When your business is growing, it’s difficult to see anything but the bright future ahead. Bay Pest Control was on a roll in the early 2000s; since establishing the company in 1995, we had grown to five routes in Mississippi and two in Louisiana, close to an even split between residential and commercial business. We were growing fast, and our financial forecasts were outstanding. I didn’t think twice about financing our growth, buying new trucks and equipment as demand increased.
Then Hurricane Katrina hit. We lost 70 percent of our business overnight.
Many of our customers lost their homes and moved from the area. Our commercial customers had the critical issues of repairing and rebuilding ahead of them. No one was looking for pest management services — not to mention that for two months after the disaster, we couldn’t have serviced them anyway. We were engrossed in recovering our own lost vehicles, repairing our offices and homes and getting our utilities back. Add to that the monumental challenge of getting gasoline and supplies in those early weeks after the disaster, and we were in no shape to service our customers.
Our employee situation was dire. Eight of our 11 team members left the company, moving away because their homes had sustained irreparable damage. We continued to pay those who stayed on, even though our cash flow was zero — and for several weeks, there was nothing for them to do.
But once the healing process began and the phone started ringing again, we had trouble rebuilding our staff. The government was issuing subsidy checks to those affected by the devastation, so people for the most part weren’t actively seeking employment. Our business was coming back, but we had no one to do the work.
The other challenge? All of those loans we had taken out to finance our growth still had to be paid. We were fortunate in that our lenders were understanding and worked with us through the hardest times, but the debts remained our responsibility. Simply put, we had a lot of work to do.
A Difficult Climb. We went aggressively after the commercial market because it was rebounding much faster than the residential market. We knew from previous experience that we couldn’t just advertise our way into the market — we had to broaden our referral network and strengthen our reputation. That meant providing flawless service to our existing customers so they would recommend us, and then following up face-to-face with all of those potential customers. We spent a lot of time approaching new accounts and asking for business. Our efforts paid off; by 2007, two years after Katrina, we were back on an upward track, building momentum and again looking forward to growth.
But our success was delayed once again, as the Great Recession began to hit late in 2007, compromising our markets in yet another way. In 2010, the Deepwater Horizon oil spill in the Gulf of Mexico devastated our region again. We weathered one disaster after another.
Today, we’re back up to eight routes, and we’ve built our commercial business significantly — it now accounts for 75 percent of our revenues, which puts us in a stable position. We’ve built our reputation to a record high as well, as our markets have come to rely on us for incomparable service at an unbeatable price. None of this came easily, though, and had we been better prepared financially, we would have been able to spring back more quickly. Our debt put an additional strain on our business at a time when we simply couldn’t afford it.
Prepare Yourself. My advice? Understand that no matter where you live or how big you are, your circumstances can change overnight. Disasters and accidents happen without warning; you need to be as prepared as you can possibly be.
Financial planning is one of the most important actions you can take. Look at your business plan, your growth plan, your financial strategy. Don’t be in such a hurry to grow that it leads you to finance more than you can pay back if circumstances change. Ask yourself, “If I lost half my business, would I still be able to service all of my outstanding notes?”
There are plenty of formulas out there, and plenty of advice in terms of how much you should have in reserves. But the size of your business, the size and diversity of your market, your personal comfort level and your threshold for risk should all be factored in to your ultimate plan. Here in the Gulf region, we’ve learned not to take anything for granted. We pay as we go, investing in our company only when we have the available funds. We recognize that growth is good, but also that it’s important to control the speed of that growth. Knowing how much growth you can sustain and at what pace is pivotal to your long-term success.
Hurricanes and oil spills might not be a risk in your market. But how about tornadoes? Earthquakes? Flooding? And no one escapes a national or global recession. There is always the possibility of unforeseen setbacks — so be ready! As long as you have a game plan, chances are good your business will make it through any challenge that comes your way.
As told to PCT contributor Donna DeFranco.