Smart strategies for increasing profitability
When you think about business growth, what’s the first thing that comes to mind? If you’re like most business leaders, it’s probably profits. After all, without a healthy amount of revenue, a business will not survive for very long. In fact, 82 percent of businesses that fail crash and burn due to cash flow problems, according to a U.S. Bank study.
Fortunately, it appears that profits are on the rise for many small to medium businesses across the country. Businesses with less than $10 million in annual revenues experienced an average 7.3 percent annual sales growth last year, according to financial information company Sageworks. As a result, 2016 marked the fifth consecutive year sales have grown more than 7 percent. In another national small business survey that covered nearly 16,000 firms with less than 500 employees, more than 60 percent of surveyed firms said they expect more revenue in 2017 than last year. To top it off, another 40 percent say they have plans to expand their workforce this year.
So, how can you claim a piece of this pie and increase revenues for your business? Keep reading for some pest control profit-boosting tips.
The trifecta of profit growth
When it comes to boosting profits, pest management companies must consider a number of factors, says Daniel S. Gordon, CPA and owner of PCO Bookkeepers, an accounting firm that specializes in the pest control industry. Gordon is also the author of From Technician to CEO: The Evolution of a High-Growth Pest Control and Lawn Care Company (North Coast Media LLC, 2014), a book that details how to properly grow a profitable pest management business. (All proceeds from sales of Gordon’s book go to The Valerie Fund. Visit www.thevaleriefund.org to learn more about this charitable organization.)
According to Gordon, there are three essential ingredients for the ultimate pest management profitability: Pricing, route efficiency and cost control.
The price is right: According to business experts, the price you offer for products and services will ultimately determine whether or not your business is profitable. “Proper pricing is extremely powerful,” Gordon emphasizes.
However, pinpointing the perfect price point can be tricky. If your pricing is too much higher than your competitors’ costs, you could price yourself right out of the market. On the other hand, if your price is too low, you may not generate enough revenue to cover essential business expenses. To make matters worse, when you offer rock-bottom prices, it often sends the wrong message. Consumers may assume your “bargain” products and services are inferior, low value or ineffective.
So how do you make sure the price is right? “Pricing is about understanding how to calculate an acceptable dollar per hour of service using break even analysis to ensure a 50 to 55 percent gross margin,” Gordon explains.
Route realities: While all businesses must contend with proper pricing, there’s one element of profitability that specifically applies to pest management companies: route efficiency. “Tight routing is just as or even more important than pricing as it determines a PMP’s real return per hour and minimizing windshield time,” Gordon explains.
By Amy Bell