Why I Love The Pest Control Business

That tells me how big the market is in that particular category. The global pest control market was $22 billion. Right. So when we talk about total addressable market, is there a big enough market. Right. To do what it is that we're trying to do? And in this business, there's two sides to this business, much like most businesses. There's the residential side and then there's the commercial side. Commercial is going to be bigger, B2B accounts. Residential is going to be a B2C marketing method. And what matters in these businesses is A reoccurring revenue, B marketing strategy, C growth, D, hr and how they grow their technicians. Because what happens is you get more customers, you need more technicians to serve more customers. So you're always caught in between too much marketing, not enough sales and distribution and fulfillment. Too much sales, not enough distribution, too much labor cost or fulfillment. That is technicians, not enough marketing. And people are sitting around not being fully, fully utilized at their capacity. And so you're always going to be stuck between these two things. Okay, I want to make sure that whatever I'm picking, he's got a big enough global total market, I know that there's an exit strategy. So I go pest control. Yep. The investment thesis is really simple. Regardless of the economy, regardless of the stock market, regardless of what's going on in real life. Right. If your spouse or significant other is afraid of spiders, it's not hard to say, I'm going to pay Terminix $159 every 90 days. That is my investment thesis. Right. It's going to be $600 on an annual reoccurring customer. I know that if I spend money in marketing, in Facebook ads to drive traffic, or we pay door to door canvassers, or I'm going to get a lead is going to cost me $17. If the conversion rate of that lead is 10%, meaning I got to spend $170 to get one convertible lead. That means my client acquisition cost is 170 bucks. Well, I know that the average client is going to be about $150 a quarter depending on what market you're in. And the lifetime value of that customer is going to be. So annual value is about 600. Right. My acquisition cost was 170 based on my leads. Based on my conversion, my, my annual value contract premium for that customer be $600. Because 150 times 4 at the cost of 170. Now, now I know that the average customer in the light in the pest control business is going to be there for 2.5 years. So I take $600 times 2.5. That is the lifetime value of the customer. And so here's the trick. The person that can spend the most amount of money in client acquisitions wins. The goal is how many times? If I know I got to spend 170 to make 600, how do I replicate that? 30,000 times, right? What do I need to do that? I need a marketing company, I need a digital advertising company, I need a conversion funnel, I need a sales team, I need a cetera, I need a closer. I need one. Once I get X amount of customers, I need a technician that's going to be able to go to the 92009- ZIP code and service X amount of customers. So how many clients can they run on a route? How many clients do they need density wise to make that make sense, to bring on a new technician? Does that make sense? I'm going through this rudimentary math because things, this is the game that you need to figure out as you're building these companies. And this is the same and to be true for all of these industries. So I go back to this market cap here. If I go pest control, mergers and acquisitions, 2024, just by doing a simple Google search. If you wanted to apply this to cleaning, if you wanted to apply this to commercial cleaning, if you wanted to get H vac plumbing, any one of these categories, it doesn't really matter. This is PitchBook. I have an exclusive login for PitchBook. It's a $30,000 membership. You don't need PitchBook. Okay? This is like all of the M and A guys, all the private equity people, all of the bankers, all the people that are underwriting the debt. Like all of the semantics of the deal. You don't need this level of information. You, you're going to get lost in the weeds. And the details that don't really matter to you in this one to $10 million market. We're still talking about mom and pop businesses, right? We're still talking about small stuff. What I want to know is who's doing what, right? The value, okay, pest control sector update, Capstone Partners. It's valued at $24 billion. In 2024. The global pest control sector is to reach a $49 billion, you know, let's see, 49 billion dollar market rate with a compound annual growth rate of six and a half percent. What I'm looking here for is growth. And I'm looking for buyers. I want to make sure that there is demand in the Open market with what I'm doing, right? And you want to think about that as well, like, okay, who's doing what? Who are the players? Who, what kind of transactions have happened in the last year? What does that look like? Like a simple Google. Look at this one. December 2024. Rent to kill. Terminix expanded in key markets in 2024. Acquisitions included American Pest Control, Live Oak Pest Control, Paramount Pest Control, Valley Pest Control, Advanced Pest Control, City, Termite and Pest. These companies are spending their free cash flow profits to buy market share. I tell the story of those guys from Chicago and Virginia that ended up having, you know, 10,000 Google reviews, five year old company, 30 year old guys, $4 million in free cash flow, $2 million each business partner, they did a great job expanding in Virginia and Chicago and they had these two markets in lockdown. Actually the brother was over in Washington, so there was actually three separate companies. These two were going to market. They ended up getting bought for 25 times earnings, $100 million, when they only had $4 million in EBITDA. So when I look at that, I go, who is going to pay 25 times earnings and why would they pay that? Right. That will sharpen my focus to go, okay, why pest control and who's doing what in the space? Why are they buying this stuff? What are they buying? What kind of assets are they looking at? This Live Oak had 36 employees in McAlpin of outside of Lake City, Florida. I don't even know where that is. Why 36 employees? How many customers did they have? What type of technicians, what type of software? Like you, if you make the decision to I want to be in pest control. This is the type of legwork you need to do on the front side and be asking yourself, why is this stuff happening? Who's buying this stuff? What do I need to dress it up? Like what, what was so interesting that made these guys fall over and write a check for $100 million? Like it would take 25 years on that debt to make their money back. Okay, who in their right mind will do that? Why would Terminix do that? Well, because they want market share is would they rather go to Chicago and start from scratch and build a location or five locations or six locations in the suburbs? Or would they rather just go buy it and pound their system in there, raise the prices? Right? They probably, they have a plan to cross sell their current customer business. They have a plan to bundle other smaller companies. They probably have their own regional locations that they can add on to what they're doing and backfill their current routes and get efficiencies and get more profit margin. They have a very different game plan than what you have at this level. Right. This is who's buying the next level of stuff. Okay. And so I want you to do the research here. And right here, 58 on PCT's top 100 list. Okay, great. What is pest control technology? Top 100. Who's made it? Who are the top 100 companies? Boom. Free email address. I can find who the top 100 players are, and I can go straight to LinkedIn and I can go rent to kill Virginia. Who is the guy? Right, Right. And I can create these conversations with people with very limited data in front of me. Okay. So I'm just doing this. And you can apply this to any category.