PODCAST TRANSCRIPT:

Ian Robertson

Seth Garber, welcome to the show. I gotta say, this might be one of my favorite ways to get a guest on a show, is when someone listens to my podcast and openly disagrees with me. I think that’s the coolest possible thing ever. But we’ll get into that in a second. I’m excited. Seth, tell us about yourself and how you came about listening to our episode on starting a pest control company a few weeks ago, and why we ended up here.

Seth Garber

Yeah, first off, man, I appreciate you having me. I think I had mentioned to you earlier. I haven’t done a podcast in two years, and so this is the first one I’ve done in two years. So I’m excited to be here. Yeah, like here’s the thing, is that in my world, for the people in the pest control industry, and probably quite a few people in the home inspection industry that know us or know our brand, like, I do this, I built my businesses out of like passion to build it, not because I wanted to like build something that, like I was going to go sell or make tons of money on. And so, you know, I guess it was a week or two ago, I was on social media, which I don’t spend a ton of time on, and I saw an episode, so I went and listened to it, and the episode had talked about you know why build a pest control company or how to build, you know, the pieces to it. And like as I listened to it, I was like, man, I go, this is actually like a lot harder than what’s being described here. And I was like, man, like I just got to say something about it. And so just as a basis, it was the first podcast that I had listened to a full episode of in probably over a year because I got so fired up on the comments. I was so fired up about it, and I probably have never made a comment to a podcast host or someone that’s running a podcast in my entire life. Just so you know.

Ian Robertson

This is my favorite thing. You came out of retirement to be on this podcast with us, podcast retirement that is.

Seth Garber

Yeah.

Ian Robertson

You made a comment on our post, which you never do. Listened to the whole thing,

Seth Garber

Never.

Ian Robertson

And this is my favorite thing. So, if I could toot your horn for you. So, Seth runs what is called Pest Daily. So Seth has been in the service industry for 20 years. He has built and sold a pest control company. He works in private equity. I just learned today that Seth has also helped with over 100 acquisitions of pest control companies in just the past three years outside of private equity, and he also works with some of the largest home inspection firms in the industry. And also, Seth, could you tell us about a project that you worked with in the home inspection industry that we were talking about just a moment ago?

Seth Garber

Yeah, I can. Yeah, and so you know, you know, it’s weird to hear all these things you said about us because, like, for me, I’m just like an operator, right? But yeah, I mean, I think probably one of the most unique projects that we did, which has been the most impactful, was one of the largest home inspection companies in the U.S. had talked to us several years ago about how to build the most successful conversion methodology from a home inspection to a pest control service, and the cool thing was they invested in it, we built it, it worked, and so it was really unique. And you know, I think we were the first ones to put this together. And you know, and over the years since then, over the last couple of years, we’ve taken it to scale across lots of the larger home inspection companies in the U.S. But yeah, it’s a really unique project, man. And you know, I’m happy to tell you all about it or describe it however you want, whatever’s good for you.

Ian Robertson

I think a lot of us would be familiar with it, if you could tell us what it is in just a brief minute here.

Seth Garber

Yeah, yeah. I’ll give you a quick high level. So, like, you know, the most important part is, it’s the philosophy behind it. And so, a lot of people think, oh, we’re in the home inspection sector, so we do a home inspection. We’re at the house, and you know, we should just be able to easily, sell them pest control service if we have a pest control company or any other service that may be plugged in. But the reality is that people have to understand the competitive advantage behind it. And the competitive advantage is not the fact that you have the homeowner’s information or the buyer’s information. The competitive advantage is that you have the information before it becomes public record. And so, the big key to success for anyone doing this is that you have to have the methodology that converts that person to a recurring customer before they ever actually go into the home. The second that they go into that home, or the second that it becomes public record, is the second you get all the pest control companies, or for that matter, other home service companies after them. And frankly, at that point, home inspection companies aren’t, they’re not big enough and strong enough from a marketing standpoint to compete against the large pest companies, they just have much bigger budgets and just much bigger bankrolls to go after them. Much bigger teams and everything, you know. So that’s the reality. That’s at the high level around it, I guess, Ian.

Ian Robertson

Yeah. So let’s go back to. I really like that point you brought out. That the one advantage we have is speed. We have the element of surprise, so to speak, when we’re a home inspector, and you know, let’s say the average time period between the home inspection and closing is four weeks. We have four weeks to close that client for pest control. So, you said in your comment, which I did appreciate, I thought, as I mentioned before the show, I thought it was thoughtful, and I love it when people disagree with me. You had said it’s not as easy as it sounded. I didn’t intend to make it sound easy. It’s still a whole business, but you have a much more involved view of what a pest control company entails than I do. So to let you know where I’m at, so we are working on starting a pest control company, but we’re in New York State, so I don’t know if you’re familiar with the laws. You need a different license for just about every different type of bug. If it limps, if it looks at you funny, then you need a different license. Practically, it’s a joke. So we’re years away just planning it. Other states, it’s much easier. So we understand a little bit of the complexity, but tell me why it’s not as easy as we might think as home inspectors. What’s the difference between a solo inspector to maybe a guy that has two or three employees versus you know a full-on pest control company? The logistics of it.

Seth Garber

Yeah, absolutely, and I would tell you that being in New York, New York is one of the most difficult states to open a company in. Currently, we have oversight on about 120 million dollars of revenue in New York, so we work in New York all the time. And so, New York is complicated. So, I think one of the most important pieces to think about, as a home inspector who wants to go build a pest company or why it’s more difficult potentially, is that the mindset of a home inspector is much different than the mindset of a pest control operator, and a lot of times what we see is as you go into the business, we go in not necessarily understanding the differences, and so a lot of times what we see is, like a home inspector has a mindset of hey, we have to win the next deal, right? So we have to get the next deal, we’ve got to get the next inspection, and in the pest control world, we don’t think that way. So, in the pest control world, what we think about is that once we earn that business, it’s about the longevity of that business because that’s how we make money. And so, a lot of times, like you know, from a sales standpoint, it’s a philosophically different sales process, building a pest business than is building a home inspection company, but the important part is when you go to start a pest control company, a lot of times we see home inspectors get into that business and then they basically over-engineer the business that they want to build because if you think about the detail of a home inspector, a home inspector, like man, you make a mistake, like you’re getting sued, right? And so they want to dot every i, cross every t, get every piece of the perfect equipment to do the greatest inspection in the world. In the pest control world, the pest control business as a whole is a simple business, and a lot of people are going to disagree with what I say here. But honestly, like it’s fine. So the pest control business is not a service business. The home inspection business is a service business. So the pest control industry is a keep-customer-happy business. And so what it really is, is a sale, right? So it’s a sale, which is typically done on a phone. From the phone, a credit card gets put on file. We then go out and do a service, and then we show up every quarter in most markets. We show up every quarter. We walk around a house for 10 minutes. We get back in our truck, and we leave. Right. So the customer might not ever see you. And then we bill the credit card. And then we hope that that customer is happy enough that they never think about us ever again. And so in the home inspection sector, a lot of times as a home inspector, you need your clients to continue to think about you, right? Because there’s the next guy that’s coming in the door. So as a home inspector, you’re meeting with realtors, you’re going to market centers, however you generate your business. But then you need them to think about you again. So you have to do everything in the world to get them to think about you again. In the pest control world, the best companies do everything so the customer never thinks about them again. Does that make sense?

Ian Robertson

That makes perfect sense, and you’re speaking my language. You’re talking lifetime values. So if you were to use, like billing software, like even Stripe or something, you’re gonna have customer lifetime value. You’re gonna have MRR. You’re gonna have churn rate. So for anybody listening, we’re not gonna get into churn rates. But what’s the average churn rate for a pest control company? And we’ll let everybody look that up later.

Seth Garber

Yeah, so I tend to work in what I would consider is like a gold standard, right? So there’s averages and there’s a gold standard. In my world, when we build businesses in the pest sector, you know, if the company stays under 15% per year of churn, that’s a good company. We tend to target sub 12%, is what we target. It’s very difficult to do that at scale. However, it’s our target. And let me just, I’ll talk a step further. One of the most important parts about churn, which a lot of times you never hear about in our industry, is that you also need to look at the people who move out of your market to another market, which is a public piece of information, and usually in most markets that’s, in most most expansion markets, that’s usually three and a half to four and a half percent, and so typically you’re going to lose three and a half to four and a half percent of your customers if you’re going to scale for no reason at all. But that’s typically it. So 12 to 15% I would say is where we want to target annually for companies.

Ian Robertson

That’s fantastic. So the reason I want anybody listening to look that up instead of explaining churn rates here on this podcast is it’s an important exercise in the change of mentality. You’re not going to be looking at like Seth said. Okay, how many clients did I get this month? You’re like, how many clients did I retain? What’s the lifetime value? What are my churn rates? What is my MRR, etc. So, what are the lifetime values? So, I will explain this part. That’s easy. Lifetime value is how much does this client pay you over the lifespan of how long that client’s going to be around? Whether they leave you for one reason or another, they pass away, they move, they fire you. When you acquire a client, what’s the average lifetime value?

Seth Garber

Yeah. So, in the pest control sector, it varies dramatically by market, and it also depends on your acquisition strategy. So, a conventional company who generates a lead, the lead comes in, they convert it on the phone, is that in most markets, the customer is going to stay with you somewhere between four and a half to seven and a half years. It used to be seven and a half years was kind of the gold standard, but now there’s other acquisition strategies that have dropped that down because there’s not as much value built as part of the sales process. And so if you look at a market, and we can use New York, and so if you look at like the northern New York markets are actually some of the highest lifetime values that exist in the country, so we typically see around $1,200 a year per customer. So if you take that number times, you know, four and a half, that puts you at $5,400. It would be a lifetime value of that customer on a regular pest control service. Now, what that doesn’t take into account is if there’s additional bolt-on services, which happens in pest control, bolt-on recurring services. So in the New York markets, as an example, you typically would have flea and tick as a bolt-on service. You would typically have mosquito service as a bolt-on service. You don’t typically see termites as prevalent as other markets, but you would see these as bolt-on services. And so we do have companies that we operate like in the northern New York markets where you’ll see ACVs in the $2,800 range, which it is an anomaly market. It is an anomaly market. As an example, in the city, it’s sold differently due to the fact of how routes are developed in the city, which we don’t need to get into that. And so in the city, you’ll see ACVs somewhere as high as $2,000, and so if you do the math, it gets pretty lucrative pretty quickly.

Ian Robertson

So let’s say just hypothetically for for our audience here too, because I was just doing some quick math, and as my audience knows, my math can be a little squishy sometimes in my head. But let’s say with those add-on services and all that stuff, lifetime value, average market. Let’s just throw a number out: 10 grand-ish, lifetime value. Yeah, think about that, for the audience, think about that in terms of a home inspection. When we acquire one client, we get $500 to $1,500 if we’re doing a bunch of ancillaries one time. When you acquire one pest control client, we get $10,000. It’s a different way of looking at things when you acquire a client. Even like low end, like you might say, well, I don’t want to do any condo inspections because I’m only getting those. Those are super cheap, and I don’t want to waste that in my schedule right now. Whereas, if you get lower-paying jobs as pest control, you’re like, okay, yeah, but that’s four and a half to seven and a half years of that, and I can schedule it whenever I need. It is a much more lucrative business in that way, but it is a different way of thinking. So Seth, I did write this down, and I know I’m jumping ahead a little bit, but this part I was excited about because you you offer this information. How much are these pest control companies being sold for? Like you acquired, I think you said over 120 or so without private equity, off to the side on your own here. When a home inspector’s like, is it really worth putting this much effort in? Because that’s a lot of effort. That’s a different billing system, different way of thinking. I’m going to need training. Might even need coaching from someone like you, which hopefully you’ll give us a website to look at at the end. I know you didn’t want to advertise that, but I do because you have over 2000 clients and you know your stuff. What are these companies being sold for?

Seth Garber

Yeah, and so what I would say is, and I want to preface this answer because there’s a lot of noise in the space around value, right? And so what I would tell you is that the companies that our clients have acquired, and again, we don’t do M&A. We support them on the negotiation and so on and so forth, which is that 100 and some odd companies. The majority of those deals are sub $1 million deals, right? They’re sub 1 million. We typically buy those deals on like owner finance. Typically, those companies are not pretty companies because we know they can be fixed, right? And so those companies don’t trade at what I would say is a pristine company by any means. So those companies will trade a lot less, and so those companies might trade at 50 cents, 60 cents on the dollar, maybe a touch higher, but with some type of terms, right? But these are not perfect businesses. But the important part about pest control is that if you go on and build a pristine company, pristine meaning, and let me walk you through pristine because I want to make sure it’s clear for people. A pristine company would be a company that’s 75 to 85% recurring revenue. So recurring services, the balance would be one-time services. You would see a gross margin, which would be their operational efficiency in the 60s, right in the 60% range, and then you would see an EBITDA margin or an EBITDA margin or profit. You would see that in the in the high 20s, low 30s, and adjusted up as part of the deal. Those companies trade not on multiples of revenue, but they’ll trade on multiples of , and so if you looked at a business, a pristine business, in a strategic market that’s 5 million bucks, like that business, that business would probably trade in like the maybe $15 million plus range when it’s all said and done. Some may go a little less, a little more, depending on who the buyer is, but that would not be unreasonable. And so it really depends on the market, but these companies trade for significantly more than the home inspection companies, you know. And so I’m a little hesitant sometimes to call it value because the values are all over the place again. But they do trade for significantly more overall, you know. But if somebody’s a sub 1 million, what we hear a lot, is you got a company that’s a sub 1 million, that’s an unpristine company, and they believe that they should be valued as a $25 million pristine business, and it just doesn’t really happen. And so, you know, but I think comfortably, if someone’s got a $2 million business that’s operating fairly well, they could probably trade that business for two to three times revenue, maybe higher if it’s a better business.

Ian Robertson

So again, with my squishy math in my head, as long as it’s a good business, I think we just need to kind of wipe out the unpristine ones because those are just, okay, you’re buying a fixer upper, so it’s kind of like, you don’t go buy market value of a house that’s falling apart in foreclosure. So if you built a $2 million company, you know, sell for 6 million, so 3x on average, it sounds like a little bit more, a little bit less.

Seth Garber

Yeah, I mean, I think plus or minus, you feel comfortable there, but I think the key is it’s got to be a big enough business. And so, I think a lot of times, and we see it a lot with the home inspectors, they’ll go out and they’ll build a million dollar business, but then they think it’s going to trade for significantly more than it does, right?

Ian Robertson

It doesn’t.

Seth Garber

It just simply doesn’t. It simply doesn’t.

Ian Robertson

Home inspection businesses. I don’t know if you’ve ever helped anybody purchase one or sell one. I’ve helped several. I mean, there was a home inspection company that had five inspectors. Good reputation. I forget their gross revenue off the top of my head, but it was no joke, as you can imagine with five full-time inspectors and the owner helping. And the only offer he got was five grand for his website and his logo basically. They’re like, we don’t even want your trucks; they’re getting a little older. We have our own tools, and you know, home inspector tools besides some IR cameras aren’t that expensive. He was basically buying the website, and I’ve seen some inspection companies sell. I’ve seen some sell really well, like especially if it’s the manager of the company buying it. It depends on who the buyer is. But if you were just bringing it cold turkey to the market, it’s a dead stop business model. There’s no recurring revenue. There’s no lifetime. The lifetime value of a client is that one inspection, no recurring revenue. Usually, owner is too involved to sell, and once the owner is gone, that’s it. Recently, there was another guy. He contacted me, and he was negotiating a sale, and you know, got his attorney and got his accountant, and I was helping him with some other stuff on the back end. Not that I’m an attorney or an accountant, but he’s just like the attorney and the accountant says this guy’s business is worth nothing. It can’t be that. I’m like, listen, if you gave him a grand for 400 inspections a year and a solo operator, you gave him a grand, that would be overpaying him. And he’s like, no way! That’s exactly what the accountant said. I’m like, yeah, because once he’s gone, somebody else could advertise and get that work from you. That’s it. What if they don’t like you compared to the other guy, and that’s it. There’s all his work gone.

Seth Garber

You know, it’s a super good point, Ian, and like, it’s a super good point. I think like, there’s kind of a definition that I think anytime we build any kind of business, whether it’s recurring or a one-time business, whatever that looks like, that I really press for people to think about. And I’ll give you what the definition is. And so, one of the questions I like to ask people is like, how many customers do you have, right? And what I find is in one-time service-based businesses like a home inspection business and different things is that they always tell me how many customers they have. And so they look up in their software and they go, look I have 47,000 customers, whatever the number is and I said, well, no. I said the problem is that you have to understand what the definition of a customer is in terms of your business. And so they go, well, what do you mean? And so in the same thing in the pest industry, you ask a pest guy how many customers they have, and they tell you how many people are in their database. And I said, listen, the definition to me for what a customer is, is someone who has a future invoice. That’s a customer. If they don’t have a future invoice, they’re either something in your database or they’re a lead that you need to be following up with in some capacity, right? And so I think a lot of times, like to your point, you know, you see these inspection companies are chasing business, chasing business, chasing business, but like, who is a customer? Like what is a customer? And if they don’t have a future invoice, is it a customer? And it sounds like from your experience, it sounds like that the definition is really spot on.

Ian Robertson

I think the definition really comes down to customer versus a client. So if I own a sandwich shop and you come in and buy a sandwich from me, you’re a customer. You bought a sandwich, and I may never see you again until you’re hungry or until you’re in the area. If you’re a client that now I cater to, like I bring catering into your office every Friday at 1:00, we have a contract for the next two years to do that. Now you’re not a customer, you’re a client. So I think you’re very right in how you’re piecing that together. We get out of the customer mentality and get into the client mentality. Like, who do we have in our system that we are making money from regularly, that we are servicing their home and taking care of them. So, let me ask you this, Seth, because honestly, I get really excited about this subject. So I have to like pull back my excitement here, but if you were Seth Garber home inspector, maybe maybe one or two guys under, you’re maybe a solo inspector, and you’re listening to this podcast, and you’re like, okay, that’s a little bit more involved than I thought, but man, that sounds really good being able to maybe pull myself out of the business a little bit, and let the business run itself some more, or even be able to sell and retire and things like that. What would be your next steps? What would you do?

Seth Garber

To open a pest control company or for the home inspection company?

Ian Robertson

To transition from just, you know, home inspector Seth Garber into the pest control industry.

Seth Garber

Yeah, so I think there’s, I’m going to walk you through a couple of steps the way I would think about it because I think it could be really important to people. So the first thing I would think about is the why am I doing it, right? Let me explain why. So I say why because if I’m a home inspector and I’m running like a couple-of-men business, is that we have to think about what we’re going to be doing with our profit, right? And so a lot of times, what we do is we continuously reinvest our profit versus thinking about what we’re doing with our money. And so, the first question is: Are we doing it because we want to go build another type of business that we can sell in the future to retire? If that’s the case, pest control is a great opportunity. But the question is if you’re not good at building a business, are you utilizing your cash in the best way? So if your home inspection business is pushing off 20% in cash, and let’s say that’s $200,000 a year, you’re taking care of yourself, you’re doing whatever you need to do, does it make logical sense to take $100,000 and go try to buy a pest control company or start a pest control company, or if you’re not a good business builder, or does it make more sense to take that money and go invest it in something else? So I think the first question that you have to ask themselves is like, why am I doing this? If you’re a good business builder or an average business builder, or you have some kind of ambition to sell something bigger, then yeah, pest control is a great business. And so depending on the state, you know, if you look at New York, yeah, it’s difficult. If I’m a home inspector, I probably don’t want to open a business in New York unless I’m a business builder. If you’re in Florida, kind of a lot easier. If you’re in Montana, you just need a business license. If you’re in California, there’s probably zero chance in the world I would open any other business, right? And I hate to say it that way, but it’s just so hard to do business, right? And we do 400 million, I think, in California or something like that. And so, I know it’s a hard place. But I think that the first thing is, why am I doing it? Then the second thing is, you have to understand that the pest control business is a simpler business than home inspection, so we don’t want to overcomplicate it. And so after I decide I’m going to do it, we have to decide what products we’re going to offer. Pest control on its own is great. Termite on its own is great. Put those two together, you’ve got a really profitable business. And then you want to keep it very, very simple. And so then you say, what is my program? Here’s what my program looks like. Then you have to understand, the next step is, what does an organization look like? We don’t want to guess in pest control, just like we don’t want to guess in home inspection. Like in home inspection, we know when we need a new inspector. In pest control, you know when you need another technician, and so you move in, you decide what your organization is going to look like. You know, a four-technician business with you as leading the business is $1,200,000 business. That business has lots of opportunity. Then the last piece that I would think you have to take into account is like, what’s your real time frame to do it, and how do you avoid the trap of falling into the things of the get-rich-quick world, right? Because pest control is not get-rich-quick. It’s not how rich can you get, be the next millionaire. That’s not what pest control is. Pest control is a rigid approach to building something, right, just like home inspection. So a lot of times people look at pest control and they go, oh, it’s going to sell for a lot. It’s very profitable. But then they get into it and they’re like, wait, this is actually like a complicated business because we just made it complicated. So they take tons of courses and all these things. They waste all this money, and they haven’t built anything yet, right? And so I think those are like the key components to think about, you know. And then you know whether they use companies like us for learning or whether they don’t. I mean, at the end of the day, like pest control is a sales business, and if you’re a good salesman as a home inspector, if you’re a good salesman, like you probably should go try to open a pest control business if you’re in an easy state to do it in. Like it probably makes logical sense, right? I don’t know if that answers your question. I know I can get on a tangent there.

Ian Robertson

No, no, no. I think that’s a fantastic point, and it takes quite a bit of metacognition to be able to step back and really look at ourselves with that. So take a look at our inspection company. If we’re profitable and we’re killing it, we’re probably going to do okay in pest control. If we’re struggling and can’t figure it out, and we’re looking at pest control as a way to do a different business that we might be better at, we might have an issue, and we might need to address our business skills and work on those first. So I think that’s a fantastic idea. It does make me very, very sad to hear that New York is one of the hardest, but I already knew that. It is, aww, Seth. It really is brutal. Looking at the laws. And then the other day, I discovered that if we get one license, and I forget which one it was, I’m like, oh, that’d be a cool one to have. But then you need two other ones to make that one work, and I’m just like, that doesn’t even make sense. I need a license to have a license, but the other license to have the second license.

Seth Garber

Ian, it might be a little easier than you think it is, but we can walk through that. I can explain it.

Ian Robertson

Yeah, yeah, yeah, yeah. That’s why people hire people like you. So, if you don’t mind me, if you could put it out there now before the end of the podcast, your company and website, and because we have a little bit of time here left, but I just want to make sure people get that early enough on.

Seth Garber

Yeah, so the company people know us for is Pest Daily. It’s just pestdaily.com. We’re an online learning company. We have an events arm, and then we have a coaching consulting arm. Pest Daily currently services 2,800 clients through our online services, and then we have 152 consulting clients across the U.S. Our business, which is very unique, is we’re fully operationalized, and so we have zero contractors in our company. Everyone’s full-time employees. We’ve got offices in Tampa, Florida, and offices in Scottsdale, Arizona, and so that’s our business, and we have all kinds of events and all kinds of other stuff that goes on all the time. So, I guess that’s about us.

Ian Robertson

Awesome.

Seth Garber

We build pest control companies, you know.

Ian Robertson

Yeah, and I mean, I’m learning a lot of stuff here. So that’s pestdaily.com.

Seth Garber

Yep.

Ian Robertson

So now, if I could ask you one step further, so now we step back, and I’m thinking of a couple of clients of mine right now that have talked to me about this, and they’re very good business people, and they’ve either, a couple of them have saturated their market already with their home inspections, and it’s like listen, you can put two more poles in the pond, but if there’s only eight fish, it doesn’t matter if you have 10 poles in the pond. Expand your territory, do something different, and they’re very much chomping at the bit for pest control. So if you’re that guy, good at business, savvy, good at keeping structures and things like that, what would you do next after the metacognition part?

Seth Garber

Yeah, I think the very first thing I would do, like again, I’m a high analytic, right? So the first thing I would do if I’m that guy, has market share, the first thing I would do is I would take a look at my existing database to have an understanding of what my database looks like, and depending on how large the market is, is I would carve out a small section of that database and say, look, I’m going to open a business in this section, and I would get a technician in a truck, somebody who knows what they’re doing, and get your license up and running, and then I would start selling directly to my database, is what I would do, in order to keep your customer acquisition costs down because pest control leads are very expensive to purchase, in most markets, and so that’s what I would do, and I would get to work, and I would set a target. I would set a target of 600 clients in my first year, which would put you at around 300,000, you know, 275 to $300,000. Learn how to build a route, you know, utilize the right technology to do that. After you get that under your belt, then if you’re comfortable, scale it up. And that’s what I would do. I wouldn’t overthink it. I wouldn’t go meet with 25 chemical reps of all the products to use. I would use the simplest, most basic stuff, and get your inbound sales process dialed in. Get the way your technician talks to somebody dialed in, and I would get to work. That’s what I would do. And here’s the thing: if you get out there and you don’t like it, someone’s going to buy that business, right? Someone will buy your $100,000 version of your pest business in two seconds, which is which is pretty cool, right? So that’s what I would do. That’s what I would do. I’d set a reasonable target. I would get going, and I would move very quickly. I wouldn’t overengineer it. I wouldn’t talk to 100 people. I would just go out there and start doing it. That’s what I would do.

Ian Robertson

I love the way you think, Seth. That’s exactly how I do things. I go on the old mantra: I’d rather face a bunch of lions led by a sheep than a bunch of sheep led by a lion. Like, there’s something to be said about just getting out there tenaciously and getting it done. I’m doing some rough math in my head, and I think you threw out the number, and I’m kind of coming up with that too. I’m thinking you need a good 100k to get something small started grassroots with your database. I’m thinking 40 grand for a technician and have him do some handshaking and baby kissing, as long as he’s the right kind of guy for that. I’m thinking licenses, websites, business cards, connections, inbound and outbound marketing, some CRMs. I’m thinking lean, 100k. I’m thinking if you really wanted to go super lean, you could start off with 50k, and then put the other 50k in over the course of a year to make it a little bit more palatable. So that way, it’s not 100k right up front. Would that be a good estimate?

Seth Garber

I think it is a good estimate. I would say that we have built businesses, we have been part of building businesses where a guy had 10 grand and has built a multi-million dollar company quickly. What we typically see with home inspectors, they typically tend to overbuy, then go get customers, right? And I think that’s just the nature of the home inspector coming from needing the equipment and the tech. Like, I think it’s just part of the nature.

Ian Robertson

Yeah. So basically, the wrong thing is just what I said to do.

Seth Garber

Look, there’s all kinds of theory, right? So, like, if you think about marketing, and you’re an expert in marketing, and so if you think about marketing, there’s an argument that marketing could be very cheap here because you already have the database, right? And so there’s an argument it can be very cheap. There’s also an argument that says, hey, you don’t want to go compete in the pest control world against pest control companies who are sophisticated as it relates to marketing. It’s impossible to compete. They’re too good for somebody who’s getting into the business. And so, like a lot of times, you’ll see guys come into the industry and they’ll try to go compete against sophisticated marketing companies, and they just can’t do it. No matter what money they spend. So, yeah, I think if you have $100,000, so like I’m going to commit $100,000 over the next 12 months, and my output’s going to be a quarter million dollar or $300,000 business. I think that that’s completely reasonable. One of the really well known home inspectors who everyone would know, we’ve been part of building one of their businesses, they invested $250,000 over a two and a half year period. And that business today, does $3.2 million. It’s a really, really good return, but that was a company that had a big database. They had big databases. They got really good at cross selling, upselling their database. They got really good at building a team. They knew how to operate a home inspection business. They were sophisticated, and they built a real pest control company that operates at almost a 30% margin. And so this business, they put in 250 over a couple of years. They’re going to make $900,000 in profit this year, right? That’s a little bit of an anomaly, but that’s realistic for good operators, right? So I think the way you’re processing it is correct. I think 100,000 easily gets you there if you don’t try to market your way into the business. If you want to market your way in the business, 100,000 probably doesn’t get you there in the pest industry in most markets.

Ian Robertson

I get what you’re saying. So it’s basically a summary of my favorite Sun Tzu quote from the Art of War: Fight your enemy where he is not. So if they have a big fortified city, don’t go after the fortified city. Go after the unfortified village off to the west instead, where they can’t get you. Okay, so if I were to start a company, I guess I would take my massive database, or if I were just a you know newer inspection company with the database I have, and start marketing to the people that I’ve already built trust with, and hopefully get them before their house goes to public record, and all these big companies send in their marketing army, so to speak. So where they are not is that four week period after the inspection and before their house gets completely sold, that’s when we have to seal the deal. That’s where we fight where our enemy is not because they don’t know it exists yet.

Seth Garber

Yeah, you’ve got about, realistically, and again, every market records things differently, right? They record the records differently, but you have about 40 days, right? So you’ve got about 40 days from the time you complete that inspection to get that deal to have an advantage. After that, if you have a sales organization, you can do it. But it’s hard, it’s hard. But if you came out of the ground with your business, as an example, Ian, that would be your new demand gen, right? But the reality is, it’s the existing database that I would start with if I built a business, and so I would take everyone you’ve ever spoken to, everyone you’ve ever done inspection for, and those would be the people that I would attack first as part of my growth strategy. Because on the inspection side, they’re going to drip in based on however many inspections you’re doing per week, per month, per year, and we know how to take that and quantify that, like what that should equal at the end. But the biggest opportunity for these home inspection companies is everything they’ve done previously to start, right? That’s the biggest, that’s an advantage to them because now they’re working on a switchover or to win the business, and there’s a pretty compelling argument. So maybe they have to use an offer or something like that. It just depends. But those are people that they have some sort of a relationship with that they don’t have to pay for that lead, right? And so they try those first. And usually what you’ll see is, and I’ll give you some real math here, is usually on an existing database, depending on how large it is, over an 18 month period, you could typically convert that 20% of that database to a recurring service. And so if you’re an inspector and you’ve got 10,000 people, people’s information, over 18 to 24 month period, you could probably generate 2,000 recurring customers from that database.

Ian Robertson

Well, that’s $2 million business at our time value, or $2 million lifetime value.

Seth Garber

In New York, it is. In other markets, it’d be a little less, but like, but yeah, and so that’s a huge amount of money, and like if you had to go produce those, in most markets, you know, a pest control lead is going to cost, like to generate a lead is going to cost, you know, most markets $120 to $150, and if you’re converting at 50% you’re $240 to $300 customer acquisition cost, and that’s where the opportunity is.

Ian Robertson

Yeah, so actually my math was wrong. That’s what I mentioned, the squishy math. So 2000 times 10,000 is $20 million lifetime value. So divided by 4.5 years. So I mean, that gives you a $4.44 million a year company. Oh yeah, yeah. But so let’s say in a lower end state, maybe 2.5 million, 3 million, maybe in a higher end state, 5.6 million, something like that. But either way, we’re in the millions now. And if you build a pristine company, as you mentioned, I mean that’s substantial. So you know what’s funny, is there was a pest control guy after that podcast, that told me, he goes, oh, it could be the other way around. Maybe pest control takes over the home inspection industry. And I’m like, that’s still the same switchover. I find that the pest control companies don’t like the home inspection industry, even though it generates them leads, because they’re just kind of like, you guys do a one-off, like you just do this inspection and then you’re done. I don’t know. I’ve seen most pest guys kind of get turned off by the home inspection industry, whereas the other way around, the home inspectors really like, we’re drooling at the pest control.

Seth Garber

Yeah, I mean, like, look, we could be a little controversial here, right? That’s okay.

Ian Robertson

Yeah, we could we could do whatever.

Seth Garber

Yeah, I mean, here’s the thing. And again, I don’t want to put a broad stroke around the whole pest control industry, but like the reason home inspection gets such a bad rap from pest control guys is a lot of the home inspection guys are doing termite inspections, right? And a lot of them aren’t qualified to do a termite inspection, so they get a license or they rent a card so they can make the 150 bucks or whatever the extra they charge, and they’re really not qualified to do it. I mean, a proper termite inspection is insanely hard to do. So I was a certified operator in termite in Florida, and a proper termite inspection is difficult, right? And so a lot of the home inspectors, they’re renting licenses and all these different things, and so the pest guys don’t like that, they just don’t like that, and which makes sense, right? It would be just like a home inspector wouldn’t want a pest control company to say that they could go do a home inspection because a home inspector needs to know, needs to know the craft, they need to know the construction, and a pest guy doesn’t really know that in most cases, you know. So, I think there’s a lot there. The other part too is like, is that the home inspection industry is not going to take over the pest industry. The pest control industry is massive. It’s just massive comparative, and it’s not as lucrative. And so you’re dealing with like the most profitable home inspection companies at the end of the day. The most profitable home inspection companies and the biggest ones are very small compared to mid-market pest control companies, you know, and they’re just different scales, you know. If I’m a home inspector that can build a business, I’m in the pest industry 100%. I’m 100% going to do it. I don’t know how else to say it.

Ian Robertson

Yeah, yeah, no, and I think a lot of us are feeling the same thing. But um, Seth, we’re running out of time. But if you ever feel like coming out of quote unquote podcast retirement again, and doing another one with us, I love the way you think. I love people that don’t always agree with me and are willing to give a broader picture. And I love talking about churn rates and things like that. That’s valuable information. So what you’ve brought us has been fantastic, and we really appreciate it. Appreciate you taking your time today.

Seth Garber

Yeah, hey man, Ian, I really appreciate you having me. I feel like I found a new podcast to be able to listen to. I think you guys are doing great work, and I hope today ends up impacting tons and tons of people’s lives in a really positive way. So thank you for having me.

Ian Robertson

Yeah, no, appreciate it again, and everybody listening, we’ll see you again on Inspector Toolbelt Talk.

Outro: On behalf of myself, Ian, and the entire ITB team, thank you for listening to this episode of Inspector Toolbelt Talk. We also love hearing your feedback, so please drop us a line at [email protected].

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*The views and opinions expressed in this podcast, and the guests on it, do not necessarily reflect the views and opinions of Inspector Toolbelt and its associates.

PODCAST SUMMARY/BLOG

Home inspection companies often chase the next job because the revenue is earned once, delivered once, and then gone. Pest control flips that logic. A pest control business is built on recurring revenue, route density, and retention, which is why terms like customer lifetime value, monthly recurring revenue, and churn rate matter so much. Seth Garber explains that pest control is less about creating a “wow” moment and more about keeping the customer satisfied enough that they never think about you again. That sounds odd until you realize the business model is designed around credit cards on file, predictable quarterly service, and long customer relationships that can last four and a half to seven and a half years, plus profitable add-on services like mosquito, flea, and tick programs.

The most valuable connection between home inspection and pest control is not simply having a homeowner’s contact info. The real competitive advantage is timing. Inspectors can reach buyers before the purchase becomes public record, creating a window of roughly 40 days where the big pest brands and their large marketing budgets are not yet swarming the customer. Seth argues that winning that conversion before move-in is the difference between an easy close and an expensive fight against sophisticated lead generation machines. This is also where a trust-based database becomes a strategic asset. Instead of paying a high customer acquisition cost for pest leads, an inspection firm can start by selling into relationships it already earned, lowering costs while learning how to build routes and deliver consistent service.

Numbers make the mindset shift real. Seth shares “gold standard” churn targets of under 15% annually, with sub-12% as an ambitious goal at scale, while noting that normal moves out of market can automatically account for roughly 3.5% to 4.5% churn. On lifetime value, markets vary widely, but recurring agreements plus bolt-on services can push annual customer value dramatically higher, especially in parts of New York. That is why pest control can feel so attractive to operators used to a one-time inspection fee. A single pest customer can be worth many times a one-time service call over the life of the relationship, which changes how you think about sales scripts, CRM follow-up, technician communication, and retention systems.

Valuation is where recurring revenue becomes undeniable. Seth separates “fixer-upper” pest companies, often sub-$1M deals with owner financing and discounted pricing, from “pristine” companies that command premium multiples. A pristine pest control company typically has 75% to 85% recurring revenue, gross margins in the 60% range, and EBITDA margins in the high 20s to low 30s. Those businesses tend to trade on EBITDA multiples rather than simple revenue multiples, and the difference in enterprise value can be massive compared to a one-off service model. His practical advice for inspectors is to start simple: decide why you are doing it, choose a tight product offering, hire an experienced technician, sell into a carved-out slice of your database, and avoid overengineering gear, chemicals, and software before the first customers are won.