Knock It Off!

Editor’s note: Click here for PCT’s previous coverage of door-to-door marketing in the pest management industry.

Jacob Borg has Google Alerts set up so news stories about solicitation bans drop into his inbox.

“In the last two years, there have definitely been more city governments trying to instill stricter regulations for soliciting,” says the owner of Pointe Pest Control in Liberty Lake, Wash., and founder of the company’s door-to-door marketing firm, Pointe Pros, which knocks for other companies, too.

The headlines go something like this…

Utah pest control firm threatens suit over east Boulder County cities’ door-to-door sales ban.

This one — about Aptive Environmental — ran in The Denver Post after the company had sued nearby Castle Rock and won. The “peddler’s ordinance” was unconstitutional, Aptive argued successfully.

Another bit of breaking news: Pest control company sues Macedonia over door-to-door sales ban. This story from an Akron, Ohio, news outlet came after Aptive filed suit against Macedonia because its ordinance was adversely affecting business. The company’s attorney said the lawsuits are a last resort, and that many municipalities have changed their anti- solicitation laws after being told the laws are unconstitutional.

There are search result pages of potential lawsuits, actual suits and complaints posted from across the country where Aptive and other door-to-door companies send out summer sales forces to knock on doors and close sales.

“One issue we’ve faced recently is the increase in the number of cities attempting to prohibit or limit door knocking,” acknowledges David Royce, Aptive’s founder. “Luckily, solicitation is protected by the first amendment of the Constitution via freedom of speech.”

Royce says Aptive has threatened legal action against dozens of cities that have “improperly outlawed door-to-door solicitation.” He adds, “We were even forced to sue one stubborn city. Not only did we win the case, but the judge ordered the city to pay our attorney’s fees.”

Royce says, “It’s good to know the law is on our side.”

How much of an issue is non-solicitation, really, for those pest control firms that use door-to-door (D2D) marketing? That depends on who you ask. Aptive has taken a more forward approach with addressing municipalities’ regulations head-on.

At the pest control firm ProSource, owner Spenser Morgan researches markets carefully before determining where a D2D sales force will be planted. (Aptive and others do the same.) In a given metropolitan market, communities’ non-solicitation policies will vary. So, a decision is made whether taking a stance against a municipality’s law is worth it, depending on if a team needs more area/doorsteps to cover in order to meet sales targets.

Morgan says, “I’ve had a lot of marketing companies, and I’ve never had a ticket written to any of my guys.”

GETTING A BAD RAP. You know the Seinfeld episode when George wants to leave on a “high note?” “It’s one of my favorite episodes,” Borg says. “George will exit a meeting while something good is happening because he wants people to remember him in a good way.”

After an unexpected knock on the door, and possibly a less-than-welcoming answer, Borg wants his salespeople to stick to that George mantra. “Sometimes people don’t respond well to us, but no matter how they treat our representatives, or how good or bad it goes, we want to leave on a high note. Most of the time, we pull that off.”

The issue some homeowners have with door knocking is twofold. One, it’s just plain agitating to some people, who then tip off local officials, complaining about the annoyance. And two, there’s the aftermath of a sale made on the stoop that wasn’t fulfilled. So, you’ve got people who feel like they were jilted at the door because the service doesn’t live up to the promise. “If the technician shows up to do the service and he doesn’t provide what was promised at the door, that will not only result in the person not becoming a long-term customer, but also in a bad review,” Morgan says.

The most challenging thing about being in the D2D space is countering the negative reputation, Royce points out, saying that an average close rate is 1 percent and “it takes a very specific personality profile to make it through a long summer of rejection in 90- to 110-degree heat.”

Generally, “homeowners we come across on doors are polite,” Royce says. “Our organization has spent a lot of time building a great company culture, aligning incentives and dialing in best practices to help change the way homeowners think about door-to-door solicitation.” Naturally, happy homeowners who don’t complain of knocking leads to a city that’s more open to solicitors.

Meanwhile, in the industry, most private pest control firms are not ringing the bell. And like some homeowners, there is a camp in the pest control industry that is equally skeptical of D2D marketing tactics. Some scoff at the “pump and dump” sales machines that grow fast and sell out — while others wonder if they should try D2D, too, but can’t figure out how (or why) they’d pay 60 percent and higher per contract to get a new customer. So, there’s plenty of fuel to fire up non-solicitation laws.

D2D firms are trying to snuff out the negative image. “I can’t stress the importance of having a very regimented sales pitch and limitations to what salespeople can say — and then making sure the service team is more than eager to provide exactly what was said at the door,” Morgan says.

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Also, trained sales representatives spend more time on closing at the door — so, they can maximize the potential in a given area vs. “untrained” salespeople who “burn through areas faster, and that becomes a bigger problem.”

Why? When a sales team cashes out an area — the team needs more doors to knock — then the progression is to expand the territory. But if neighboring cities have non-solicitation policies, that’s a potential barrier to entry. (The operative word is potential.)

“Every city is a little different,” Morgan says.

So, he finds out before entering a market how much permits cost, and how permits are issued. For example, in Carey, N.C., Morgan sends in a packet that includes a passport photo and information about the salesperson. “We pay $15/person and they issue a nice permit with a picture of the guy that says Carey Solicitors Permit,” he describes. “It’s easy because I don’t have to send my guys there, and I can do this all through mail and one visit to the sheriff’s department.”

On the other hand, Wake Forest, N.C., outside of Raleigh is costlier and more complicated. “We hardly ever knock there, and it’s a good city that would be worth knocking in,” Morgan says. “But, to justify that we’d need to have a team of 30 guys. Since we can knock everywhere else [around Wake Forest], because there are few barriers everywhere else, we are not going to worry about it unless [our team] is busting at the seams and needs more area. Then, we’ll get the permit.”

The key, Morgan says, is the size of the D2D sales team. And, back to training, more knowledgeable D2D sales folks require less area to close sales.

Paul Giannamore is managing director at The Potomac Company, which executed more than $250 million D2D transactions and advised Scotts LawnService from 2011 to 2015, which was selling an average of 135,000 new accounts per year by knocking on doors. (It was the No. 1 source of new sales for Scotts during that time.) From his experience, non-solicitation laws don’t seem to be much of an issue for D2D companies, which can feasibly grow from zero to $1.5 million in a few years. “The door-to-door companies tend to open offices all over the country — the big players might do $50 million in 12 different states,” he points out. As for municipal peddling laws, “they maneuver around that.”

Fines are relatively low should a company get called out on an offense. But, the fees could wrack up to a chunk of change if a charge got serious. The Douglas County, Colo., sheriff’s department states: “Anyone who violates the ordinance commits a class 3 petty offense; a summons may be issued, and upon conviction thereof, shall be punished by a fine of not more than $600 for each separate violation.”

This is the same area where Aptive successfully shot down the offense, because of its violation of the First Amendment.

“Quite frankly, I think [the non-solicitation policies] are more of a nuisance for these companies than anything,” Giannamore says. “I haven’t heard anyone all too concerned.”

INVESTED IN KNOCKING. There are pest control companies that are focused solely on D2D. And, there are D2D companies that work as marketing arms — expensive ones, albeit — for pest control companies that want a piece of the door-knocking action but have no idea how to do it. There are some specific economics at play for D2D companies.

According to Giannamore, companies that outsource D2D can pay 60 to 100 percent of the contract value. That does not include upfront fees. A typical payment to outsource D2D might be 85 percent of the first-year contract value, and there might be a retention clause. With this rate, you’d pay about $340 to get a customer.

Multiply that by a thousand customers, or more, and the marketing expense to grow is some real cash outlay. Dan Gordon of PCO Bookkeepers says that this “very expensive” marketing that is “not for the faint of heart” is also robust and wildly successful for companies that do it right. His company works with five of the largest D2D pest control businesses and a handful of up-and-comers. (They’re not on the PCT Top 100 List, he says, because they don’t report and tend not to be involved in industry affairs, for the most part. There are exceptions.)

“They are highly skilled businesspeople who do very meticulous projections and understand exactly how much they are going to lose year after year,” Gordon says. “When they start in a city, they know they’ll lose money. If they put $1 million of revenue on in year one, and spend 60 percent on marketing, it will cost them $600,000. Year two in the city, if they put on another $1 million — and say there is 30 percent attrition — now they have $1.7 million in revenue and the marketing cost is 35 percent. Every year, the cost comes down. They understand what it costs to flip a company back to profitability — a few years.”

Some companies utilize the skill sets of young, Mormon missionaries. Students who have completed an 18- to 24-month mission to spread the word of the Church of Jesus Christ of Latter-day Saints learn from experience how to knock on doors. Many times that experience translates well into selling services door to door.

“If you talk to some of them and ask, ‘How can you knock doors and get doors slammed on your face,’ they might chuckle and say, ‘Try selling religion,’” Gordon quips.

He adds, “They are outstanding salespeople who are well-trained.”

And, they see opportunity in the pest control industry because of its recurring revenue model and high valuations. (D2D marketing is also found in industries like home security/alarms and solar power.) So, rather than starting a D2D company focused on marketing in general, available for companies to use their services as outsourced marketing, they’re starting pure pest control firms that use D2D as a sales platform. “And, they’re growing like crazy,” Gordon points out.

The one that does report to PCT’s Top 100, Aptive, ranked No. 11 in 2018 with revenues of $88,168,081. Are they in the business for the long haul?

“The longer you are in the business, the higher a valuation,” Gordon says, noting that those who recognize this are taking a long-term posture in the industry.

Royce is one. “We have worked to find the best practice and developed systems and processes for every aspect of the business,” he says of his operations investment.

Morgan adds that ProSource is focused on securing long-term contracts at the door — not just making fast sales. “We focus on developing good teams that are well-trained on how to get those customers, and our training emphasizes how to get customers to upgrade their services and be happy that they did,” he says.

Borg points out that D2D wasn’t the first way his company acquired customers. “Our first five sales were from phone book advertising, before we even knocked on a door,” he says. “From day one, we were interested in other marketing methods I had experienced working in the corporate environment. So, we have been doing traditional marketing from the very beginning.”

But D2D has proven to be a profitable sales strategy for these focused companies that understand the grit, training, business model and potential risk, and are not concerned about solicitation regulations getting in the way of success.

Borg keeps getting those news alerts. But, he says, “It hasn’t impacted us in the areas we work in, and we go out of our way to get the necessary licenses.”

The author is a frequent contributor to PCT.