[2012 State of the Industry Report] Full Steam Ahead

Many business owners scratch their heads when they hear experts say that the recession has been over for more than three years. But it’s true: Economists at the National Bureau of Economic Research (official referees of the economy game) say that the Great Recession began in December 2007 and ended in June 2009. What they didn’t say was that anyone should expect to go from rags to riches overnight.

Like other business owners and executives, PMPs have slogged through some challenging — sometimes dire — straits over the past couple of years. But PCT’s 2012 State of the Industry survey found most of you back on your game, building business, developing new strategies and, in many cases, raking in near-record profits.

Here’s a snapshot of what we discovered in our recent poll of business owners and executives.

Revenues and Profits Rebound. In most markets, business is picking up again, and the profit outlook is great. If there’s one thing business owners learned from the recession, it’s how to rein in costs and turn every sale into some bottom-line benefit. Compared with the first quarter of 2011, the first quarter of 2012 was strong for PMPs: 71 percent enjoyed year-over-year revenue increases. Only 13 percent reported declines.

The Best of the Pests. While the economy may have slowed down for a while, ants and bed bugs certainly never did. Both continue to proliferate; in fact, they represented the largest growth markets in 2011, each earning more than 20 percent of the vote (they also are the most difficult pests to manage, respondents say). Perimeter pest control (17 percent) and termite control (12.5 percent) took the No. 3 and No. 4 spots, respectively. Although only 5 percent consider rodent control a growth market, 85 percent said rodent revenues were either up or even over the past year. Not surprisingly, revenues from public health-related pests (mosquitoes, fire ants, bed bugs, etc.) has increased for more than half of respondents (55 percent) over the past three years.

Termites are pulling their weight in terms of revenues, as nearly half (45 percent) of the PMPs who offer termite services (two-thirds of surveyed respondents do) report increases in 2012. For another 34 percent, revenues are holding steady.

Steve Scherzinger, president of Scherzinger Pest Control in Cincinnati, says his company is having its best termite year since 2004. “The warm winter and spring brought lots of swarming to the area, which has resulted in strong business for us,” he said.

Like half of the companies that provide termite programs, Scherzinger offers universal pest management, with general pest and termite management under one umbrella. “Our Guardian Plus program, which combines quarterly pest management services with ongoing termite monitoring, has been outstanding in terms of increasing our gross revenues and margin,” he shares. “It has nearly doubled our customer retention rate, and it offers efficiencies in how we service accounts. (Specifically, one technician can perform both services during a single visit.) This program builds business two ways: Pest management customers add termite protection, and termite customers add pest management services.”

In addition to his thriving termite business, Scherzinger is, like many PMPs, experiencing growing demand for bed bug services. His six bed bug teams are scheduled three to four weeks out, and he’s looking to hire more technicians. This kind of success — Scherzinger is looking to hit 20 percent this year — illustrates why so many PMPs believe the worst of the recession is behind us.

Investing in Business. Scherzinger’s not alone in his success. About a quarter of respondents (24 percent) reported double-digit growth in the first quarter of 2012 over the same time period in 2011. These firms, as well as many whose growth has been more modest, are investing in their businesses again.

For some, that means diversification. A fifth of survey respondents said they’ve diversified their firm over the past year. Of those, 38 percent added bed bug services, 16 percent green pest management and 13 percent mosquito misting and/or home repair services. Many more say they are considering adding green or other services within the year.

Others, like Clark Pest Control in Lodi, Calif., are investing in different ways. “The slowdown in business over the past couple of years has given us the chance to catch our breath, take a step back and look at our internal efficiencies,” explains Operations Manager Robert Baker. “Over the past year, we’ve invested in a number of operational improvements, such as equipping our entire service staff with handheld computers. In the long run, these investments make us more efficient and better prepared to grow as market demand picks up again.”

Not everyone has been so eager to invest. Even though New Orleans has been one of the fastest-growing markets in the nation — climbing 44 spots in 2011 to rank among the top third of The Wall Street Journal’s MarketWatch Best Cities for Business list — and DA Exterminating had one of its best years in 2011, President Jed D’Arensbourg remains cautious. Like business owners across the nation, D’Arensbourg is keeping a watchful eye on Capitol Hill and the looming fiscal cliff.

“Uncertainty is definitely influencing some of our business decisions,” D’Arensbourg says. “For example, where I would have bought a new truck in the past, I might opt to make repairs instead. I also find myself comparison shopping for deals on everything from chemicals to insurance. In large part, these measures are in response to our soaring health-care costs. We’ve absorbed all of those costs to protect our employees, but that’s meant cutting back in other places. Until we see what the new regulations are going to cost us, we remain cautious on the spending front.”

Where are the Candidates? PCT’s State of the Industry survey finds employers as generous as ever when it comes to providing employees with benefits. Nearly three-fourths of respondents (71 percent) offer benefits ranging from vacations and health-care coverage to vehicles and sick pay. Additionally, more than a third of respondents (37 percent) have raised technician wages over the past year.

Do the employees appreciate these efforts? Eighty-nine percent of respondents say employees care about the business they work for as well as its owner.

They care. They’re being well compensated. They’re enjoying benefits. You would think people would be tripping over one another to land a position with a pest management firm, especially in light of high unemployment.

Not so. In fact, almost a third of survey respondents (31 percent) say it’s tougher to recruit technicians today than it was a year ago. What gives? “It’s a mystery; you’d think they’d be lined up around the block, but it’s really hard to find qualified candidates,” says D’Arensbourg. “We’ve done newspaper ads, radio spots — nothing works. And it’s not just us: Competitive companies in our area are facing the same issue. In fact, we help each other out by sharing resumes when they come in. If someone applies and we don’t have an open position, we fax it to one of the other companies to see if they might need someone. Most of the time, though, we’re fighting over qualified candidates.”

New Generation of Marketing. We all know that the Internet is changing the way people get their information, and clearly PMPs are tapping into this powerful resource. From search engine marketing (SEM) and online media to social media sites and blogs, PMPs are discovering the benefits of engaging with customers and prospects in a way that one-dimensional ads simply can’t. “Twitter and Facebook help us make connections,” says Erica Brister, president of U.S. Pest Protection, Nashville, Tenn. “These platforms have enabled us to establish a presence in markets and conversations where we otherwise would not be included.”

Keith Birkemeyer, owner of ProBest Pest Management in Gilbert, Ariz., agrees. “I strive to blog once a day and update Twitter and Facebook at least once — optimally twice — a day,” he says. “People call regularly saying they’ve read something in my blog (callprobest.com/blog), so I know I’m getting a return on my investment of time. These channels also establish and reinforce my expert status — my ‘brand’ — with customers and prospects.”

Baker says Web marketing is “critical” to Clark’s strategy. “We got involved in online efforts about three years ago; today, the Internet is our primary marketing focus. Each year, we shift more of our dollars from traditional marketing vehicles to the Web. It works,” he says.

While SEM has leapt to No. 2 as the “most effective” promotion tool PMPs are using (behind print and online Yellow Pages), other online tools are just beginning their upward climb. Respondents are convinced of their value however, as many of those who don’t currently use social networks, online coupons and search engine and email marketing say they intend to begin using one or more of these in 2012. Those on the chopping block? Print ads in the newspaper and Yellow Pages.

R-E-S-P-E-C-T. Those who have been in this industry for a while know pest management hasn’t always been revered by the masses. Today, that mindset is changing thanks to the efforts of the Professional Pest Management Alliance and individual PMPs who promote the important role the pest control industry plays in protecting public health and property.

“Companies today get it. You have to be professional, reliable and respectful to your customers and business partners,” says Birkemeyer. “Communication is key to our reputation, too. The NPMA/PPMA continues to serve as a strong mouthpiece for the industry, and those of us who engage with people through social media and blogging reinforce the message that we are professionals with plenty of expertise to share.”

Baker concurs. “PPMA has certainly played a role in raising public perception of what we do, and we’re meeting or exceeding expectations consistently out in the field,” he says. “This generation is much more focused on professionalism than in decades past. That we’ve been able to lift our reputation to new heights — in spite of challenges like ‘Billy the Exterminator’ — is a tremendous acccomplishment.”

The author is a Cleveland-based freelancer. She can be reached at ddefranco@giemedia.com.