more companies are beginning to offer damage coverage in their warranties, Rambo notes that change is slow. But seeing manufacturers offering damage coverage is a positive step. “When a major company does that, then the industry has to look at it and say, ‘Why can’t I do that?’”

Meanwhile, borates, which are also non-repellent, appear to be finding increased use in the pretreat area, according to Dr. Roger Gold, professor of entomology and endowed chair in urban entomology at Texas A&M University, College Station, Texas. He says these, as well as other wood treatment products, are being used in early construction phases more often. In addition, he says, more homeowners are inquiring about treated wood.

Gold cautions, however, that it’s important for PCOs to be conservative in their sales approaches of these newer products and not overpromise what they can do. “Termite control will always be hard work,” he said. “There still is not a silver bullet. It takes good inspections, excellent applications and detailed record-keeping for all of the termiticides.”

 

Losing Its Luster

Although most PCOs continue to advertise in their local Yellow Pages, many  are starting to branch out into other methods of promoting their company.

By: Lisa McKenna

It appears that pest control professionals have made some changes in their advertising plans. The long-time, No. 1 method, Yellow Pages advertising, remains in that position, but appears to be slightly less popular among PCOs: About 68 percent of companies used Yellow Pages advertising in the past 12 months, compared to 81 percent in 1999. Newspaper advertising was used by a third of PCOs in the last year, compared to one quarter of PCOs in 1999. And close to 30 percent of PCOs said they used Internet advertising in the last 12 months. This advertising vehicle was not measured in the previous survey.

The percent of PCOs who did not advertise in the past 12 months, at 15 percent, also increased from 1999 when 11.5 percent reported they did not advertise in the previous year. However, the amount of companies’ annual budget devoted to advertising appeared to remain the same, at about 7 percent.

Those PCOs who use Yellow Pages advertising have differing opinions about its effectiveness. Some say it helps answer the immediate need of consumers looking for a pest control professional, while others feel almost forced to use this medium, since all their competitors do.

Chuck Russell of Eradico Services says the Yellow Pages is still the No. 1 source for consumers of pest control services. “Normally, it’s somebody responding to a problem that causes them to pick up a phone book,” he said. In addition to Yellow Pages, Russell also uses direct mail, to help stay “in the consumer’s radar.” And while he doesn’t yet have an Internet presence, he plans to soon.

Thomas Pollard of Best Control Pest Control says the phone book also helps consumers identify companies that are in close proximity to them. “There’s a perception that if consumers find someone close, that it’s going to be cheaper,” he said. “And the only way to validate that is by looking in the book and finding someone with a similar phone exchange.” Pollard said some other methods he’s used, such as direct mail or local newspaper advertisements, haven’t been as effective. He does advertise successfully, however, in his church bulletin. “That probably pulls more than print ads,” he observed.

But not all PCOs are convinced about Yellow Pages’ effectiveness. Bruce McCown of Florida Pest Control & Chemical Co. says phone book advertising does seem to be less effective these days. “In the past, people that moved into the area would open the Yellow Pages and pick out a company,” he said. “Today’s customer is much smarter and more informed. They will typically consider what they see on TV or go on the Internet and most importantly, talk to their neighbors.”

Joe Ippolito, technical director of Liberty Pest Control, Middletown, N.Y. agrees. He says he’s looking to reduce the amount of Yellow Pages advertising he does in favor of what he says has been most effective for his business: the 75+ red trucks driving around town with the company’s name on them.

Will Bennett of Bill’s Home Service Company says he’s found that the effectiveness of Yellow Pages advertising “depends on where you end up being in the book.” If the ad appears closer to the first page of pest control ads, for instance, it seems to be more effective, he notes. Instead, Bennett prefers to take a more low-key approach. “Probably our biggest and most productive advertising is that our employees are involved in the communities they live in,” said Bennett. The company supports community organizations such as Little Leagues and Rotary Clubs.

While most pest control companies still aren’t using the Internet for advertising, a large number of PCOs are interested in doing so in the future. According to the survey, 16 percent of pest control companies now offer customers the capability of scheduling a service visit on the Internet. Those companies that offer this service say it’s a valuable technology with much potential.

Hydrex Pest control of the North Bay, Petaluma, Calif., for example, is one such company. Besides providing useful information about pests, Hydrex’ Web site also allows users to request an appointment online. Darlene Munson, president of the company, says the Web site has been effective. “We do get quite a few hits on our Web site,” Munson said, “and we have received jobs that way.” Munson added that while the Web site has been a worthwhile venture, the majority of the company’s business still comes from its Yellow Pages ad.

Many PCOs have found that using a mix of advertising methods can be especially effective. Terminix International uses four key mediums of advertising: broadcast, direct marketing, interactive marketing and Yellow Pages. Goldenberg says while the company uses each of these for different reasons, all four work together for effective lead generation. Furthermore, he notes that the Internet has become a great way for consumers to learn more about the industry. “It is extremely effective at providing information to consumers who are researching the category and the company,” Goldenberg said.

Tom Walters of Western Pest Services says his company spends a lot on advertising, using Yellow Pages, print, TV, radio, billboard and direct mail. Even so, he says, “it’s difficult to pinpoint exactly which one of those is giving you the best return.”

However, he added, one thing the company has enjoyed this year is a cooperative advertising arrangement with a manufacturer, that helped fund the company’s television advertising. “That seems to have been very effective for us,” Walters said.

 

Good News On Gas Prices

Pest management professionals are doing all they can to avoid the increased costs associated with higher gasoline prices.

By: Lisa Josof

Gasoline costs in recent months have been a source of headaches for PCOs. And while prices have eased, many still view them as high. Thankfully, PCOs saw some relief in prices during the summer of 2001, when prices dropped sharply. In July, gas prices posted a decrease of almost 18 percent, the biggest drop in 15 years. Such variations in gas prices can be largely explained by the increased supply of gas, with refineries operating at nearly full capacity and gasoline demand slowing. In August, the Energy Information Administration (the source for the information at right) forecast that gas prices would remain relatively flat for the rest of 2001.

 THE GOOD OLD DAYS. Even so, many PCOs look back wistfully at gas prices that were less than a dollar just a few years ago. “We’re a petroleum-based industry,” said Corey Chantry, president of All Seasons Pest Control, Spanaway, Wash. “Gasoline has made us look a lot more at routing density.” Chantry, whose company serves the greater Pierce County area, which includes Tacoma, Wash., said he has tightened up his service area in recent months. “Within the past five years we’ve really tried to anticipate the fuel concerns,” he said. Chantry has also purchased smaller vehicles in recent years and is much more attentive to vehicle maintenance as well as avoiding callbacks. “Everything has to be stepped up and improved upon to reduce the waste of gas,” Chantry said.

John Gedeon, president of General Pest Control, Cleveland, Ohio, expressed similar sentiments. “It has been a major factor,” he said, noting that while gas prices have come down from last year, they’re still somewhat higher than where they were. “The cost of operating the fleet has increased,” he said. “Route management is absolutely critical in dealing with the increased transportation costs.” And because General’s technicians’ paychecks are affected by the amount of revenue produced, there’s a built-in incentive for technicians to spend less time driving and more time at accounts.

Chuck Russell, director of operations, pest services, Eradico Services, Southfield, Mich., said gas expenses at his company swung by as much as $40,000 from year to year, due to price fluctuations. But these variations can be managed. “We found the customer certainly understands it, so we’ve been able to offset a lot of those costs through price adjustments,” he said.