Pest Control Services
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Industry Overview
About 10,000 companies provide residential, commercial and industrial pest control services in the US, with combined annual revenue of about $7 billion. Major companies include Terminix and Orkin (owned by Rollins). The The industry is fragmented: the 50 largest firms control less than 50 percent of the market. A typical pest control firm has 20 employees, one office location, and annual revenue close to $2 million.
Competitive Landscape
Demand is driven by home sales and the occupancy of commercial and industrial properties. The profitability of individual companies depends on providing good service. Large companies benefit from brand recognition and economies of scale in advertising, franchising or backoffice operations. Small companies can compete successfully because large companies have no advantage in providing good service. Average annual revenue per employee is about $85,000.
Products, Operations & Technology
Pest control firms - also called pest control operators (PCOs) - are in the business of identifying the presence of pests and applying poisonous chemicals to kill them. Firms hire and train employees to detect and identify pests, and to choose and apply chemicals, which typically involves certification.
Companies buy chemicals and other control systems from distributors or directly from the large number of chemical manufacturers. Chemicals are identified as general- or restricted-use, which are the more dangerous chemicals that can be applied only by a certified worker (“applicator”). Labor costs are the largest operating expense for pest control firms.
The two distinct markets are residential, and commercial and industrial. In the residential market, firms provide services to individual homeowners and concentrate on controlling termites. In the commercial and industrial market, firms provide services to apartment buildings, office buildings, institutions, hotels, and to the food industry -- with a concentration on controlling rodents, cockroaches and flies. Larger companies serve both markets, but small companies typically operate in the residential market. Services to commercial customers often involve regular preventative measures like spraying and inspection. Services to homeowners usually involve just a single job unless a bait system is used.
The two major methods for dealing with termites are chemical barrier and bait. The traditional chemical barrier system involves injecting liquid chemicals (termiticides) into the ground around a house's foundation, thereby isolating the house from any underground termite nests, and directly applying chemicals to any infested areas inside the house. Newer bait systems consist of a number of plastic stations, initially containing wood bait, which workers insert into the ground around a building and inspect at regular intervals, usually monthly. If inspection reveals termite activity, a worker replaces the wood with termite bait, which consists of any of a number of slow-acting chemicals that will eventually poison the termites. Termites take the poison back to their nest, where they pass the poison to other termites through exchange of secretions and food, eventually killing the entire nest.
Homeowners usually prefer bait systems, because they use a much smaller volume of toxic chemicals. The disadvantage of bait systems is that they are only effective after termites find the stations, which may take a while even if termites are present in the soil. Bait systems may cost over $1,000 to install and $20 to $30 per month to monitor.
Methods for dealing with other types of pests are generally straightforward. For insects, workers often spray contact poisons on surfaces that pests might cross. For rodents, workers leave poisoned food in containers that only rodents can access. Typically the rodents digest the food and leave the area in search of water, perishing outdoors.
