AllerClean Pest Control

AllerClean Pest Control

AllerClean Pest Control was established in 1997 and started with zero business.  Mike and Lee were the founders: Mike sold the business to me on July 15, 2013.  Lee is our general manager.

Mike and Lee built the business first by having the friends become customers; then they grew the business by word of mouth referrals.  Mike, who had almost no liquidity, used his credit cards to acquire other pest control businesses. Mike’s philosophy was that he would rather acquire businesses that advertise for new customers because his experience with Yellow Page Ads, print advertising, Coupon advertising always resulted in a very poor return for his marketing investment whereas he knew exactly what he was getting when he acquired businesses.

The business grew to gross annual route sales of $1,400,000. There is an additional “One Time” business. Mike decided to move to Florida and retire. I purchased the assets of the business (not liabilities or accounts receivable) for “one time the gross” of $1,400,000 plus Mike negotiated a consulting fee for 2 years at $300,000 per year. Therefore I was committed to $2,000,000 and that amount was secured by real estate that I own “free and clear”. The terms of the sale: $300,000 down; 3% interest; 6-year amortization commencing after the 2-year consulting term expired. I pay one half of the monthly loan payment to Mike and the other one half to Phil, who is Mike’s brother and silent partner.  In addition, I deposited $100,000 in our bank for initial working capital. One of the three properties that secure the note has been released by Mike, and in several months, I will ask him to release the second property because the remaining property will be sufficient to secure the balance of the loan. This concept of releasing properties as the note balance was paid down was negotiated at the time of the acquisition of AllerClean.

Subsequent to the purchase, I acquired one route and made unsuccessful offers on 3 other pest control businesses. They all wanted more than “one time gross” and some had termite business which I did not want to acquire. Since I also have other business interests, I hired additional staff so that I now work 3 days per week (Monday, Wednesday and Thursday) and the day-to-day business runs itself.  I am responsible for motivating the staff, dealing with staff problems, hiring and firing, acquiring trucks and other capital assets like computer systems and dealing with the none day-to-day tasks, following up on each person’s performance on an “as needed” basis, and dealing with complaints and personal staff issues that the staff could not handle. Marketing is also my responsibility, although one of my daughters, Stephanie, works very part-time in the field calling on new potential accounts.

Hiring and retaining technicians is a major hurdle because there are very few responses to our CraigsList and Indeed.com advertising.

2. My Expectation for AllerClean from the CSUN MBA consulting program:

In addition to theories, it would be nice to have a list of practical precise actions that I can take to grow AllerClean.  In addition to general concepts, I would hope that you would provide contact information for any of your suggestions.  As an example:  If you find that SEO advertising is important, it would be helpful if you provided the exact contact you recommend with reasons for your choice.  Another example:  If you suggest that “social media” would be an important aspect, it would be helpful if you provided exact contact names and the reasons that you selected that contact. I am acutely aware that social media advertising and SEO are critical, but I have not been able to find a reasonably priced person to implement those tasks.  Perhaps you can find a part-time college student and provide exact contact information.  I know an MBA student would not be an affordable option for AllerClean.

Also, any research that you do would be greatly appreciated.  We find it difficult to determine what our competitors are charging for the services that I have listed on the price list that I provided to you.  Example: If each of you could call one competitor each and survey the competitor regarding their basic prices, this would be of major benefit to us.

If you could determine how we could hire and retain technicians, this would also be helpful, but please remember that there is a cost/benefit issue here because we are a small company without a great deal of liquidity.  Example:  If you found that offering a variety of Medical Benefits or 401K type benefits was prudent, specific information as to whom to contact and pricing considerations would be helpful.  I have been told that some payroll companies have “employee leasing” or similar programs so that AllerClean would obtain the cost savings of the payroll company, who may have 50,000 “leased employees”, rather than the costs that we face as a small company.

We currently pay a small fortune for Workers Comp insurance and Liability insurance.  If you researched cost savings ideas and contacts, that would be a giant help.  Hint:  I am currently looking into ADP Payroll “Total Source” which apparently provides economies of scale since they may have a method for “leasing” our employees or other creative and cost savings ideas so that we could take the funds we save in insurance and invest that saved money in medical benefits for our employees.  Another idea:  I have a contact at AFLAC Insurance that claims to have some great dental, vision, and other programs that the employees pay for on a cafeteria plan. I would be happy to provide her contact information.

Also, I am 69 years old and I would like to retire in 2 1/2 years when the loan on AllerClean is paid off.  It would be nice if I could give a substantial raise to Jen, our office manager to handle 99% of the business (as she does now) and pass most of my part-time duties on to my 2 adult children, pay them a salary, and still draw a salary for myself for retirement.  After retirement, I have contemplated paying Jen a very generous bonus but linked to the growth, profitability, and performance of AllerClean.  An exit strategy would be helpful.

Regarding acquisitions,  it would be helpful to find more small targets for acquisition and to determine a formula aimed at paying a fair price for acquisitions.  The “One Times Gross” may not be accurate or too low at this time.  Hint:  Terminix, Western Exterminators, Clark Pest Control, Rollins, and Rentokil are actively purchasing pest control businesses and perhaps they can be surveyed regarding their formulas for valuation of pest control businesses. In addition Business, brokers may have ideas. If you decide to follow up on this matter, please contact me because many of the acquisition companies advertise in Pest Control industry magazines and I would be able to provide contact information to you.

I am not likely to want to survey any of our current staff, because I do not want to signal in any way that changes are being considered.  I do not want to get their hopes up and then dash them if we do not move forward with other “benefits” for them.

“Explain your company’s strengths and what differentiates your company from your competition”

AllerClean’s niche in the pest control industry is developing and retaining property manager customers.  Each property manager may send us 1 to 50 separate apartment buildings, commercial buildings, strip malls, restaurants, or shopping centers.

Since pest control in an insignificant line item amount on the budget for an apartment building or commercial building, the property manager needs to get any requests from tenants handled quickly, efficiently, and off their desk ASAP.

This is where Allerclean outshines the competition:  The property manager makes one call to our office and we make sure that their pest control issue is handled so that the property manager can move on to other matters unrelated to pest control.

Our staff knows the idiosyncrasies and character of each property manager.  By contrast, the competition typically has a “call center” and the people at the call center know nothing about the customer.

Also, since we are a relatively small company, we can easily adapt to each customer’s specific needs. As an example, some property managers need an unusual form of billing, or they may need unusual paperwork, or status emails, or special instructions.  Very few pest control companies can be as helpful in structuring these unusual requests.  Certainly the large companies like Terminix, Western, Rentokil, Clarke, Orkin, etc. cannot be nearly as flexible in giving personal service to each property manager.

In addition, I suspect (but do not know) that our pricing for services is at the lower end of the typical range.  To reward our customers for keeping service with us,  we never raise our prices.  We have some customers that are still at the prices that were in effect 15 years ago.  This is not just a reward to the customers for longevity with us, but we are concerned that if we raised our prices, customers would shop for other customers and the net result would be a loss of gross income.  Our philosophy may be flawed on the issue regarding not raising our prices and I would encourage input about the “pricing” issue.  It would be wonderful  If you could survey our competition to determine whether our prices should be raised.

Another important point is that we do not treat the technicians in a “corporate manner.”  We do not micro-manage.  The technician is responsible for the satisfaction of the customers on their route.  As long as we do not receive any complaints, the technician is free to finish his route at any time:  they can be finished at 2 pm and that is fine with us (although they remain “on call” until 5 pm in case an “emergency” service call is needed. AllerClean’s only requirement is that the route is fully serviced and the customer is happy with the results. Therefore the technician can have a great deal of free time on certain days of the week. The technicians seem to appreciate the non-corporate, non-micro management AllerClean philosophy.  (But perhaps you will find that we are too lenient).

In addition, our staff has retrained me. I come from a  law-related background and I conducted myself in a very formal manner with customers and staff. However, I noticed that in the pest control business, humor, chatty conversations, chatty, chatty (almost unprofessional) emails are preferred to the formal style of communication and personal relationships and genuine interest in a property managers personal life helps to develop lasting clients and builds our relationships with them.

Last, most pest control companies are very cost conscious about the use of their chemicals and pesticides.  Therefore, they typically purchase the cheapest chemicals and pesticides and they think this will add to their bottom line.  Our philosophy is different: we encourage our technicians to use whatever chemical or pesticide they need to control the target pest, regardless of the cost to AllerClean.  Therefore we have fewer callbacks and the customers and technicians are far happier because the technicians take pride in the excellent results, the customers are pest free, and the property managers are delighted that they do not need to deal with a tenant that is complaining of pests that are not controlled.