Seismic Activity - PCT - PCT Online
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That's not the ground shaking under your feet. It's the continental shift-level changes happening within the PCT Top 100 and the pest control industry at large. The magnitude of each subsequent move, especially over the last three years, seems to out-quake the next, and the pace doesn't seem to be ebbing as ripples and aftershocks continue to jolt the industry.
It all started in 2006 when Ehrlich Pest Control was acquired by Rentokil Initial, beginning a mergers and acquisitions run that has not slowed down. This, coupled with a host of factors, has seen new entrants, business models, market disruptions and seismic shifts reshaping the face of the industry like an actual earthquake carving up the landscape.
Growth at Unseen Levels
A new norm appears to be taking hold with the number of Top 100 companies experiencing 25 percent year-over-year growth. In 2018, the number of companies experiencing 25+ percent growth doubled (eight companies in 2018 compared to 2006, 2011 and 2016, which had less than five). The trend continued last year, doubling again, up to 17 companies. This rarefied air gains three more this year, bringing the total to 20 firms (20 percent of the Top 100 list compared to 5 percent 10 years ago).
Why is This Happening?
Many factors are in play for these tectonic swings, each with different impacts. And with the diverse reasons for such swings, it's very possible that this accelerated growth rate may have a long run ahead with wide-ranging implications on the industry, its leadership and the fabric that makes us what we are.
Reason No. 1: PPMA
It's hard to overstate the Professional Pest Management Alliance's (PPMA) influence over an industry that's grown to more than $10 billion, according to a Specialty Consultants study. The investor-driven arm of the National Pest Management Association has been successfully marketing the value of professional pest control to consumers for 25 years. The alliance has done this by stepping up efforts across all media. According to its 2020 annual report, PPMA generated 9.1 million social media impressions, 1,850 placements with news organizations such as the Washington Post and Women's Health, and radio and TV public service announcements that were aired 118,101 times.
Reason No. 2: Smarter, Better, Faster with a Generational Difference
When I entered the pest control industry in 1984, we saw the beginning of a whole host of second-generation business owners entering the industry. I remember the introduction of the Jenkins brothers (ABC Home & Commercial Services, Nos. 12, 31 and 34), Mike Rottler (Rottler Pest Solutions, No. 32), the Trelevens (Sprague Pest Solutions, No. 24), the Ives (Rose Pest Solutions, Troy, Mich., No. 26) and the list goes on.
They were my generation. And while we grew at different rates for years, most of us saw annual increases of 5-15 percent.
Not anymore. The new generation of leaders has succeeded my contemporaries in breaking every paradigm. In my opinion, they are smarter, better, faster. I am not discounting the success of my peers. They broke new ground and set the stage for what is happening today.
This new wave of leaders has learned from my generation's successes and failures. They are not settling for 20 percent growth. Instead, 30 percent is the new benchmark. Using operating systems such as Gino Wickman's Entrepreneurial Operating System (EOS) and Verne Harnish's "Scaling Up" (along with other savvy techniques), they are laser focused.
Much of this new growth is from millennials (and younger Generation Xers). While older generations were all joking that millennials (generally identified as those born between 1981 and 1996) were spending so much on avocado toast that they couldn't afford houses, I am convinced that the most recent surge has much to do with this generation taking over the reigns and leadership of PCT Top 100 companies.
What we know of millennials is that their rulebook is different than that of the baby boomers and Xers. They challenge the norm faster and are willing to try riskier things.
For example, Pest-End Exterminators in New Hampshire, No. 99 on this year's Top 100 list, scored a 17 percent growth rate in 2021 over 2020, and is forecasted to hit 20+ percent in 2022. Its leadership, which includes owners Courtney and Adam Carace and Amanda Forrestall, have an average age of 37.
A new entrant to the list last year, Pest-End is second-generation, but it is putting a new twist on things. Leveraging everything the industry has to offer, they are active in the National Pest Management Association and its committees, use EOS (Entrepreneurial Operating System) and are not looking back.
With a deep leadership team and an engaged workforce, they spread around the challenges of scaling up and increasing growth rate.
The wealth of new consultants and resources the industry is now drawing from is also smarter, better, faster. From marketing/lead generation companies, to accounting software that provides greater financial acumen and data analytics that helps companies crunch their numbers, the industry has seen many new, focused experts, which has accelerated growth.
Reason No. 3: Non-Traditional Players Coming from Outside the Pest Control World
For years, new entrants into the PCT Top 100 came from members of pest control companies who wanted to start their own businesses or were second- and third-generation folks intent on growing their family firm faster.
Hoffman's Exterminating in New Jersey, No. 74 on this year's list, was founded by Bill Hoffman. He was part of Western Pest Services (Parsippany, N.J.) when he decided to go out on his own with remarkable success. Hoffman and Robert Schwenker followed the traditional path and have developed the company into a New Jersey powerhouse, combining organic growth and acquisitions.
This was the typical story, but not anymore.
With the allure of recurring revenue, a host of new entrants, including private equity firms, have looked at the rewards of this incredible industry and have brought new twists to the narrative. When I look at the PCT Top 100 now, this is what jumps out at me — just how many companies have no traditional ties to pest control.
Reason No. 4: The Private Equity Impact
Private equity (PE) is creating profound changes for growth in the pest management industry. The PE trend is growing year over year, bringing large amounts of cash to accelerate the growth of pest management companies.
While many of the Top 100 companies have sold to Rollins, Terminix and Rentokil, along with activity by Arrow Exterminators and Massey Services in traditional mergers, the PE play is becoming much more common with more firms joining the fray.
Certus (No. 18) and Anticimex (No. 5) are just a couple of the companies backed by PE. There are others out there too, but some aren't on the Top 100 — yet.
It's not just that these PE firms are investing in Top 100 companies. With PE comes money, expertise and leverage of their platform, accelerating growth even further. The money is going to many of the millennial-based companies that are smarter, better, faster. And now with capital on their side, their growth has unlimited boundaries.
Reason No. 5: The Door-to-Door Impact
Starting in the late 1990s and early 2000s, we saw the introduction of door-to-door sales in the pest management industry. Piggybacking off the door-to-door marketing models, we watched Clark Pest Control in Lodi, Calif., grow its business on the backs of the Utah and "build-to-sell" models used successfully by David Royce and others.
The trend continues, as the family tree of companies owing their roots to the early door-to-door efforts continue to grow and spread across the United States.
North Carolina-based Aruza Pest Control, No. 85 on this year's list, takes the traditional Utah door-to-door model and turns it on its head. Christian Ludwig, the company's millennial-aged co-founder, is a North Carolina native, who sold door-to-door for two years in Atlanta before heading home to start his own firm.
In four years, executives have built the company to $9 million with very high year-over-year growth, and it anticipates closing in on $20 million for 2022. But how the company has done it is what is changing in the industry.
Using local college talent around North Carolina, Aruza has built a homegrown door-to-door sales force, combining it with digital marketing, which yields organic leads. Understanding that the door-to-door industry typically has lower retention rates for customers, Aruza also focused efforts on the service side to reverse this trend.
The Growing Market and What is Ahead
With this evolution of the market comes a "rising tide" for the industry. This was the phrase that was coined by PPMA when it started 25 years ago, and it's more true than ever.
With the impacts of the new entrants combined with the work of PPMA, more homeowners are using professional pest management than ever before, providing greater opportunity for the entire industry. I do not expect this to slow down as more and more money will enter the industry driving growth of the customer base.
For those of us who love watching changing industry trends, it should be a fun time ahead. All of the factors will continue to play out, making 2022 an exciting time for an industry that has already seen earth-shattering changes. Find a door jamb and hang on for the ride.
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