Tough Times

Many businesses, whether they provide services or sell products, are affected by these lean times. In the good old days when profits were skyrocketing and businesses were flourishing, it was easy to overlook liberal spending or unnecessary overtime. Today, however, even within a climate of growth, rising costs such as fuel, insurance, materials and taxes (to name a few) can eat up the profits you have come to count on. In the pest management industry a 10 percent profit margin or greater is what most owners desire. However, that profit margin is getting smaller and smaller. So, what’s a business owner to do? When times get tough, the tough get going. Becoming a stickler of your business is a great way to start.

INCREASE PRICES. Since staying profitable is the goal, consider raising your prices. At Bug Doctor we use industry-specific software to calculate hourly production. It reports the average time spent in minutes at any given account and revenue brought in. This includes building in extra service time as well. We have uncovered accounts that are at $200 an hour and accounts as low as $50 an hour. So, what do you do when you discover long-time, low-paying accounts that are unprofitable? Do you keep the account and lose money? Or, do you raise your prices high enough to make a profit but risk losing the account? We had to ask ourselves those same questions. We chose to raise our prices and risk losing some accounts in order to stay profitable.

STICK TO YOUR BUDGET. Sticking to a budget takes discipline, perseverance and commitment. Just as important as sticking to a budget is calculating it. For example, following an inflated monthly budget for chemicals and materials at a percentage higher than what you really need will not contribute to profitability. Closely examining each budgetary item and determining whether any item can be reduced or eliminated is essential.

COST-CUTTING MEASURES. Finding ways to cut costs can save you plenty of money and add to your bottom line. One area where you can save thousands of dollars each month is your health insurance plan. Numerous pest management owners across the country are looking for creative ways to reduce the costs of their plans. Some companies have initiated a specific dollar amount for each employee, not losing sight of their fixed costs for the year. Other companies are lowering their percentage of contributions each month. Some firms are only providing health insurance for the employee, excluding coverage for family members. In this instance, the employee may have the option to buy into the plan for their family.

Re-routing your service routes is one of those projects you should schedule periodically. While it may seem to take more time than it’s worth, there are underlying benefits that can significantly impact your bottom line. Not only will your operation become more efficient, you will save on overtime, fuel, hiring new technicians and/or adding new vehicles. While your re-routing project can be done manually, we use industry software that has automatic routing features.

“Bundling” of services is scheduling two or three different types of services (general pest control, nuisance wildlife/animal control, tick and flea control, lawn care, rodent control, bird control, mosquito control and other services) at the same time, rather than sending the same technician three different times or having three different techs providing different services. While this may seem obvious, after assessing your service routes you may be surprised how many redundant stops your technicians make or how many times you send different technicians to the same location.

It’s important to identify your service area or zone when routing or re-routing. Companies need to make a philosophical decision whether they will travel 25, 50, 75, or 100-plus miles to provide a service. If you are being pulled outside your service area, you might consider establishing an allied partnership with another pest management company, one you can trust. That company can be your sub-contractor, and use your service tickets and work orders, etc. Some companies have set up a reciprocal relationship with each other. This arrangement can mutually benefit both companies.

Reviewing your existing salary and commission structures, paid overtime and existing positions is a difficult yet critical step to stay profitable. Close analysis of the organization might reveal the necessity to reorganize and eliminate certain positions. Not paying unnecessary annual salary packages will significantly impact the bottom line. The tasks from the eliminated positions may be combined with other positions.

Finally, overtime can be reduced as a result of tightening the schedule through re-routing.

Another way to cut costs is by examining your advertising expenditures. Are your advertising costs worth the revenue you are spending? For example, we tracked our full page Yellow Page ads, which cost us $6,000 each month, but found it only generated 2½ times what it cost to advertise. Industry experts say that you should bring in six dollars for every one dollar spent on advertising. In the pest management industry, every company should be tracking its advertising dollars and checking its lead sources. Where are the leads coming from, and how much are you spending to obtain those leads? Once you track that, you also need to track percentage sold, and measure which method of advertising is the most effective in bringing in revenue and reduce or omit completely that which is not. Recently, we began placing door hangers at homes and businesses throughout northern New Jersey. We also rely heavily on cold calling, word of mouth, customer incentives, magazine ads, decaled vehicles, and our website that is currently under redevelopment.

The last type of cost cutting measure is to consider leasing more fuel efficient vehicles. Also, a different type of vehicle might also carry a less expensive lease.

Again, these are just a few areas that can reduce overall costs. Evaluating the many different areas, small as they may be, each one combined can make a big difference in the end.

ACCOUNTABILITY. The only way employees can be accountable is if their job responsibilities are clearly defined and communicated. High performers not only welcome clearly defined performance expectations, they will do what’s necessary to exceed them. Poor performers on the other hand dislike having defined performance expectations and being accountable for them because their poor work performance will quickly be discovered. Other ways to encourage accountability is holding weekly status meetings to encourage your team to stay connected on strategic items that impact your business. Finally, ensuring that your sales force is generating sufficient leads and meeting sales quotas is essential to growing your business.

Another way to keep tabs on your sales and service team is with GPS tracking. This monitoring system literally tracks where your vehicles are on the road at any given time. If they should venture off their route, your service manager will receive a report indicating the location and time the vehicle was spotted. This not only keeps your service and sales team accountable, it also cuts down on fuel used. It is also beneficial because if a client needs service or a price quote, you can see which technician or inspector is closest.

VALUE EMPLOYEES AND PRAISE PERFORMANCE. Although with the economic crunch pay raises may not be as generous as in previous years, you should always be generous with your recognition and affirmation of excellent job performance. Research suggests that pay raises and bonuses do not necessarily contribute to job satisfaction but instead prevent job dissatisfaction. It is praise and recognition for a job well done that contributes to overall job satisfaction and motivation.

Also, keeping your staff informed about company happenings and new business developments such as acquiring high-profile accounts, new employees that join the staff, promotions, birthdays, employment anniversaries, etc., helps your staff feel valued. Whatever the position or level, each employee should know that their contributions do make a difference to the success of the organization. Taking the extra few minutes to explain why it’s important to complete a proposal within a certain timeframe, for example, creates a sense of ownership and pride.

CONCLUSION. Facing tough times may not be all bad. It may motivate you to dig a little deeper and become a little tougher. It may motivate you to become the leader you were destined to be. You may be forced to look at your business in a whole new light and to initiate opportunity for efficient and effective change. This process of getting tough builds character, perseverance and endurance. These are qualities that define a great leader. Of course you are not looking for a pat on the back; you are just trying to do whatever it takes to survive in these tough times.

The author is owner of Bug Doctor Termite and Pest Control, Paramus, N.J