Survival of the Fittest

As it does every year, the U.S. Census Bureau recently named the country’s fastest and slowest growing metropolitan areas. It’s no surprise professionals in greater Dallas-Forth Worth, Phoenix and Atlanta are seeing an influx of residents —and more customers — than those in Detroit, Cleveland and Pittsburgh. But population growth alone can’t compensate for an increasingly tight-fisted economy. We talked to professionals in boom and bust markets, and found business acumen is the name of the game, regardless of local conditions.

RIDING THE WAVE. People moving to hotspots in the Southwest and Southeast have meant more business and double-digit growth for pest management professionals. “A lot of our growth is attributed to the growing economy here and population growth, there’s no doubt about it,” said Myers Pest & Termite Services President Danny Myers, Dallas. Kevin Burns, senior vice president of new business development at Arrow Exterminators in Atlanta, agreed. “That contributes to our success and our year-over-year growth.”

Some of that growth is from Northerners experiencing pest pressure for the first time. “You’re getting adopters from other areas moving here that haven’t had pest control in the past,” explained Blue Sky Pest Control President Nate Woolf in Mesa, Ariz., where scorpions and spiders are everyday occurrences. New residents “don’t understand the pest problems until they’ve been here a year or two” or until they step in a fire ant bed, agreed All-Rid Pest & Termite President Kevin Burk, Dallas.

Referrals, then, become big business. Eventually new residents come to realize they need quarterly service and ask their neighbors for advice, explained Burk. “Referrals are the core reason we’re growing,” pointed out Woolf. Stinger Pest Solutions President Laura Mitchell in Metro Atlanta agreed. Half of her firm’s new business is from referrals or customers adding services.

WARY CONSUMERS. The dour economy, however, is a wet blanket even in high growth markets. “The consumer is a little cautious right now,” said Myers.

And where general pest revenue has increased, termite work continues to be a sore spot. “If you’re in the pretreat business, you’re hurting here for sure,” said Scott Agee, owner of Action Termite Control in Phoenix. His firm does termite inspections and post-treatments only and has stayed busy working for banks holding foreclosed properties. “We stay pretty steady. I consider myself lucky at this point.”

Stinger Pest Solutions saw zero termite growth last year, “but we haven’t lost any,” said Mitchell. Short swarm seasons and the removal of WDO inspection requirements from Georgia real estate contracts last year “had an impact on everybody here.”

It certainly affected Arrow Exterminators, which is heavily invested in the real estate market, said Burns. “We’re doing much better in the last 90 days than we did in 2007.” New construction housing is starting to move, but existing home sales are only marginally better than last year, he said.

WAITING IT OUT. Lackluster termite business is one of many challenges facing professionals in Detroit, Cleveland and Pittsburgh.

“The economy is bad,” said Harris Pest Control President James Harris Jr., Detroit. “The amount of service we provide has decreased. The calls have stopped.” Customers, he said, have turned to do-it-yourself tactics. “Are they going to pay $100 for an exterminator, or are they going to put food on the table?” Harris is waiting for 90-degree weather when roach populations explode, and customers realize they need professional help. Then it will be “time to build the [fiscal] nest back up.”

As the automotive industry restructures and reinvents itself, so must the local economy, explained Chuck Russell, president of Eradico Services in Novi, Mich. “You can’t help but be affected negatively by what’s going on.” New construction has dwindled and talent is leaving the state, taking both potential employees and users of pest services. “They’re moving out of state and putting their spending dollars somewhere else,” said Russell. “It’s a very tough climate.” In addition, he said Michigan’s “unfriendly” tax burden is making the problem worse.

Jim Stocker, CEO of Apex Pest Control, which serves customers in high-income Cleveland suburbs, has noticed “people are holding onto their money a little bit more and only doing what they have to do.” Selling long-term contracts has become more difficult. “Unless they really have the money or unless they really have the need, it’s tougher getting those nowadays.”

Yet opportunities remain. Despite Pittsburgh’s aging population and exiting young people, Witt Pest Management sees a bright future. “It’s not a rapidly growing area but there’s still a lot of opportunity in this region,” said General Manager Adam Witt. The firm, celebrating its 100th year and fourth generation of management, has increased volume 5 to 7 percent each year. “Being steady and stable and having a good customer base is not an issue for us.” This is partly due to Witt’s aggressive marketing efforts, he said.

LONG-TERM STRATEGIES. Professionals firmly believe in spreading the risk, which can help firms weather tough market conditions. Offering additional services like lawn care, holiday decor, and tree and shrub care also let you sell more services to existing customers, said Eradico’s Russell. Stinger’s Mitchell agreed. Her new EcoGreen service, which is attracting customers who normally wouldn’t use pest control, has been “a big percentage of our growth,” she said.

Pros also see promise in commercial/industrial business, which has not felt the pains of the residential segment. Myers Pest & Termite Services has a 50-50 residential-commercial mix, and that business model “has helped us,” said Myers. Apex’s Stocker hired a salesman to target commercial customers, which currently account for 20 percent of the firm’s business. “We hope to get that percentage more in tune with the residential market,” he said.
Improving service delivery and cutting waste always makes sense, but especially so in a downturn. Existing customers become more valuable and losing them is far more damaging, said Russell. “Showing the value of your service to the customer becomes critical.” Even if it’s hand holding, said Maples Environmental President Gary Maples, Livonia, Mich.

Take a hard look internally and make adjustments to improve the business, Russell added. “Through the fat years, we tended to get fat ourselves,” he said. His team analyzed clerical, sales and service systems and improved processes. “It’s really helped us in the last two years.”

“Any area you can cut, you cut,” agreed Maples. He’s found cheaper chemical prices, is doing payroll himself, and will buy used vehicles in the future. “You find other ways to make yourself competitive and lean.”

Just keep fiscal discipline top-of-mind, reminded Harris. “When the going gets good, you have to know what do with that money.” Pay off the trucks and the office building — don’t lease — and put money up for payroll and advertising, he advised. “When it slows down, we have to go back to those resources.” Companies that spend unwisely may face shutting down when times get tough.

RETHINK AND ADAPT. The bottom line: As market conditions change, so must you. “You better be willing to adapt your business,” said Myers, citing changes he’s made to make up for lost termite revenue. Choosing to do nothing is not an option.

Maples agreed. “In this economy, you have to use every tool you’ve got.” Tough market conditions will put some people out of business, “but it’s going to make it better for the guys who stick around.” When the economy turns, firms that adapted will be ready to capitalize on the up market, he said.
Although certain times may call for scaling back, “I don’t think you need to be afraid of doing new things,” said Russell. “I don’t think a bunker mentality pays off.”

The author is a frequent contributor to PCT magazine.