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Pcobookkeepers 12566777133623 Phpapp02 Document Transcript

  • 1. A Division of Wealth Depot, LLC P.O. Box 810 Newton, NJ 07860 Phone: 973-300-0288 info@pcobookkeepers.com www.pcobookkeepers.com We are an accounting and business advisory firm obsessed with providing pest control companies’ information they need to prosper in today’s competitive business environment Daniel S. Gordon, CPA
  • 2. Success in the Pest Control Business is No Accident… Daniel S. Gordon, CPA, General Partner and founder brings over 20 years of experience in accounting and managing high growth pest control companies. As an owner, manager, chief financial officer and industry consultant he has been involved with the development of several pest control companies from inception to the $15 million in annual sales levels and beyond. PCO Bookkeepers is an all inclusive accounting and business advisory firm serving pest control companies with over $500,000 in annual sales. We create financial and operational systems that allow firms to grow rapidly. With our experience and your efforts, you can use our expertise in the following areas to improve and grow your company: • Monthly Closeout Service, synchronizing your CRM system with your General Ledger so that you can make accurately informed business decisions (e.g. PestPac®, ServicePro®, other pest control specific software solutions, and QuickBooks®) • Preparation of Sales and Income Tax Return filings • General Ledger maintenance, including monthly entries • Outsourced Accounts Payable management • Outsourced CFO services • Management of labor costs • Strategic Pricing services for profit • Management and measurement of advertising campaigns • Service Contract design • Design and implementation of management information systems • Renewal Management • Route Management • Development and execution of compensation programs • CRM, Accounting, and Sales software consulting
  • 3. Five Questions for You to Answer… PCO Bookkeepers deploys a unique approach to managing a pest control company for growth. We help you configure your company for success, focusing on developing and maintaining healthy, accurate operational systems that enable business growth. Here are five questions for you to ask yourself: 1. Are you experiencing stagnant growth or rapid growth that you can’t handle? 2. Do you feel like your employees are not understanding your vision and/or not contributing directly to your company’s growth? 3. Do you feel like your company should be more profitable at your current level of revenue? 4. Do you feel that if you are not involved in every aspect of running your company, things just won’t get done? 5. Are you gathering tons of data but still do not know how to leverage it to provide visibility and understanding of the current shape of your business? If you answer “YES” to any of these questions, then our capabilities will be meaningful to your pest control company’s further development .
  • 4. Understanding the Anatomy of a Pest Control Company… The pest control business is a simple business model that is EXTREMELY difficult to execute effectively. First lets take a look at why the pest control business is a simple business model. The flow chart below is a simplified visual representation of how a pest control company works.
  • 5. That looks easy, doesn’t it? Well, you know as well as we do that it’s not that easy to execute. There’s a lot of planning, system design, implementation, and execution that goes into successfully operating and growing a pest control business. Information is the key! The diagram below illustrates the activities that must be performed within your business systems in order to operate effectively. Are you currently performing each of these activities? And if so, are you performing these activities correctly and efficiently on a regular basis? In the end, the objective is to set up and operate your daily business processes and information systems in a way that satisfies the needs of each of these activities. Doing so will enable your company’s management team to achieve a higher level of business decision making -- management with visibility.
  • 6. Getting Started with PCO Bookkeepers: We’ve made it easy to work with us. Our professionals work with you every step of the way to ease you into the system. The PCO Bookkeepers process includes: I. The Assessment II. The Operational Cleanout III. Regular Service Agreement I. The Assessment A. During the assessment phase, we will look under the hood of your current systems and assess your business in the following areas: Office Processes – What we look for here, is how work is generated, dispatched and recorded. This is the heart and soul of any PCO firm and without smooth procedures, growth will never be sustainable. Accounting and Bookkeeping Procedures – Here we review your chart of accounts, which is the backbone of your reporting system. A well designed chart of accounts enables you to generate consistent reports allowing you to benchmark and determine areas of improvement. B. Next, we will prepare a Financial Report Card: Revenues – What we look for is not only dollars but quality of Revenues. Obviously they need to be high enough to sustain a profit, but they also must recur or lead to recurring revenue. The three sources of revenue we look for are: • New Sales • Route Work • Renewals Expenses – Cost containment should always be a priority in any business – a pest control business is no different. Sometimes it isn’t always easy to isolate which areas need work. In this phase we break down expenses into three departments: • Direct Costs • Selling and Advertising
  • 7. • General and Administrative Once costs are organized we are able to report on the reasonableness of these costs as compared to revenues using our in-depth industry experience and from working with other successful PCOs who are already doing what you want to in terms of growth and profitability. C. As the final step of our assessment, we will make Recommendations for Improvement: This is the operational report card where we will provide feedback with regard to what you are doing well and where you can improve your operation and accounting processes. In this section we also outline what PCO Bookkeepers can do to help and what our fees will be. II. The Operational Cleanout This phase includes the initial set up and implementation of our agreed upon procedures. Using the knowledge and insight gained from the Assessment Phase, we will work collaboratively with you to set up your systems so that you can transform your business into a tightly operated profit generating machine. We will show you what to measure, how to measure it, and how to interpret the results in such a way that you can operate your pest control business with new found visibility and focused intention. We help you set up your accounting system using operational software and we blend it with a general ledger system. The two systems will be configured and mapped in such a way that it enables us to “marry” the systems, keeping them synchronized and enabling informed business decisions based on accurate and timely information. When this phase is complete, we will have everything set up for ongoing accounting and creation of the valuable reports that we will provide to you on a monthly schedule.
  • 8. III. Regular Service Agreement At this point, your pest control company’s technology systems and business processes are configured in such a way as to support your business’ growth initiatives. Based on the findings of the Assessment Phase and your Operational Cleanout, we will regularly perform a monthly set of business and accounting services customized to your business needs. Our regular service offerings include: • Monthly Closeout Service, synchronizing your CRM system with your General Ledger so that you can make accurately informed business decisions (e.g. PestPac®, ServicePro®, other pest control specific software solutions, and QuickBooks®) • Preparation of Sales and Income Tax Return filings • General Ledger maintenance, including monthly entries • Outsourced Accounts Payable management • Outsourced CFO services • Management of labor costs • Strategic Pricing services for profit • Management and measurement of advertising campaigns • Service Contract design • Design and implementation of management information systems • Renewal Management • Route Management • Development and execution of compensation programs • CRM, Accounting, and Sales software consulting Additionally, we will show you how to leverage computer technology to facilitate growth in your pest control company. Utilizing today’s most advanced customer relationship management and accounting software packages powered by the Internet, we will provide you with monthly reports that will prove to be critical to your company’s ability to make decisions and sustain growth. Our reporting package includes, Our One Minute Manager, Service Drill Down Report, Expanded Financial Reports, and other customized reports. Custom tailored to show profitability by branch, department, and service line, our reporting packages will provide you with a high level of operational visibility and strategic understanding that has previously been available only to large companies with big budgets.
  • 9. Case Study #1: JP McHale Pest Management, Inc. Overview JP McHale operates in the New York Hudson Valley, Northern New Jersey, and Southern Connecticut. They are ranked as one of the 50 largest Pest Control firms by PCT Magazine. Growth Challenge When we met JP McHale, they were doing a few million in annual revenue. They had a multitude of issues that were hindering growth. The operational software they were using was not being utilized efficiently. They relied on an accountant who had no industry experience and was not willing to spend the time to set up systems for reporting results accurately. His sole intention was to produce sales tax and income tax returns. The owners were at a cross roads. They knew they had to do something or they were going to stagnate. Suggested Management Strategy & Implementation We met with them and laid out a strategy that included retrofitting their PestPac software. We aligned all set up tables to enable proper revenue reporting. We then created their chart of accounts and set up QuickBooks as their general ledger system. Systems and procedures were created that allowed for accurate and consistent recording of transactions. Once we set up the infrastructure to handle a rapid growth strategy, a marketing plan was devised and implemented. A compensation plan for managers and salespeople was also set up to coincide with this growth initiative. Result Over the next seven years, JP McHale quadrupled in size, employing over 100 employees while becoming extremely profitable. The owners are now in a place where they provide steady employment and outstanding health benefits to employees along with profit sharing and a company 401K plan. Their employee compensation plan far exceeds the rest of the industry. The owners no longer dread going to work nor having vendors and employees abuse them. Instead, they have built a great place to work and significant wealth in the process.
  • 10. Case Study #2: RK Environmental, LLC Overview RK Environmental operates in the Northeast and Mid Atlantic States. Its owner Hank Hirsh is a Board Certified Entomologist and a specialist in food safety. The company only services the food processing and related industries. Growth Challenge In 2001 RK’s owner decided to parlay his food processing knowledge by purchasing a small route that was grossing less than $200,000 in annual revenue servicing a couple of food processors in the New York metropolitan area. He wanted to grow the company in a rapid manner while providing the highest quality service. Suggested Management Strategy & Implementation We first met with Hank and helped him develop an offer for purchase of this small company. We became his outsourced Chief Financial Officer and helped him negotiate the purchase and work out the financing terms to allow his ultimate purchase. We knew the only way to implement a high growth strategy would be to set up a strong management infrastructure in terms of routing and financial management. We performed services to set up the company’s back office tools, including PestPac design and configuration along with QuickBooks set up and implementation as the general ledger. We formulated sales forecasts and a budget, which he adhered to closely. While we ran the finances, Hank was able to focus on sales and operations and over the next 7 years together we turned this one-route company into a 2.2 million dollar company with about a dozen technicians and a bottom line of approximately 17%. Result Today RK Environmental is one of the most respected pest management and food safety firms in the industry, boasting clients who read like a “Who’s Who” in the food processing industry. We continue to work with him as an outsourced CFO, performing accounting, budgeting and business consulting services. He makes an excellent living and his firm has sustained along its high growth trajectory. The firm is currently worth several million dollars.
  • 11. Case Study #3: S&S Termite & Pest Control Overview S&S Termite and Pest Control operates two branches in Alabama. This pest control company performs termite work for residential and commercial customers, as well as general pest control services in these two Alabama markets. 2008 sales were in excess of $1.2 million. Growth Strategy We met S&S owner John Story in 2004 at a Pest Control Industry conference. Gross Revenues in the prior year was $350,000. John had built a small pest control company in the past and sold it for a tidy profit. This time around he decided that he was going to build a company that would do several million in annual revenue. Suggested Management Strategy & Implementation When we met John he was using PestPac to run his operation and QuickBooks to pay his bills. While he had the proper tools, he lacked the expertise to make them work efficiently. His PestPac was not set up to give him the proper information and QuickBooks was merely used to print checks. We did an analysis of both programs and made several adjustments to each – redesigning and implementing PestPac and QuickBooks to provide accurate and timely business information. We currently maintain both systems for S&S, allowing him to focus on building his business by working “on his business” rather than “in his business”. We also set him up with our PMP WealthBuilders program, where he learned more profitable pricing, routing, and sales management methodologies. Result Within 5 years S&S had grown from a single branch with $350,000 of sales to a two-branch operation with over $1.2 million in annual sales. We continue to be their outsourced Chief Financial Officer. John attributes his ability to grow to our program of keeping his operation efficient and providing monthly management reports. He has also embraced the insights and materials gained from our PMP WealthBuilders program to train his staff and communicate his vision.
  • 12. Principal… Daniel S Gordon, CPA, Founder • Certified Public Accountant licensed to practice in New Jersey. His expertise is in entrepreneurship and new venture management. He has personally been involved with building two pest control companies that employ over 100 full time employees. • Was employed by Deloitte & Touche, an international accounting and consulting firm, as an auditor and tax consultant • Started, owned, operated and grew a pest management firm in Northern New Jersey that he eventually sold to a large regional Pest Management Company for a significant profit. • Worked as CFO for acquiring Company. While there the company tripled in size in terms of revenues and employees. • Currently owns an accounting and consulting firm with two offices in Northern New Jersey that specializes in building service businesses, more specifically pest control businesses. • Currently runs with Jim McHale, of JP McHale Pest Management (One of the nation’s 50 Largest Pest Management firms), PMP Wealthbuilders, a business building and coaching firm that caters to pest control company owners and managers. • Has spoken for the National Pest Management Association, The New Jersey Pest Management Association, The Michigan Pest Control Association, Pest Control Technology’s Business building seminars and Marathon Data’s user conferences in Florida. Topics include route management, Business building, pricing for profit, running an efficient office and how doing so will make you a successful PMP. • Has written articles for both Pest Control Magazine and PCT on o What to look for in an accountant o Pricing Ant Programs for profit o Running an Efficient office o Effective Routing • Certified QuickBooks Pro Advisor
  • 13. • Has worked with and done dozens of PestPac Software implementations for Pest Control Firms all over the country. Has been working PestPac by Marathon Data Systems since 1994. • Dan is a graduate of Northeastern University where he graduated Magna Cum Laude with a degree in Accounting and Management. Our Professional Staff • With over 25 years of collective experience in the pest control industry, our team members are able to provide accounting and bookkeeping solutions that are custom-tailored for PCOs and relevant to the PCO business model. • The PCO Bookkeepers professional staff includes bookkeepers and accountants with years of experience using business and accounting software applications, such as QuickBooks and PestPac. • Our team of professionals is committed to providing you with prompt and courteous accounting, tax, and consulting services of the highest standards.
  • 14. Your Pest Control Company’s Growth Opportunity… Now it’s time to start working ON your business and not IN your business. Remember to prioritize and focus on what matters. Business growth! Don’t fall into the trap of doing the same things year after year. If you decide to do something different this season, hire PCO Bookkeepers as your collaborative business partner. We can help you achieve your business goals and make a difference in your life! If you believe based on what you’ve read in this booklet that PCO Bookkeepers can provide structure and enhance growth in your pest control company by implementing our proven financial, operational and accounting programs… Lets Talk! We look forward to the opportunity to serve your pest control business needs. Feel free to contact me or visit us on the web at www.pcobookkeepers.com. Sincerely, Daniel S. Gordon, CPA 973-300-0288 dan@wealthdepot.com CALL US TODAY! 973-300-0288
  • 15. Articles by Dan Gordon, CPA This section contains a sampling of articles written by Daniel Gordon, CPA. Dan’s articles have been published by numerous industry specific magazines and websites. The first article discusses the importance of having an accountant that possesses intimate knowledge of the industry you work in. All large companies have a CFO and an accounting department, yet so many small businesses are content to “fly by night” without a single member of their management team having accounting skills and experience coupled with a thorough understanding of the pest control industry. There is a gaping hole in such a management structure that needs to be filled. In the second article, Dan explains how to apply proven methodologies backed by facts and data towards pricing your services in such a way as to build a profitable pest control business that accumulates value and wealth. If your prices aren’t high enough, then you’re leaving money on the table. This article will walk you through a strategic approach to pricing that will help you capture profits, starting with your company’s top line.
  • 16. Is Your Accountant a Valuable Part of Your Management Team -- Or Does He Just Push Paper? By Daniel S. Gordon, C.P.A. Accounting is the language that we use to communicate the health of our business. When many of us think of accounting we think of April 15th – TAX DAY. However, there is a lot more to the accounting function with respect to the Service Firm owner than taxes. A competent CPA should be able to file your taxes and prepare statements for banks, creditors and other stakeholders in your business. However, the overall goal of your accountant should be to help you accumulate and preserve wealth. Saving taxes is just a small part of this overall task. A competent accountant recognizes that he/she needs to be a valuable member of his/her client's management team and is able to provide many more added value services than just tax preparation. The growing pest management business needs help with many of the financial aspects of their business. As your business grows you need the internal structure and financial controls to support this growth. This aspect of accounting is called Management Accounting and will be the focus of this article. Management Accounting has to do with compiling and reporting information that you need to improve the results of your operations. Many CPAs are in a unique position to help you in this area by helping you to set up procedures to accurately record the daily transactions associated with doing business and by making observations about your firm and comparing that information to other clients that they work with. Your accountant should be a trusted member of your management team, providing you information on ways to improve the efficiency of your business. The following are essential elements of the inside accounting function required to run a successful pest management business.
  • 17. PREPARATION OF FINANCIAL STATEMENTS Financial Statements are the culmination of the accounting process. They are used to convey a concise picture of the profitability and financial position of your company. The two most important financial statements that allow you to get an accurate snap shot of the results of your business are the Profit & Loss Statement (P/L) and the Balance Sheet. The P/L shows how much profit or loss your firm made for a given period. But more importantly it shows how that profit or loss was derived by category of expense and revenue. It is extremely important that your accountant understand the pest management industry because we use terminology specific to the industry (i.e. specials, intensives, one shots, baiting, termite labor, pest labor, etc.), and we have certain financial benchmarks to rate our businesses using this terminology that are unique to our industry. A growing pest management firm that uses a generic chart of accounts is at a distinct disadvantage to the larger players in the industry who use their chart of accounts to generate financial statements that allow them to analyze their businesses and answer important questions such as: • Is my Material expense in line with my revenue? • Is my direct labor cost in line with my overall revenues? • Am I spending more or less as a percentage of revenues than the average firm on advertising? • What percentage of my revenue do I spend on running my office? • What are my vehicle costs as a percentage of revenues? • I know I spend a lot on overtime…But do I spend too much on overtime? The Balance sheet shows the financial position of a firm on a given date (i.e. assets, liabilities and net worth). An easy way to distinguish the P/L from the balance sheet would be to think of the P/L as a statement showing how our business did in terms of revenue, profit, and growth for a given period, and the balance sheet would show us what our firm is worth as a result of all cumulative P/Ls and financing activities in the past.
  • 18. BOOKKEEPING Your accountant should be able to help you prepare your financial statements by providing you with bookkeeping services or over seeing the person who performs your bookkeeping. With the proliferation of the Internet many accountants now offer online bookkeeping services. This is an outstanding way for the Pest Management Professional to have his internal accounting supervised by a qualified accounting professional at a very reasonable cost, and it is done using ATM like security. In this day and age, most bookkeeping is done using a computer. In this regard, I suggest that the Service firm owner and his accountant use two types of software: 1. The first program should be industry specific and track all the money coming into the business. More specifically, revenue types, customer payments and accounts receivables. This program should also provide you with information on technician productivity, and other marketing and operational information used to run your business. The program should have the capability to provide you with periodic reports that can easily be exported to your accounting general ledger package. One such program that I've had experience with and provides excellent reporting is PestPac ® or Routepoint ® by Marathon Data. 2. The second program should be an off the shelf accounting general ledger and accounts payable system such as QuickBooks ® by Intuit or Peachtree ® by Sage Software. For the most part we as service firm owners do not keep large complicated inventories or sell our services using sophisticated point of purchase devices and therefore don't require elaborate and very expensive general ledger programs. In most cases these off the shelf programs should be adequate, and they are extremely powerful. However, they need to be set up properly to give you the type of information that you require. These programs will provide you information such as how much money you owe to suppliers, how much you have paid them in the past, and profit by service class. The general ledger
  • 19. program will actually generate financial statements at the push of a button. One word of caution though, the statements produced are only as good as the as the data entered into the package. Therefore your accountant should set up office procedures to insure that information is entered into your accounting system in an accurate fashion. BUDGETING Budgeting is nothing more than formulating a coherent financial plan for some period in the future, usually one to two years. As the plan is implemented we are able to rate our efforts compared to the budget that we created. Budgeting allows us to predict the amount of technicians, vehicles, equipment, etc. that we will need in the future based on our revenue projections. While many business owners think that they are too busy to do budgeting, there is nothing further from the truth. You see, the reason that most small business people do not budget is because they are so concerned with meeting a payroll each week, that they rarely take time to plan. Lack of planning continues a vicious cycle that underscores a relationship between the failure of a business to maximize its profits and the absence of planning. If you are running a growing service firm you can't afford not to budget for the future. During the budgeting process we determine the areas of spending that we can reduce. Revenues are analyzed to determine which are the most profitable and if there are other sources of revenue that can contribute profitably to the bottom line. Budgeting should be done annually and actual results should be compared to budgets monthly. ACCOUNTS RECEIVABLE MANAGEMENT Accounts Receivable Management is an extremely important area of Management Accounting. A business that doesn't have control of its accounts receivable will usually have poor cash flow and have trouble meeting its expenses in a timely fashion. Accounts Receivable Management starts with laying out a formal procedure for their collection. This procedure starts with an Accounts Receivable aging report. This report should categorize the firm's receivables by age. There should be a
  • 20. “Current”, “Thirty”, “Sixty”, and “Over Ninety Day” column. At each point along the way a collection effort should be made (i.e. at 30 days perhaps a phone call to the customer, at 60 days perhaps a letter and at 90 days perhaps a stronger effort). In any event the pest management firm should not allow a very large percentage of their receivables to go over the sixty-day column. History shows that the older a receivable is, the more difficult it is to collect. CONCLUSION The accounting function is far more than filling out tax returns. The accounting function in the successful service firm allows the owner to make sound business decisions about expansion, cost reduction and efficient operation of his firm. The Management Accounting function provides controls that insure financial transactions are recorded properly and provides the information that allows the successful owner to make those decisions based on hard facts. At a minimum, the internal procedures within a pest management firm should include the use of financial statements, a well-supervised bookkeeping function, a formal budgeting procedure and an aggressive accounts receivable management program. As your firm grows there are several other aspects of management accounting that should be explored and implemented. But the firm that successfully uses the principles of Management Accounting outlined above will accumulate much more in terms of wealth than the firm that operates by “Shooting From The Hip”.
  • 21. Pricing Your Ant Management Program for Profit By Daniel S. Gordon, C.P.A. As a Pest Management Professional we need to understand our cost structure in order for us to price our services for profit. The following article is meant to make the reader focus on the real cost of doing business and choose his/ her pricing accordingly. During the spring and summer there is no shortage of customer calls for Carpenter Ants, Fire Ants, Pharaoh Ants, etc. One thing is for sure that if priced correctly, there is a lot of money in ants! THE PRICING MODEL The Pest Management Pricing model is based on two variables: Time and Money (hourly rate). Time - The service time that it takes to fulfill the obligation of eliminating the customer’s ants under the service program. This includes treatment time and call back time. The benefit of being an experienced PMP is that you can reasonable estimate the time that it will take to complete the job and reasonably estimate call back time for the average customer. The PMPs that make the most money realize that while they provide pest management services, what they are really selling is time (the time to effectively service their customer). Every action performed that makes more efficient use of time will provide larger profits. This is not to say that we must 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. Money – This is an hourly charge for our ant control service that covers our costs and allows us to make a reasonable profit. How do we know what that hourly rate should be? Accountants calculate this number using a technique called breakeven analysis. BREAKEVEN ANALYSIS The following discussion will give you a basis for figuring your hourly rate. I urge you to think hard about the following discussion, since your profitability relies on it. Remember, that pest management is your profession. Therefore, you should
  • 22. never sell yourself cheap. After all, you are providing a needed service and if it is communicated to the customer that way, you will be able to command your price. And you deserve it!! Let’s start with some definitions you need to know… Fixed Costs- Any cost that remains constant at any volume of business (i.e. rent, advertising, utilities, etc.) Variable Costs- Costs associated with producing one unit of a good or in our case one unit of a service. For our purposes, one unit of a service will be one hour of service. Thus, variable costs are those costs that rise and fall based upon the number of hours that we provide service. Examples of variable costs would include: Hourly pay for your employees, Workers Compensation Insurance, Material Costs, etc. Gross Profit- The difference between the price charged per unit (Hour of Service) and the variable costs. For example, if we bill our service at $100 per hour and a technicians gets $20 per hour and all other variable costs associated with providing that hour of service are $35, our gross profit would be $45 (figured: $100 billed less ($20+$35) variable costs). Once these definitions are clearly understood, we can determine our breakeven point. Breakeven point in units (service hours) = fixed costs divided by gross profit per hour. Example: If our rent, utilities, and all other fixed costs are $10,000 and if using the example above, our gross profit is $45 per hour, than our breakeven point is 222.2 hours of service at $100 per hour just to break even (Figures: $10,000 divided by $45 Gross Profit Per hour). At 222.2 hours of service we will start making a profit of $45 per hour. You see the gross profit contributes to paying the fixed costs. Once the fixed costs are paid, the gross profit contributes to bottom line profit. This is the reason some accountants call gross profit the contribution margin. Is it really this simple? YES!!! However, at various sales levels certain fixed costs rise (i.e. after a certain sales level, a new piece of equipment might have to be added, thus the cost of using that piece of equipment must be added to fixed costs).
  • 23. Therefore, figuring your breakeven point can sometimes be confusing. The “Hourly Rate Calculation” at the end of this article illustrates a real life example. While everyone needs to tailor this example to their individual facts and circumstances, it should be noted that using the assumptions in the example the PMP would have to charge $76.02 per hour to make a 5% profit. THE ANT MANAGEMENT PROGRAM While this article is not meant to endorse any one method of Ant treatment, the PMP needs to decide on a program. Typically there are two programs that could be offered to customers to control ants. Type 1 Program – Employing this type of program would have the PMP perform a one time intensive that may take several hours while offering free call backs for the service guarantee period (i.e. one year, six months, etc.). This type of program usually gives the customer an option to renew at the end of the service guarantee period. Type 2 Program – Using this program the PMP spends less time on the intensive but returns for periodic visits either monthly or quarterly. No matter which program is used, the PMP must estimate the time to be spent fulfilling his obligation to the customer. For example, under a Type 1 Program the PMP might spend three and one half hours on the intensive with an average of 2 call backs each at 45 minutes during the service contract period or five hours total. Using a Type 2 Program two hours might be spent on the intensive with three additional quarterly visits that each average 45 minutes with an average of 1 call back per year at another 45 minutes. Here again, we are at 5 hours for the year. Pricing Ant Management Services – Using the discussion above and the hourly rate calculated in the “Hourly Rate Calculation” at the end of this article, each program would be priced at $380.10 as follows: Type 1 Program – 5 hours x $76.02 = $380.10 Due at completion of the intensive Type 2 Program – 5 hours x $76.02 = $380.10 $209.05 Due after the Intensive = 2 hour initial + estimated call back time of 45 min x $76.02
  • 24. $57.02 Due for each of 3 Quarterly visits (we are off $.01 due to rounding) CONCLUSION The above discussion is accurate in terms of pricing methodology. Some would argue that a small operator can operate at lower prices because he/she does not have the overhead of the larger companies. There is nothing further from the truth. You see the above costs may vary slightly from company to company. But over the long run the cost structure is the same for the small operator and large operator alike. A small single person operation has the same cost structure as the bigger companies. However, the small guy can be his own technician, run his own books, and perform all of the office functions himself (By the way, this is the way that I suggest that the small guy operate). In this manner, you may think that you are saving all of that money in technician and office salaries, and that the savings is going right to your bottom line, thereby making you much more profitable. The problem with this thinking is that you are in business to make a profit and perhaps build a business that has some value should you decide to sell it. You see the fact is, that you can go out and get a job as a technician, and you could get a job as an office worker at night. Working at these jobs you would get paid a fair wage. Why would you take all the risks associated with going into business if your plan didn’t include making more money than a wage earner? You see the profit that we spoke about before is your reward for taking the risk. If you operate under the false illusion that you can cut your price because your costs are lower, you will eliminate this reward for taking the risk. In fact, you may not only wipe out your profit you may even cut into the wage portion (It may still appear that you’re making money, because there is some wage left, not all, but some!!). At this point, why be in business? You can certainly can go out and make more money as a wage earner working for someone else doing the same amount of work. So how do you compete? Beat them on quality workmanship!!! Never on Price!!!