August 2020 Webinar Show Notes: Market Updates | How the Bugman Improved Profits

Dan Gordon of PCO Bookkeepers and Donnie Shelton of Coalmarch and Triangle Pest Control give updates on the pest control industry and economy and welcome a mutual client, Brian Olson, owner of the Bugman, in Anaheim, Calif.

Watch the Aug. 11 webinar on YouTube or here:


Economic and market updates

  • Rollins stock has hit an all-time high. Their multiple is approaching eight times revenue. [2:40]
  • Donnie says the economy is not yet feeling the effects of the coronavirus. He’s concerned about it going on and how it may affect the dollar. [4:40]
  • The pest management industry is extremely resilient, Dan says. Things came back quickly in 2008-2009. [5:55]
  • It looks like another round of stimulus is coming, which is good for the industry. [6:20]
  • There will likely be another round of PPP, although many pest management clients may not qualify because their revenue has not dropped. [8:50]

Marketing and digital strategy updates

  • Search volume for the term pest control has not changed much compared with 2019. There has been a slide for the term mosquito control. It’s lower than 2020, Donnie says. Search volume for the term termite control is also down, and so is bed bug control, likely because travel is down significantly. [9:45]
  • Coalmarch clients have seen a 41 percent increase in leads in June/July over last year. They are overall doing well on the digital marketing side. [11:30]
  • Donnie is seeing pest companies investing in infrastructure, maybe because of PPP money, in terms of call systems other technology. [13:20]

Financial and M&A impacts

  • Dan says most PCO Bookkeepers clients, with a few exceptions, are net positive for the year in terms of revenue. [14:03]
  • In terms of M&A, Anticimex, Rentokil and Terminix stopped doing deals as COVID-19 hit, although Dan’s firm closed three firms with Certus during this time. Bids are coming back from the other buyers now. [15:20]
  • Multiples are not too far from where they were pre-COVID, Dan says, although if the stock market drops and all asset classes fall, there could be a problem. [16:00]
  • The multiples on the public pest control companies aren’t necessarily an indicator of what a seller will get. [17:40]

Growing your company with Brian Olson of the Bugman [22:40]

  • Brian Olson, owner of the Bugman, describes a crossroads he was at in 2017, trying to determine why his gross profit, payroll and leads were off. [27:50]
  • PCO Bookkeepers did a financial analysis for the company and Brian learned he was missing a few key ingredients. [28:45]
  • Dan explains some of the concerns he had, one of which was gross margin. Gross margin is revenue minus direct costs (tech labor, vehicle costs, material costs – anything that happens on the road). [29:30]
  • A gross margin of 50 percent means if it costs you $100,000 to run the office (marketing, selling, etc.), you have to do $200,000 in revenue to break even, Dan says. Once that’s achieved, you are making money at 50 cents on the dollar. [30:37]
  • The Bugman needed to reduce direct costs, including technician labor and material costs. [31:40]
  • There are a few ways pest control companies can increase revenue, one being taking monthly customers to quarterly, which improves labor and material costs without selling more. [33:13]
  • The lesson is not that you need to take customers from monthly to quarterly, it’s that you need to increase your revenue. [36:15]
  • See how the Bugman increased revenue $9,133 while doing 865 fewer stops over a three-month period. [38:50]
  • Why the Bugman’s goal is to move the business to 80 percent recurring revenue. [43:20]
  • “Boring is good” has become one of Brian’s mottoes. [44:00]
  • Donnie adds that many pest control operators don’t realize that the more you focus on recurring revenue, the easier growth gets. [44:30]
  • “Over time that $150 quarterly is what’s going to get you to the promised land, not that $100,000 bird job,” Dan says. “Keep your eye focused on that recurring vs. nonrecurring.” [47:25]
  • The Bugman wasn’t ranking well in search a few years ago in some of its biggest markets. [48:35]
  • Brian was under the impression pay-per-click didn’t well anymore. [49:40]
  • It’s vital to track accurately total leads, cost per lead and the conversion rate for marketing efforts, so you know if any changes you make have an impact. [52:30]
  • Using the right digital marketing channels at the right time helped the Bugman realize a 49 percent increase in total yeas year-over-year and a 60 percent increase in paid leads year-over-year for a 42 percent increase in recurring residential revenue in 2019. [54:40]
  • In 2017, Brian was up at night and the company was not profitable. [56:28]
  • Brian’s goal isn’t to be the biggest pest control company but to fill the Bugman’s niche. He learned from a mistake he made spending $100,000 to open an insulation division, which took the business off track. [1:00:10]
  • Donnie’s takeaways from Brian’s story are to focus on gross margin (best in class is 50-55 percent), review service frequency and reevaluate your approach to cost per sale and pay-per-click. [1:01:30]

Author: Dan Gordon