Animal Exclusio nuisance wildlif

A case for adding value to your Pest Management Company

By Daniel S. Gordon, CPA
Animal exclusion and nuisance wildlife control are excellent revenue sources for many pest management firms. There are many ways to provide this service to customers. While it goes without saying that you need to be proficient at the actual work involved with wildlife control, this article will explore the possibilities of adding value to your firm in addition to creating current revenue by performing this service. While there are many reasons to be in business, I would argue that the main goal is to maximize the value of your firm. In my opinion, there is no other reason to be in business. As a result of building your firm in this manner, you provide a great place to work for employees, who make a good living while creating job security and allowing you to transact business in a socially responsible way.

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on and fe control
ith this in mind, we can apply the business concepts that we use in pest control to animal exclusion and wildlife control to increase or help maximize the value of our firm. While many firms provide animal work as a standalone non recurring service, working this way adds little long term value to your firm. After all, the PCO who subscribes to the concept of maximizing the value of his firm understands that we are in a business where we sell our time on a recurring basis. During this time we perform pest control, but the fact of the matter is that it is our technicians time that is being sold. If we

sell it using the following model we will add value to our firm. The model includes: Diagnosing the Customer Problem Providing a solution Setting the Customer up on a Service Contract Doing the Same thing Over and over until you have built a route or several routes. Sound familiar? Isnt that the way we build pest control routes? What about the variation of this model where we provide termite control. Until we started using baits and creating termite baiting routes we would warranty our work for a year and then offer

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yearly extensions called renewalswhich we still do for liquid treatments. Its this recurring work that adds value to our firm just ask any business broker. But why then when we do animal control do we think in terms of one shot work? Why cant we turn this type of work into service contracts? The fact is we can and we should. Nuisance wildlife can do damage to the inside and outside of buildings as well as creating potential health issues. Sometimes the structural integrity of a building allows wildlife to enter. Even though we repair those areas, in many cases there are additional areas that are susceptible to reoccurrence. In many rural areas, its not only the structural issues with the buildings; its the sheer pressure of wildlife populations. These two factors almost always make wildlife exclusion and control the perfect service contract business. So should animal work be put on routes or renewed? Well I would argue that it fits in with both routes and/ or renewals. If the work is performed and a structural weakness is corrected in an otherwise structurally sound building, a warranty can be offered on the work as well as a rider to cover the whole building. This would take the form of an annual renewal. If the building has many structural weaknesses or the wildlife pressure is such that there is a good chance that the issue will recur (take the case of Deer control) than perhaps a quarterly inspection and maintenance program might be more appropriate. This would take the form of route work and charged accordingly. As for pricing, what is a fair price? Pricing in pest control is based on two variables: Time and Money (hourly rate) TimeThe service time it takes to fulfill the obligation of eliminating the customers pest problem under the service program. This includes treatment time and call back time. This is by no means to say we are to trade quality workmanship for time. It is to say that we must make reasonable estimates of the time that it takes to provide quality service.

MoneyThis is an hourly charge for our pest control service that covers our costs and allows us to make a reasonable profit. In order to know what this rate should be, accountants use a technique called Breakeven Analysis. Breakeven Analysis is a technique used to analyze our pricing that allows us to profit and uses three key elements in its calculation: Fixed CostsAny cost that remains constant at any volume of business (i.e. rent, advertising, utilities, etc.) Variable CostsCosts associated with developing one unit of a good or in our case one unit of service. For our case, one unit of a service can be one hour of service. Therefore, variable costs are those costs that rise and fall based upon number of hours that we provide service. Examples of variable costs include: Hourly Pay for your technicians, Worker Compensation Insurance, Material costs, etc. Gross ProfitThe difference between the price charged per unit (Hour of Service) and the variable cost per hour. For example, if we bill our service at $100 per hour and a technician gets paid $20 per hour and all other variable costs associated with providing that hour of service are $35, our gross profit would be $45 (figure $100 billed less ($20+$35) variable costs).

Therefore, Breakeven looks like this: Breakeven point in units (service hours) = fixed costs divided by gross profit per hour. After all fixed costs are paid for, your firm starts making a profit at the gross profit per hour times the number of hours worked. Selling Wildlife Work: Pest control has traditionally been sold in one of two ways: The Outside Sales ModelUsing a salesperson who cultivates leads or by working those that come in by phone. Using this model, a sales person is usually given a vehicle or vehicle allowance along with a salary, commissions and other benefits and visits the customer at his location. The argument for this model is that an inspector can do a full inspection of the house, create a schematic and an individual proposal in addition to selling additional services.

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This model works very well for selling wildlife work as a thorough inspection can result in fewer surprises for the pest control company or the customer. The Inside Sales ModelUsing a call center approach where customer service representatives (CSR) sell the work right over the phone. Using this model the CSR is either paid a commission or some sort of bonus based on sales volume. The argument for this model is that the sale is handled more efficiently and a CSR can handle more sales opportunities in a day than someone on the road. While this is also a great approach to sales, there are risks associated with this type of approach. Using this type of approach I highly recommend creating a pricing grid with pricing for each type of product used, installed and the number of hours it takes on average to solve the various types of problems. In this manner, you can tell the customer that on average it takes two hours (or whatever you figure) and that you will use a given amount of materials for a particular

job. From there take the cost of the products used, plus your mark up, plus your hourly rate (figured using break even analysis above) times the estimated hours according to your pricing grid. When you give the price over the phone make sure that the CSR is writing down exactly which assumptions are used for the technician who performs the work. This way if the job turns out to be different than discussed, you reserve the right to change your price. No matter which selling technique you employ, dont for get to set the customer up on a route or offer them a renewal! For an expanded discussion on breakeven analysis and other financial and operational articles as they relate to PCOs visit www.pcobookkeepers.com.

Daniel S. Gordon is a CPA in New Jersey and owns an accounting firm that caters to PCOs throughout the United States. Visit www.pcobookkeepers.com for information about his firm, PCO Bookkeepers. He can be reached at dan@pcobookkeepers.com

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