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It Pays To Work For A Profit

Monday September 24, 2012

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Mr Pest Control

Question:

I realize this question may vary due to location and product pricing, but how do you determine a fair price for pest control? I have a request to provide preventive pest control (mainly for roaches) in an apartment building. There are 56 apartments total with 1, 2, & 3 bedroom units. At this point there are no pest infestations. I've heard other companies are charging from $2 per apt up to $35 per apt.

Mr Pest Control

Answer:

A few things strike me as worth discussing here, and the first would be that reported $2 per unit price that some competitors may be charging at this time. Let's consider that the service industry in the U.S., in general, considers $100 per hour to be a standard charge for their time and services. This is going to vary up and down a bit, but let's use that price for convenience, meaning that the company charging that price has determined that it is necessary for their field technicians to make $100 per hour in order to keep their company running and to make a profit. This determination is not easy, but it must take into account ALL of your fixed costs (vehicles, insurance, rent, salaries, material costs, etc.) You have to find out exactly how much your company has in expenses so that you will know how much above those expenses will be needed to be profitable, and if you do not make a profit you cannot stay in business. 


THAT is how you determine what price you need to charge a customer, along with careful evaluation of that potential account to tell you how much time you will have to spend correcting their problems. Since $2 is 1/50th of $100 it would mean that any company similar in size and expenses to yours would be able to have a technician in a unit for about 72 seconds, and clearly that accomplishes nothing. Hopefully the potential client also looks at those kinds of low-ballers and realizes that there is something wrong, and passes on that offer. Even the $35 per unit price means that, at $100 per hour, a technician could only be profitable if he spent no more than 20 minutes in that unit, and you have to ask if 20 minutes is sufficient to properly inspect each unit and then treat as needed to manage whatever pest is discovered. These kinds of fees are banking on the hope that nearly all apartments are going to be pest free and will stay that way on their own. 

Another red flag in your question is the one that at this point this complex has no pest infestations. I certainly would not want to take someone else's word on that, and would so much prefer to discover on my own exactly what the pest status is for each and every unit in this complex before signing any contracts that lock me into a price and a time frame. For all you know at this point several of the units may have minor (or major) bed bug problems that the management either does not know about or is keeping to themselves until they sign on a pest control company for the cheapest price possible. Since you say that at this point you only have a request to provide preventive service I assume that you have not yet done a thorough inspection of every apartment to see what really is going on. 

While you do need to take into account local competitive pressures, you should not be so determined to get this account that you end up regretting it shortly afterward. You must make a profit, and that will be based on how much time you end up spending each week or month at this account, once you determine what the problems really are. If you under price you either lose money every time you go out or you end up cutting corners to make money but do not provide the needed time and service. 

So, begin with a evaluation of your own company to you know exactly what your hourly "break even" point is on expenses. Then you will know how much you need to charge per hour to be profitable. Then, before signing a contract with any new account determine for yourself what really is going to be needed to manage the pest problems there to the satisfaction of that account, and for apartments it could mean satisfying each and every tenant. Put together a well written contract that addresses exactly what you will do and how often, and by all means put Bed Bugs as a completely separate contract from all other pests. 

Mr. Pest Control

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Please note, Mr. Pest Control is answering questions supplied by PMP customers across North America. His answers are generated from industry and manufacturer-provided information. The answer may not be specific to the laws and regulations for your State, Province, Territory or Country. In addition, products mentioned may not be registered and or available in all areas. Always check with your local Univar office for specific information to your area. Always read and follow label directions.

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