Ep 140 - Food Safety and Pest Control Intersect with PSSI’s Paul Lambert

Paul Lambert: Have you forced a pace, some type of achievement results so heavily that you forced your guys to get out of their comfort zone to drive the left-hand lane to push the issue?

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Paul Giannamore: Fat Pat, I was amused by the Mexican who said on LinkedIn when you published the previous episode, he says, “I thought you preferred chicken, you fat pre-diabetic monster.” That's funny coming from him because the Mexican has packed on the pounds. In 2023, he is double the Mexican that he was last 2022.

Patrick Baldwin: He's post-diabetic? 

Paul Giannamore: He's full-on wheelchair and insulin. 

Patrick Baldwin: He's owning it. 

Paul Giannamore: It's funny, this kid likes to dish it out, but he does not like to take it. 

Patrick Baldwin: Let's get him on some of that Potomac TV. Let's roll that video. 

Paul Giannamore: I don't have enough cameras. 

Patrick Baldwin: Where's the wide angle?

Paul Giannamore: Dylan, get back 80 feet. 

Patrick Baldwin: That's awesome. Somehow, we always talk about food. Speaking of food, that's a good segue, let's talk about our guest. 

Paul Giannamore: That's right, food safety. Let's talk about Paul, Patrick. 

Patrick Baldwin: I met Paul Lambert through Seth. Paul was at the Texas Pest Expo and Seth says, “You've got to talk to this guy and get him on The Buzz.” I'm like, “I trust you, Seth.” Paul is a great guy and I learned a lot about food safety. 

Paul Giannamore: Before we get into this interview, Paul is with a firm called PSSI. PSSI is the largest food safety company in the United States. Rentokil is pretty large in that with the acquisition of Startech. PSSI is a billion-dollar enterprise, they are a big firm, and they focus on all aspects of food safety and largely on the protein side, things that have to do with meat. It was an interesting discussion because Paul takes us down the path of how PSSI got into pest control. Although we did talk a lot about food safety, we also talked a lot about pest control in general and his philosophy on how to grow that business. 

Patrick Baldwin: We talked a lot about your personal experiences with food safety. 

Paul Giannamore: Yes, we did, probably way too much. 

Patrick Baldwin: I didn't even think about it when we got this all put together. Paul, what do you say we step into The Boardroom with Paul Lambert? 

Paul Giannamore: Let's do this, Patrick.

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Patrick Baldwin: I've set us up for the most confusing Boardroom Buzz ever. I've got Paul and Paul here in The Boardroom. Welcome. 

Paul Lambert: Excited to be here, Patrick. 

Paul Giannamore: Thank you, Patrick. 

Patrick Baldwin: I've already shown you how this is going to be confusing. 

Paul Lambert: You can do that again. 

Patrick Baldwin: That's perfect. 

Paul Giannamore: No need. 

Patrick Baldwin: Paul is running the Pest Division over at PSSI but little did I know, before that, he's got a big background in M&A, and I thought the two of y'all should chat. I'm going to stand back here and be quiet because you're going to make fun of me if I say something, Paul.

Paul Giannamore: My prayers have been answered. 

Patrick Baldwin: You're welcome. Paul Lambert, welcome to The Boardroom. 

Paul Lambert: Thank you, Patrick. I’m excited to be here. I've been watching the show and listening to the show for a while and we learn a lot from it. I feel more accomplished in my space toiling in the vineyards as I listen to the folks out there so I thought 2 or 3 years in, I might get a chance to come here. Now, less than two years in the pest market, here we are. I'm probably in trouble but I'm looking forward to it. 

Paul Giannamore: Good. Welcome here to The Boardroom, Paul. You're at PSSI now. Instead of starting with ancient history, let's start with today. Let's talk a little bit about what PSSI is and what you do over there. 

Paul Lambert: PSSI is a food safety company. We are the number one food safety company serving the production, mostly protein market, in North America. That encompasses the labor, the general chemistries, the intervention chemistries, the hardware, the software, and the consulting food safety expertise that essentially opens more than half the food production plants in the country every morning. Our core business is food safety and that's what we do best and that's the reason we ended up in pest control. 

Paul Giannamore: Let's talk about that for a second. When you talk about food safety, you're competing with the likes of Ecolab. 

Paul Lambert: We would. Ecolab focuses on the chemistry side and we focus on the entire package. Ecolab would draw a line on the labor side, which is integral to opening a food production plant, cleaning and certifying that plant every morning. We'll not only sell the chemistry, which Ecolab sells, but we'll also sell the hardware, the tracking software, and the labor that goes in every single night and cleans that plant to test in the morning. 

Paul Giannamore: Where does PSSI operate? 

Paul Lambert: We're represented in more than 40 states around the country. Headquarters is based in Keeler, Wisconsin, but we have offices all over the country now at this point. 

Patrick Baldwin: What does PSSI stand for? I looked at the name on the website and I'm missing an S there. 

Paul Lambert: Packers Sanitation Services Incorporated. The original founding of the business, ‘89 I believe if I go back, over 50 years. It started in Wisconsin with folks that were looking for work outside the AG space. There were a lot of large meatpacking houses in the area and they realized, “Here's something we can do through the winter. We can do it in the evenings. We can employ more people in the area. We think we could do something different in this space.” 

50 years started as cleaning meatpacking houses and eventually growing up to cleaning every type of food product you could envision today from high-end pharmaceuticals to the vegetables that come ready to eat in a package that you and I pull out of a bag and assume it is perfect when we throw it into our mouth, which is a huge safety challenge nowadays. 

Paul Giannamore: That's you guys. 

Paul Lambert: That's us. 

Paul Giannamore: The broccoli is already cleaned up and ready to go or the spinach, that's you guys cleaning this. Is it ready to eat? Should I feel comfortable? I open those bags sometimes and I'm like, “Maybe I should wash this.” 

Paul Lambert: My food safety science guys would say it never hurts to rinse something off. Yes, quality control is pretty high. We're good at that in the United States. We are a food-producing country and our standards are pretty high. There is a lot of effort in doing that. It's a challenge, you're right. Particularly the next generation of food consumers don't like to cook. 

We like to pull things out of bags and best case we microwave them and worst case we eat them. That is a huge level of food safety that has challenged the industry in the last few years and raised that level bar, which has been good for places like ourselves and some of the folks that focus on this science and good for the consumers ultimately that that level of food safety has been raised.

Patrick Baldwin: I love my raw cookie dough. 

Paul Lambert: Raw eggs are always a challenge, Patrick. 

Patrick Baldwin: What does that mean? Ecolab is doing the chemical. You all are doing the chemical plus labor, plus tracking, plus hardware, plus software, and everything. What does that look like? 

Paul Lambert: I wasn't around over 50 years ago when they started this, although I did work for our prior CEO who was from almost the beginning so we shared a lot of those stories. Ultimately, what put PSSI on the map is they guaranteed their product. As we say when we look at all businesses, if you've got a value proposition in the market space and you believe in it and your people believe in it, if you can put a guarantee behind that value proposition that you stand behind, you will separate yourself. 

PSSI did that from the early days where if you let us run the food safety component, your plant will start up, it will pass its USDA audit, that's a food safety check, sometimes the swab check, microbial check. It'll pass that audit every day and you'll start up on time or we pay the downtime until it does. That was a huge commitment to the industry and it raised our level of play as a company to assure that kind of food safety that you could be checked every single morning and guarantee the plant is on and ready to go. Everything flowed from that. 

We started with just the labor component and then we added the chemistry component because we wanted more control of that. We then added the food safety scientist because we wanted more control over that. Ultimately, we added pest because after you've spent potentially hundreds of thousands of dollars or millions of dollars doing all the rest of these jobs, to fail an auditor or not start that plant because of a pest control contract that isn't done right might be one of the simpler or certainly one of the less expensive things you're doing to not start that plant in the morning was devastating to the customers. That's what drove us to the market, it was pure customer demand play. 

Paul Giannamore: When you talk about that particular guarantee, it reminds me of a book that was written back in the early ‘90s called Extraordinary Guarantees. Have you ever read that? 

Paul Lambert: I have not and I'm a big reader. 

Paul Giannamore: It was the American Management Association that put that out. It was done back in ‘92 or ‘93. It's an interesting book because it talks about the use of guarantees, channeling, and focusing an organization on performance. What you said right now reminded me almost as if it were lifted off the pages of that book. That book references the pest control industry. 

We've got the classic Harvard Business Review case on Bugs Burger down in Florida. He would do the restaurants and his guarantee was you'll never see a mouse or a rat in your restaurant or whatever. I don't remember the exact guarantee but it had a stringent guarantee, otherwise he'd pay for it. You got to keep the place clean too. It's impossible to control pests in a kitchen, that's a disaster. The customer had to live up to their end of the commitment too. It's an old book but it's an interesting book. I like to go back to it every now and then. 

Paul Lambert: People are asking what's the difference between contracting someone to come in and do your food safety, be it the chemistries, be it the actual scrubbing of a kitchen or a facility or a plant like doing your own pest control. I often do that analogy to cutting your own lawn. When you're cutting your own lawn, if the ballgame comes on, it's done. It doesn't matter exactly if it's done perfectly or if it's edge right, it's done. You're coming on when the ballgame happens. When you pay some kid $25, it better be diagonal and overlapped and perfect ballgame on or not. That's the difference when you go to someone who this is all they do. We take that seriously. 

Paul Giannamore: You're doing the full spectrum of food safety. Of course, obviously, part of food safety is pest control. When did PSSI get into doing pest control within its client organizations?

Paul Lambert: It's a great segue. When I was first asked about pest control, I said no. Our CEO came to us and said, “We're doing all this work for these customers. They trust us. We're doing a good job. We're starting things up on time. We're starting them up safely. We are the model in this space today and yet we're still failing audits or the customers failing on it because of pest control problems. We need to go solve that. Go find me some pest companies.” 

At the time, I was running the M&A team for PSSI. My background is to scale up businesses. I was an engineer and then a startup guy and then a scale-up guy for a PE firm. I had done a CEO job, rapid scale business, got bought by PSSI, and the CEO asked me to stick around and find some more companies like mine. We were rolling up sanitation and chemistry companies and he came to me and said, “I want some pest companies.” 

I looked at him and I said, “The dollars and the expertise, I'm not real sure about this.” He was pretty insistent from the customer’s view to spend the time and fail because of a cockroach issue or a flower beetle issue was devastating to these guys for the investment they put in it. we bought a couple of pest companies, we bought two, and that was over three and a half years ago. 

I came into the picture full-time over a year and a half ago when that same CEO, Dan, came back to me and said, “We want to take this thing seriously. I'd like you to step away from just doing M&A. You used to run scale-ups. We want to go to town on this thing. How do you make this a mark in the industry? How do we become the number one guy for food safety pest control?” We started that effort months ago and we've done a number of things but we scaled it up rapidly and we've focused on that goal of not being the biggest pest control company, being the best in that space.

Paul Giannamore: I remember years ago, we sold a business down in Houston and the name escapes me but it was a pure-play commercial business. I remember you guys looked at it, you guys had reached out to us, somebody there at your shop did. It could have been you, Paul, but somebody over there reached out to us and said, “We're looking at pest control businesses in Texas.”

Paul Lambert: Those were early days but we've learned a lot about pest control since then. 

Paul Giannamore: What have you learned? 

Paul Lambert: One thing that I've really learned to enjoy about pest control is there are probably two things, how much you can impact the quality of the product by running a good organization, by running a good culture. The most amazing thing about pest control is you have many operators that are truly alone out there doing their jobs. If they are involved, ingrained, and in the vision of what you're doing and they care, it's a huge difference from someone who's not. 

It all hinges on that one route manager, one service specialist that doesn't do their job could be the downfall. The challenge of pest control and the impact that individuals make is probably the first thing I learned in the business. The second thing that I've begun to enjoy is the entrepreneurial spirit of pest control. It's amazing how the culture of folks that start pest companies, they're in it for the customers, and they're in for start businesses. They're characters and you don't get those characters across every industry. 

Paul Giannamore: Sometimes I wish we didn't. 

Paul Lambert: I'm sure. We bought more than one so I've seen it behind the scenes on a few and there's some stuff out there. 

Patrick Baldwin: In the past, you were telling a pest control contractor coming in and explaining, “The client failed an inspection because of a roach or a flower beetle.”  Against your own wishes, you've added pest control. Now you've brought pest control in-house. How is that different communicating internally versus to an outside company? 

Paul Lambert: I should first be careful about my own wishes. I was a little naive to the impact that pest control has. If I look back now, one of the smartest moves that was brought to us closed that loop for the customers. I'm a big believer in pest control having seen it. I don't want to drum it all down to dollars. I'm a dollar guy because I spent too many years in private equity in between things. The dollar spend in a large production environment on pest control is quite small across the rest of their spend. 

If you're running a large production plant, you have hundreds or potentially thousands of folks on staff running production. You have at least hundreds of people running sanitation at night. You've got multi-million dollar payroll going on here. The pest control contract is going to go, depending on the plant, $25,000 to $125,000. The idea that this plant that might cost a couple hundred thousand dollars an hour to shut down fails because of an annual $25,000 pest contract is devastating to the customer. It's tough on them because there's so much other work that goes into it for them to fail because of something like that. 

Patrick Baldwin: In regards to the Sanitation Department communicating to the Pest Control Department, do you feel like they're on the same page or is there this intercompany dynamic working there?

Paul Lambert: This is the key to the whole thing and the thing we're most proud of. When we look at what we're building now, our vision is not to be the biggest pest control company in the food safety space, it's to be the best. That means best-in-class technicians, best-in-class service, protocols, and processes. It means best-in-class communication. We've coined our own term, so to say, of integrated food safety management and a playoff integrated pest management where we integrate all the services together. 

Our ability to have the boots on the ground in that production facility every night, talking to our pest control folks before they get there, after they leave there, watching hotspots within the plant, and communicating what's going on has changed the entire environment for us. There are facilities now that we service that spent years never getting control of certain problems that we've seen no reoccurrences since and it's because of that everyday attention to detail that's going on and the interaction with those folks in the plant. 

You can imagine examples of this, right? We get the call when the fly light is not working. We get the call when they spot a cockroach somewhere. We will overlap our shifts with them so we'll show up and they'll lead us to exactly where the issue is. You can think of a recent case where they had spent ten years never dealing with a cockroach issue and sanitation folks that work that night shift led us to exactly where they see every cockroach and every piece of equipment and when they show up. Our guys diagnosed that. 

We’re big root cause diagnostic guys now. All the way down to the conduit it came from, the light fixture it came from, the void in the ceiling it came from, and solved that problem where it had never been solved before. That's because of those folks in that plant leading us and teaching us every single day. Communication is everything here. 

Patrick Baldwin: Would you say your pest control technicians end up looking more like scientists than they do like real pest control technicians? 

Paul Lambert: Patrick, I don't know if I know what a real pest control technician looks like but our guys are more like scientists. We have a six-step protocol of how we inspect, eradicate, monitor, exclude, and go through those steps. What we do is look for the root cause every single time. We drill that into our guys, “Look for what the root cause is. Why does this environment exist? Why does this pest want to live in this space? Remove that from the environment.” Yes, absolutely. I'm amazed at the stuff that my guys bring to me. I'm learning every day. I love hearing about the difference between a confused flower beetle and a red flower beetle and why one's different and exactly where he'd grow and live and why we're going to make his environment not happy for him anymore and he's going to go away.

Patrick Baldwin: That's exciting. 

Paul Lambert: It's pest control. 

Patrick Baldwin: You have multiple services, sanitation, labor, chemical, and pest control. You have best-in-class service. You're communicating with your clients. You've got this top-notch guarantee that Paul even endorses from his 1993 bestseller book. Why would a customer ever cancel you all?

Paul Lambert: Let's not let them cancel us, Pat. That's pretty easy. 

Patrick Baldwin: It's Fat Pat. Is customer attrition even the thing over there? 

Paul Lambert: It is small. 

Patrick Baldwin: Why would a customer cancel? 

Paul Lambert: Like anybody else, we could mess up somewhere. We are growing rapidly. We went from four states when Dillon and I stepped into this a couple of years ago to 21 states, that's a lot of expansion. You've got to control your process as well. We have not been canceled in any significant customer and any of our food production customers at all. We pay attention to every one of those. I'm going to knock on wood and we're going to keep doing our job and I don't expect to get cancelled anywhere. 

Patrick Baldwin: Not even one. You won't even tell me one good glorious story of cancellation, come on. 

Paul Lambert: No. The cancellations that are significant to us are usually driven by other factors than pest control. They're an acquisition, they're another partnership, and there's something else there. We've had some service issues early on, that taught me the value. We started with that. The value that every single person in your staff is key to your success. Your reputation rides on every single person that goes out there. 

There were some early service issues in some smaller accounts where we weren't paying attention to this management, the dollars were smaller, they were more of a periphery, and they weren't that heavily production focused. They screwed up, they skipped the stop, and they didn't know what they were going to do if something showed up. It happens. I'd like to think it's not going to happen on our watch moving forward. 

Patrick Baldwin: There's a high risk in putting that guarantee out there. I wonder what that looks like when it comes to training. Is it an extravagant training program or does it look a lot different than the rest of the pest industry?

Paul Lambert: In the pest business, we're not guaranteeing you're never going to see a pest. The door can open and flies are going to fly into your plant. Our favorite way to bring cockroaches into plants is usually lunchboxes and backpacks. That can happen on a daily basis. As a food safety company, we're guaranteeing the plant starts up in the morning. We need to make sure nothing systemic ever happens inside that plant to go ahead and pass that guarantee. Pest control is a little more wild than the microbial side and we do have to be conscious of that. 

Paul Giannamore: In your current operations, you guys decided to get it to pest as an adjunct service to what you're doing. Are customers able to buy your pest control service as a standalone line or is it integrated or coupled with your entire food safety program?

Paul Lambert: Good strategic question. We will do pest control standalone and that's necessary for a couple of reasons. One is the efficiency of our operation. PSSI serves about 700 food production customers of some sort around the country. We do have a goal to get coverage of those at a certain percentage to bring the product to them. 

By doing that, we then extend our routes into areas that may not have enough density for that route operator to be efficient for them to make a great living. We will work on filling those routes with other business that still values the core value set that we're moving. Food production is number one. Food-grade manufacturing, which is a whole nother level of production, is stuff that goes into the food industry, be it a straw package, a tray, or whatever it's going to be. That's a whole nother audited facility. 

Beyond that, we go into anything institutional and audited. Those will be our worst. We work our way into other food space. We'll go to the restaurant all the way up to the production house. That gives us the ability to keep our people current with some of those retail environments to fill out some of those routes and keep the density up. We generally start with the anchor tenant and then we fill out around that. 

Paul Giannamore: How do you grow that? For example, you've made a few acquisitions in pest. You've acquired some operations and now you have some capabilities so you don't need to go out to all the 39 or 40 other states and make acquisitions. You're able to build upon the capabilities that you've acquired and roll that out somewhat organically. Is that how you're doing that? 

Paul Lambert: Yeah. it's a good strategy. We should invite you to our strategy session. We use M&A as a tool in our path to get us to where we want to go. It's not the focus of what we do, it's just one more thing in the arsenal. Where we have a good platform, we will grow that platform. Most of the M&A work that we've done, most of the acquired business that we have at this point, you're talking 2 or 3 years in most of them, every one of those groups has more than doubled since we brought them on board. We've organically used that core base and then we look for people that bring skillsets to us that augment what we have. 

As an example, we're probably the hyper-strategic buyer in your world. One of our real key acquisitions was a pest control company that spent twenty years just doing food production plants. That's a tough business. I don't know if I would have done that as the owner but the owner was passionate about that and he drove it. He had about 250 customers, doing a $3 million-ish business, all food production based. Every one of those route managers knew how to serve his production plant. 

His technicians they had on board, his technical leader that ran the regulatory department, they had processes built down that built out that we have now spanned across all the rest of the customers that we have. That was a great example of somebody who had almost zero attrition in there. He built a great, as we would say, lifestyle business. He hit it to where he can control it all, built the processes, ran it, and absolutely what a gem to find. We're always looking for stuff like that. 

Paul Giannamore: It strikes me as very unlikely that you would be able to go out and acquire food processing customers through acquiring pest control businesses. You buy these pest control capabilities and now you can cross-sell that to your current customer base across the United States. For you, acquisition, as you said, has been strategic. You're buying capabilities. You're not buying customer bases per se. As you grow, your pest control operations, of course, will serve your current clients. When you get into particular areas where there might not be that much density, now they're able to do not only your food processing clients but also class-A buildings, industrial parks, and whatever else they can do on the commercial side I would imagine. 

Paul Lambert: Absolutely. Yep. We'll always be commercial. We won't grow beyond that skillset. You'll stay institutional. You'll focus on audited facilities that will pay the premium to make sure whatever standard they're going to is never missed because that's the culture we built within those route managers. 

An interesting thing you do bring up though is when we look at a business similar to you, we thought, “We're going to use these capabilities to address needs in our existing customer base. We can build a top-ten commercial pest company. We can crack the PCT top 10 commercial only just by servicing our existing customer base. If I hit a high enough percentage of my 700 plants, I can be there, and I can be best-in-class.” That was our goal. 

What we've learned since then is that pest control has value from the other side of the equation. Pest control has an ability because the spend can be a little bit lower and the changeover can be a little bit quicker, you're not moving in a large piece of million-dollar production equipment or a couple of hundred-man crew. 

We can come into somebody that is in the food space that has a short-term issue with expertise in pest that introduces us to the plant, introduces our process, and our ability to integrate and communicate. We'll do that with the existing folks within that plant. We'll often see sanitation, chemistry, and food safety challenges that we can address with other services. Interestingly enough, pest can go broad and bring customers into your more focused space as well. 

Paul Giannamore: To what extent can you use personnel that’s focused on one particular aspect of food safety and also deal with routine maybe pest control inspection or low-level maintenance type issues that don’t take a real pest expert? 

Paul Lambert: That was one of the fears of our sanitation operating partners when we got into the business and even our customers, “You're going to use my chemical guy to spray for bugs. He knows chemistry. He's going to do this and that.” Very different chemistries here. No, we never do that. Our pest control experts are pest control experts, they're licensed, and they're certified. A lot of folks are doing this now but all of our guys are NPMA food safety certified. 

They all have at least 180 hours apprenticed in a production plant before we put them in charge of anything, which is one of the reasons some of those secondary accounts are valuable to grow our people before we put them in those production environments. Very high level of certification and skillset before you show up in that plant. None of our chemistry guys or sanitation guys are going to be doing that job. 

However, there are a lot of other jobs that are integral to good food safety and good pest management. The simplest example is production plants starting to have fly problems, those flies are not coming from the plant. They're not a pest control issue per se. That is an issue that's going on a trailer washout behind the plant that's not being cleaned properly and it's causing a habitat for those flies that are then coming into the plant. 

We can offer our services to go and clean up that area for the customer. That can be something we drop into a master sanitation contract and clean it up. A couple of thousand dollars to solve a problem that could cost them hundreds of thousands of dollars. We can do that for them. Those services do interact. Small things. 

As a pest control guy in a large production plant, there's nobody that can destroy pest equipment faster than a sanitation guy with a high-pressure hose. I can take out more ILTs and push more MCTs out of the door than you could ever imagine. The fact that our logo is sitting above the MCT on the corner and the guy with the hose knows he's pushing his own stuff out helps. The fact that the guy knows that the guy that shows up here to fix that ILT is wearing my uniform helps. The interaction of these things is valuable at the end of the day. 

Patrick Baldwin: Any consideration going upstream in terms of the food supply? I heard you say, “We work with the auxiliary, the packaging, the manufacturing, the food wrapper, the straw wrappers, and all the way down to a restaurant.” What about going to the poultry plant, the beef house, the farm, and doing pest control there? Is there any benefit to gain? 

Paul Lambert: You're absolutely right. This is where it gets broad and where we're learning how broad the food safety chain is and how intimate pest is in that environment. I was out at a vegetable oil plant in Missouri and we were doing bird netting on that plant to keep bird feces from going into the potential containers as they work their way out. 

Here is a vegetable oil that's showing up in our kitchens today, everything they do in that plant will get thrown away if we have birds that are nesting above the loading facility for those train cars. The tie is phenomenal from the grain elevators to the ethanol plants to the grow houses for the chickens that feed into the chicken plant, all of those are environments where we can provide service that more intimately closes that loop for the customer. 

Patrick Baldwin: Are you also in supermarkets? 

Paul Lambert: We have not, although it's interesting we've been asked. Here in Texas, some of our largest grocery stores have their own bakeries, dairies, and the rest of the mix, and we clean those for them.

Patrick Baldwin: I was thinking about when they're doing all the butcher work and seafood and stuff that's in the store. There's one grocery store in Texas so we'll wink and say we know who it is. That's interesting when it comes to making sure that safety follows all the way through to the consumer. I don't know how early you can start or how late you can go. I’m just thinking out loud here. 

Paul Lambert: You can do the whole thing. The most amazing thing to me about food safety science is our team now tracks data all the way from potential microbial load in a grow house for an animal all the way to the shelf life in your grocery store. The data we now track from what's coming in the plants to the temperatures in the plants, the temperatures in the water, the pressures, the chemical loads, and the titrations in the plant. This is the most amazing thing for pest control for the next space. As we go to more and more remote sensing technology and truly monitor technology, we can integrate all of this together. 

Now we know all the factors. We know the time of season, the time of year, what's happening in those plants, what to do about it, and to have that backbone of software. I'm not a software expert but I've been through enough industries that I've learned. If you provide enough data for some smart folks and you let them noodle on it for a while, they'll come back to you with things you never imagined. You start to look at how to interpret that and how to build a better product from it. 

Paul Giannamore: To what extent are you guys using remote monitoring now on the pest control side? 

Paul Lambert: We use it not as much as we should. The challenge is in our environment, it's been such a heavy industrial environment that they've shied away from things that have been traditionally more expensive and can get damaged easily. There also has been a little bit of a challenge, of course, with folks worrying about if things show up and you're not there, how many times do you get called back in and out of these places? We've always worried about that in the industry. 

There are two factors that are going in our favor here rapidly. One is the prices are dropping dramatically and so it's just going to be here tomorrow. The second thing is because we have folks in the plants all the time, if we were to get a false positive on a trap or a bait station or something like that, again, this is not pest control to go and check is that a false positive or not? If there's something in it, the pest guy's coming out. If there's nothing in it, we're good. The guy's going to show up on his regular service. This gives us the ability to roll this out prolifically throughout the organization as the costs come down. We're certainly geared up for that right now.

Patrick Baldwin: I'm thinking about safety. We had a large petroleum little substation here, a big oil company. For my technician to be on-site, he had to go through annual safety training like watching videos and doing certifications. We had multiple technicians go through the training in case the main route technician was sick or something happened. I'm imagining you're working with very high safety standards with all your clients. How does safety play into everything you do there? 

Paul Lambert: Safety first, Fat Pat, always. Our core value is safety, integrity, team, and customer achievement. I roll that quickly because everybody in our organization is the same.

Patrick Baldwin: Slow it down so the rest of us can understand what you said. That's how frequently we do that. If you're not being safe, you're not coming home. If your folks aren't coming home the same way they left every morning, everything else we've done as a leader has failed. No reason to be in business. Integrity is number two. If we're not doing what we say, saying what we do, we're not being forthright, our problem, their problem, such forth, we're not going to get all the end. Integrity from our people and with our customers. 

Team comes above the customer and the achievement. If my team is motivated, my team believes in what they're doing. If my team takes this personally, the customer will be satisfied. The customer comes up next. It’s always paramount that the customers are up there. The last one is achievement. Achievement is personal achievements as a team. Ultimately, if you begin to value your personal achievement over the team's achievement, we have the next cultural issue. 

That's our group of core values and they're in order for a reason. Safety is absolutely the top and achievement, which is the numbers Paul and I live by every day, is as a finance guy, I'd say, unfortunately at the bottom, but no. Fortunately, that's at the bottom because everything else happens first. When that number comes out, we've done it right. A lot of stuff on safety, a lot of training and standards. There are customers that we potentially will not work with but I would say all of our key customers are 100% on board with us. Safety is always first for the guys. 

Patrick Baldwin: Safety to us sometimes was reactionary. If there's a vehicle accident, go take a drug test. Not a lot of prevention went into that. Don't text and drive or someone called and said they saw you texting and driving. I imagine that you're learning a lot. If an accident was to happen, based on your scientific method to everything that you do, you've got to be able to figure out there's a reason that there was a safety issue. 

Paul Lambert: Absolutely. Like food safety, worker safety, and root cause diagnostics, why did we have the issue we had? In pest control, our number one safety is statistically getting in those vehicles every day and putting those miles on the road. We watch that. Of course, like everyone else, we track the GPS data, we do behavioral monitoring, and we do rewards for that. Beyond that, we've learned from that how to convey some of those messages back to the whole rest of our group. 

We had a near incident with one of our trucks. Texas roads and Texas freeways, notoriously, this is the largest domestic migration in the history of the world. That might be correct. We should probably check that statistic later. Number of people moving into Texas was more than the gold rush. We're building freeways like crazy. Those freeways are always in construction. There are always barriers in the left-hand lane. 

We had one of our operators barely avoid a water heater that had fallen out of a truck and was up against that cement barrier that had been placed there during construction. He's in the left-hand lane, he's got a semi on the right side of him, he's got a truck in front of him, and behind him. He's got a decent amount of space so he had enough to scoot the truck over enough and this water heater barely grazed the left-hand side of his truck. 

Diagnosis on that on the first pass? Everything's fine. He was going the right speed. He had enough gap. He reacted to it well but we went a level deeper. Eventually, we got down to, “Why were you there? Why were you on this road? Why were you taking that freeway? Let's go further. Why were you in the left-hand lane? As management, did we create a situation that caused you to have a need to be in that left-hand lane?” By nature in Texas, it’s a little more dangerous place to be in a truck. 

Now, we use that analogy through the rest of our organization that isn't even driving trucks to say, “Have you put your guys in the left-hand lane? Have you forced a pace and some type of achievement results so heavily that you forced your guys to get out of their comfort zone to drive the left-hand lane to push the issue?” It's an interesting analogy that came from pest that now spans all of our other teams. 

Paul Giannamore: Did you come to the conclusion that there was some sort of incentive or mandate otherwise that caused him to be in the left-hand lane in order to get someplace faster? Was that the conclusion you drew from that? 

Paul Lambert: The conclusion is we can be better at that. That's right. We can always be better at making sure our folks realize that if they believe at any point that they are unsafe, we have their back. We will back up not doing that customer stop that day. We will back up not having that result. That's more important. We had to begin reemphasizing that to the teams. 

It's always a balance. We push achievement. Our guys want to achieve. We have an aggressive team. We bonus our team. We incentivize our team. They run a lot of their own routes. They do a lot of their own add-on sales like any great entrepreneurial pest guy. As leaders, we need to continuously balance that. They may begin to make decisions that aren't in keeping with them with their own health and well-being. At some point, we have to be careful about that. Yes, absolutely. We pay a lot of attention to that now.

Paul Giannamore: That's interesting that you guys looked at it from that perspective and said, “Is there anything that we, the management, is doing that would put you in a position to do that?” It's not often that management is as self-aware or self-reflective. Kudos to you guys for taking a step back to think about that because at the end of the day, clearly, the mission is important but not jeopardizing life for them to get there. 

Paul Lambert: We do this for our families. We're in the food safety business. We're doing this for millions of families around the country. 

Paul Giannamore: Safety is your core business. 

Paul Lambert: Safety is our core. If we messed that one up, we got to start thinking about why we're here. 

Paul Giannamore: Fat Pat, what's rolling around in the noggin?

Patrick Baldwin: I'm thinking if there's a food I can eat that would have a little bit of bacteria to help me lose weight but not enough to kill me. 

Paul Lambert: You got a small stomach illness. It's going to solve your problem. That'd be awesome. 

Paul Giannamore: Let me ask you a food safety question. I was in Cairo, Egypt, and I left Cairo. I had to swing through Istanbul, had a meeting, hopped on a plane, and then I was doing a Rentokil transaction in Louisiana, and I had a meeting in Louisiana. I shot from Cairo to Istanbul, Istanbul to New York, and New York to Louisiana. I got there on a Thursday night, the meeting was on a Friday and had an all-day meeting. 

By the end of the meeting, I felt like I was going to die. I had a fever, sweating, had gastrointestinal distress, and I was supposed to fly that night to Chicago. I ended up having to check into a hotel right after the meeting. I didn't leave the hotel room, I wasn't able to leave for 72 hours, that's how violently ill I was. I ended up finally showing up at a hospital and they said, “You might have E coli. We're not going to give you any antibiotics because I could complicate your life. We're going to take all sorts of samples.” They took blood, stool, and the whole nine yards. I'm not going to tell everyone what my symptoms were because they were horrible. 

Finally, for one week, it was the sickest I'd ever been in my life. I remember getting a phone call on my cell phone from the Centers for Disease Control. I made it back to Chicago and I went to the hospital there and it was the Cook County Department of Health. There were two folks on the line and they said, “We've got some questions for you.” I said, “What's that?” They said, “Are you in the food service business?” I said, “No. What do you mean?” “Did you work at a restaurant or anything?” “No, I do not.” They said, “You have a CDC-tracked disease called Campylobacter. I don't know if you've ever heard of that. 

They started asking me a lot of questions. Where was I? Where did I eat? Where was I physically? I was like, “I was in Cairo, in Istanbul, New York, and then Louisiana.” They said, “You were in Louisiana.” Out of all of that whole thing, the CDC deduced that where I must have picked this up was Louisiana, not Cairo, not Istanbul, and not New York, but definitely New Orleans. I picked up Campylobacter and I'm not sure where I got it but it was the worst experience of my life. I guess you being in the food safety space know what that is. 

Paul Lambert: We do. You can imagine if that happens to you, a healthy individual, how that could kill an elderly or a young child. 

Paul Giannamore: It's one of those things. What happens when you get Campylobacter is you bleed from your rectum. I'm not talking about like a little bit of blood in your stool. When I went to the bathroom, I thought I had been impaled because it was just blood gushing out. Campylobacter eats the inside of your small and large intestine. It was an absolute nightmare. I looked down and I thought I was dying. I'm like, “This is the way I'm going to go.” It was bad. 

The health department/CDC called and told me that I likely got that from vegetables that were not properly washed and had some exposure to either human feces or bovine feces. It is where that likely came from. again, New Orleans hasn't been ruled out, the case is still open. That was over six years ago. I hope and pray no one reading this ever experiences that because it's horrible. That's how important food safety is because that can get you. 

Paul Lambert: That's a horrible but great story to the value of what we do. Nobody should have to experience that. By and large, we're better in the US than many other places. It's interesting you had to travel all over the world to come back to Louisiana. All things come back to my home town. It starts there and ends there. 

Paul Giannamore: This raises a few questions for me. The CDC was keeping tallies and lists and then the conversation I had was the Cook County Department of Health that was trying to trace this. They were asking me particularly, “Physically, where have you eaten? Can you tell us the restaurants? Can you tell us where you purchased your food?” I couldn't because the incubation period can be multiple days and I was in multiple countries. 

I never thought about a public health foodborne illness outbreak until I, in fact, experienced it myself. I would imagine it's a race against the clock for these public health officials to try to determine, “Was it bad spinach from some particular processing plant somewhere?” I can see if you get some folks who are either elderly or have compromised immune systems how this could put you down because there are people that die from this. 

Paul Lambert: It is a race against the clock. What they're looking for there is, “Can we trace this back?” They're doing root cause, “Can I trace this back? Can I get it out of the marketplace as fast as I can? Can I just not expose the next person to that?” That is a complete race against time. There are amazing tools now and I'm not a food scientist. If you want a many-hour-long in-depth conversation, we could probably drag out Jake Watts or some of the guys.

Paul Giannamore: I would love to have a conversation with a food safety scientist, for sure. 

Paul Lambert: There are technologies now where they can DNA type that particular bacteria that you have that's causing you a complication back to a particular root source, be it an actual field that came out of a production house that came out of potentially a table in a cutting room for that salad going into that package. They can trace all that back now, if not fast enough, to get that product immediately out, at least we're learning how to do it better the next time. What do we focus on? This is the real long-term play for the Food Safety Modernization Act, FSMA, which is building these processes that deal with the known control points that we've analyzed over time and building those quality control processes into that. There's a lot of technology in that right now. 

Patrick Baldwin: Peej, it's been over six years, but do you still have a sample that we could send and get checked out? 

Paul Giannamore: I'm afraid I do not, Patrick. 

Patrick Baldwin: Moral of the story is don't eat vegetables. 

Paul Lambert: Don't eat in Louisiana, that's what I just keep hearing. Don't go to Louisiana, that's what I'm getting outta this one. 

Patrick Baldwin: This is what you look like when you don't eat vegetables. 

Paul Lambert: I like New Orleans. My wife and I were in New Orleans. Yes, it doesn't look like the aftermath of some crazy frat party all day long. It's a little gritty but it's fun. I enjoy the music. I enjoy the cocktails. I enjoy true Creole food versus Cajun food. I love both but it's interesting to be able to work with both of them. 

Paul Giannamore: Louisiana is a great place. I'm guessing the culprit was Cairo based on the potential incubation period of that bacteria. That's probably where I got it. I've had a love-and-hate relationship with Egypt for the better part of twenty years and I seem to pick up a lot of things there. That's probably what it was. 

Paul Lambert: We keep learning and we get better at this. Pest is relatively new the last 2 or 3 years for me. Prior to that, I spent many years when I was a young man doing startup businesses and later doing scale of business for PE firms. We'd invest, we'd scale the business up, and we'd sell them. Having your people aligned around why they're doing their job every day is key in all of those businesses that I've seen be successful. 

It's no different here that our pest operator goes out there and realizes you not getting sick is the reason they're going to do their job. They're going to check every single trap and they're going to watch every single thing out there. There's zero tolerance. One cockroach is not acceptable. It's not, “They used to be bad and now they're better.” I've heard that come out of pest control people's mouths, not ours. Hopefully, not yours, not most of ours. 

That level of having the vision of why are we here every day often goes into our new teams. I love talking to the teams. I love going to the team meetings. We're doing product pickups. You got all the route guys there. I love traveling with the guys. It's amazing what you learn by noon if you sit in a truck with a guy. Of course, I'm learning pest at the same time. 

I love going to those meetings and asking, “If you had to do a job, you're going to be taken care of. Your family is going to be taken care of. Your kids are going to school. Everyone's going to eat. The world's good. You have to pick something to do. Would you pick this? Is this what you pick? Why would you pick it?” By and large, you'd be surprised how grumpy that audience often is when we're doing some safety training or something or product pickup. 

You start with that grumpy audience. By and large, when you start asking them, “Would they do it? Would they pick this?” If they're going to get paid to do anything, would they pick this job? Most of our guys say, “This is what I would do. Even if I could do anything, I would do this.” You ask why. The overwhelming thing I'm learning in pest control is individual operators consider themselves everyday heroes, everyday first responders. 

They love that thrill of, “There's something causing pain to a customer. I'm the expert. I can solve the problem. I can explain the problem to that customer and why it's not going to come back.” I hear them talk about that. It's a first-responder mentality. They're proud of the crazy story and how to solve it and what they did and how they communicated and how it's not going to come back. Those are the guys that fit my culture. 

Those are the guys that get the vision of what we're doing. Those are the guys that you can trust to be out there every single day. Those are the guys who are going to make sure some cockroach doesn't bring something across that bit of lettuce and end up in Paul's diet one day. I love the culture about that group. 

Paul Giannamore: I needed one of those guys. 

Paul Lambert: When I looked at scale-ups, there are all kinds of things you do to scale up a business but vision is one of the top ones.

Patrick Baldwin: As part of the culture every day, there's some standup meeting that's reiterating why they're out there today. 

Paul Lambert: Certainly, every week. I don't know that it's every day. I do have teams that do talk every day. Every week, our teams get together and they start with a core value call out at the beginning of every one of their meetings. You guys have talked about this for a while. For lack of something standardized across my three recently acquired businesses, we had to roll out an operating system of some sort. 

We use the US system, which is not perfect in any way but it's a nice framework spoon-fed to you in a little book with graphics that anybody can read and figure out. Our teams do live by that. Once a week, they walk in and they talk about the vision of where they're going. They know their vision. They know their mission. They know their core values. We had a meeting where one of my old school, great regional directors for me came out of the oil industry, and ran a Derrick for a while. This is a tough Texan boy. 

We were driving back from a meeting somewhere. We both were in the trucks and we were starting to talk to each other and he suddenly had a little bit of downtime and he said, “Paul, I get all that stuff you've been preaching to us. It makes sense to me. If my guys know where they're going, they know the vision of where we're going every day, they understand the vision, and they live by the core values, I don't have to manage anymore. It all works. They know where to go and they know how to act. They know what to prioritize. Everything else works.” 

For a guy coming out of an oil Derrick, they come around and say, “If I can figure that out in my teams, my life gets so much easier. My customers’ lives get so much better.” That was a great thing to see. To that point, yes, we open every meeting that way. We close everything that way. The more you can get them aligned, the better they do, whether we're looking or not. 

Paul Giannamore: Before you landed at PSSI, now it's time to take a stroll down memory lane, Paul. How did you end up here, to begin with? 

Paul Lambert: That's a long stroll. I'm not a young man anymore, Paul. 

Paul Giannamore: I've got some time here. 

Paul Lambert: I don't know that much. I'm a guy that likes fixing things, I've always been that way. I was a guy that took things apart when I was a kid. I was a guy that figured out how to re-rig a radio to put it in my sister's room to bug her room and listen to her friends and freak everybody out. I was that kind of guy. I was always taking apart things and putting them back together. I came out of school as an engineer but I have to say, I never did any real engineering. I came out and I wanted to fix things. I want to run things. 

I spent my first few years in technology startups. At the time, I didn't realize how hard startup was. The first one succeeded and went public and I thought this is how they all work. Guess what? The next two did not work that way. A couple of failures later, I had one that went well again. I came out of that and then I ended up on the private equity side of the space after coming out of a number of startups. I was the fix-it guy again. I was the scale-up guy. 

We would invest in businesses and I would scale those up. I saw that we focused on middle-market businesses so anything from $5 million to $50 million that had stalled for some reason, a good product, and a good customer base, just stalled operationally. What does it take to get it to that plateau from $50 to $100 million? 

I did that for many years, some of the most enjoyable work I had because you see people with great products, great customers, have a vision, and they've stalled organizationally. You capture what's valuable, you shed what's holding them back, and those are tough conversations and tough decisions, and then you watch them accelerate. It's magical to see it happen afterward. I did that for many years. I ended up in PSSI because I was doing one of those. 

I had taken a CEO job to scale up a food safety business and we did well. We grew that business 50% or so in two years, almost doubled the operating margins on the business. Funny enough, the strategic buyer came along and decided that they needed to buy us so we'd stop stealing business from them. We ended up rolling that business in and that was into PSSI and then I started doing M&A for them. A long path to get here but probably the bulk of that work was working with those businesses that were struggling to get over those next plateaus. That's essentially what we're doing here. It has all come full circle. 

Patrick Baldwin: Somehow STaSIS didn't get a mention in there. 

Paul Lambert: Were you watching videos again in the middle of the night?

Patrick Baldwin: Maybe. Paul likes fast cars. 

Paul Lambert: I had a brief combination of my passion and my love for vehicles with an actual business. We did scale up and run a business that provided products into the aftermarket. We were one of the early ones that pioneered the idea that you could walk into a dealership and walk out with a vehicle that was personalized for you. We built those products and distributed them through dealerships throughout North America and eventually into Europe. That was a successful business. We were sharing videos of fast cars the other day there. 

Patrick Baldwin: Wasn't that immediately preceding PSSI? You did the CEO of the other sanitation business. Did you go straight from STaSIS and this aftermarket bit to food sanitation? 

Paul Lambert: No. I spent a number of years with Fieldstone Equity in between there. As a CEO of a small business, most of your job is raising capital. I knew a lot of PE folks at that point. After leaving that business, I had offers to get into the private equity space and I found that intriguing. It's fascinating to see how you can impact businesses, that's the part I liked. I'm an engineer so I'm pretty good with math so I could hold my own with the finance guys. You can reverse engineer a lot out of a business from a P&L and you can come up with solutions and I did that for a number of years. 

Patrick Baldwin: When PSSI acquired the business that you were running, were you brought on as more operator or M&A was going to be your focus? 

Paul Lambert: Like many businesses that you set up, you'll have an earn-out of some sort to prove what you've told them is truly going to happen. I had a certain earn-out for a year so I was obligated to be in the business for a year as part of my earn-out. I did work as an operator within the business transitioning my accounts, my customers, and my team into the parent company. 

At the end of that year, the CEO at the time came to me and said, “This was successful. We like the team. We like where it's going. We're looking for more businesses like this. Can you go out? You've got a good operational foothold. You understand how to deal with operations folks and you've got enough PE background to understand how to run a process. That's a unique combination of skillsets.” I spent about five years rolling sanitation and chemistry businesses into that parent company. 

Patrick Baldwin: Now running the pest division. 

Paul Lambert: Now running the pest division, that is a little bit of a segue, but in some ways, it's going back to the core. It's going back to scaling up core businesses and identifying value sets and getting teams aligned on single missions and looking for how we differentiate the marketplace and building operational processes that make sure that happens every day. 

Patrick Baldwin: Your field employees, do you view them as remote workers or are they working from branch operations? 

Paul Lambert: They work as teams. We do have a team environment here. They are branches within regions within a division and each one has ownership. Building that operations process is about balancing authority with accountability. If they're accountable at their level, they have the authority to make the right decisions, you'll get the best decision of the field team. 

Those teams, while they leave their houses every day in their trucks, they're not coming to a central point, they are working together on projects often in some of these large production plants. They're getting together to do that and they're certainly together for all of the weekly meetings and they're together for all the production pickups and all the safety trainings. We build as much camaraderie and sharing of ideas as we can into that. 

Patrick Baldwin: Do you want to go on the record and tell your CEO that you were wrong about the pest thing?

Paul Lambert: I have told him that but I will share that publicly. I was wrong about the pest control thing. The value add to our customers is immense and the potential to bring new customers into our field from the breadth and reach we get out of pest is potentially a next generation for the company as well. 

Paul Giannamore: How is it that you stumbled upon The Boardroom Buzz? Is it you guys were looking at a pest and you're like, “Here's some dudes talking about pest control.” 

Paul Lambert: You did an episode on M&A from the buy side so it was all of the things that you run into with sellers and all the challenges we have and it was so spot on that I started sending it to all of my colleagues. This is exactly what we run into. You immediately followed it the next week with one from the seller side, which then exposed all the things that we talk about from the seller side, and that one made me a little less comfortable. 

Paul Giannamore: Depending on what it is that you are, one will make you happy and one maybe not so much. 

Paul Lambert: Yes. We are very strategic in what we do so we are looking for, as you say, resources and skillsets. We are looking for very unique entities. By the time we get into that process, it's probably a little different than the traditional play. Still, listening through that was one of those ones you're like, “I've done that before.” That's what got me into the business. The interesting thing about PSSI and this would be the same if you're going to Rentokil or Ecolab, when you have that kind of scale, your ability to impact things quickly is exciting. 

As a leader, to run a startup company effectively, the way we need to think of ourselves as the pest company. We're a startup inside a large industry leader, a billion-dollar-plus company with 16,000-plus staff representing over half the country's protein production. In that environment of resources and customer access to build a startup is an exciting thing. You don't get that opportunity every day. 

Patrick Baldwin: Did you say a billion-dollar startup? I don't know if those went together. 

Paul Lambert: No. It's a billion-dollar company. It's a unicorn. We're the $50 million startup inside the billion-dollar company and we're not at $50 million yet but that's the goal.

Paul Giannamore: As you guys think about growth, PSSI has extratized focus over the years. Pest control is a logical adjunct to food safety. It's part of food safety. It's tightly integrated. One could argue that it's core to food safety. When you guys think about strategy in general, do you think about other ancillary services that you guys might potentially add in the future? Is there just too much ground to cover by focusing on your core now and further penetrating the market? 

Paul Lambert: There's certainly a lot of ground. Food production is the fourth largest industry we have in the country. That is a tens of billion dollar industry that we're working in that space. There's a lot of room there. Within that, the highest concentration of our business today is on the protein side. That was the neediest side at the time that we went into the business. As our food tastes mature, we begin to move away from pure protein into more vegetarian and vegan type diets. 

You get moved beyond the pure USDA play, which we're talking about, into the FDA space, which is more what you are running into where you're talking produce, vegetables, and salads. There is more room there to grow that's still food safety based. Even beyond that, the skillsets that are in food safety start to transform all the way down the food chain and the whole manufacturing chain. We do a lot of cold storage facilities. We got a lot of distribution centers. We do all the stuff that feeds in and out. There's a lot of ground there. 

Paul Giannamore: I often have conversations with pest control operators that are running sizable pure-play pest control businesses and there's a variety of different schools of thought. You get somebody like Mike Rogers, who's been on the show before, and he often looked and said, “I own the relationship with a customer, they have a home. What else can I sell them for the home?” 

On the flip side of that, there is a tremendous amount of runway in the pest control industry, an industry that's continuing to get further penetration every year, both on the commercial side but primarily on the residential side. Do you look at it and say, “I have that customer relationship, what else can I sell them? Do I want to remain focused on my core, which is pest control, and continue to more deeply penetrate my current footprint and expand that footprint?” I've often argued that folks need to focus. 

As you know, Paul, the history is littered with companies that have become mini conglomerates or huge conglomerates with a lot of business lines that somebody in a boardroom can argue that they're tangential but it turns into a total train wreck. In your business, you guys could start building cold storage units and operate those and now you're in the warehousing logistics aspect of food safety. You're not only maintaining the food safety of these facilities but you're also leasing them out. There are probably a million different ways you can go but it sounds like that's not one of them. 

Paul Lambert: This is America, we're capitalists. We're always looking to grow and provide more. If we do a good job, we believe we should continue to do more. At PSSI, we do believe we run first in class in what we do. Keeping with that food safety side of the space, our focus to date has been, “How do we control more of that process?” We started early in the days of just cleaning a facility then it got to, “We're using chemistry. Let's use our own chemistry.” 

At some point, we got to where one of the acquisitions I did a few years ago was buying manufacturing facilities. We manufacture our own chemicals and raise that level of quality control instead of going to an industrial chemistry supplier that may be more generic in their nature, build production facilities that focus specifically on the food safety space. That's more of a vertical integration where we begin to control the entire process for our customers. 

The benefit that we've heard from the customers is you begin to remove the finger-pointing game that happens when things aren't perfect. We own that space. It's not a poor chemistry choice if that plant has a microbial issue in it. It's not the pest guy letting something in the door if something got contaminated somewhere. We're going to own that space. One of the things that had the company do so well is when we removed 3 or 4 different vendors that when the customer suddenly had an issue, they all stood in the room and pointed at each other and then left. That doesn't happen today. 

We've all seen it happen in production environments when the chips are down. When something happens to a plant, we show up and we own it. We'll continue to look for more opportunities to do that. In pest control, it's interesting, one of our biggest sources of new business is the suppliers into our existing business. I have a customer I was visiting that I went and I met with the QA person, my route manager, and she told us the story of how her plant is perfect, her QA is perfect, her sanitation's perfect, and her pest control guy is the best guy she's ever known, great for him. 

She said, “We had a rodent show up in our plant. I knew it wasn't from us. I knew it was from a supplier. I found the supplier and I told them they're not sending another shipment to my house until you switch your pest control to PSSI.” That's the reach you start to get. That's where we go with this, we keep reaching further into the food chain and the market certainly is there to bring value.

Patrick Baldwin: Based on what you said, I'm trying to put this team thing together, what does a team look like? Is it a chemical guy, a pest control guy, and a hardware guy? How do they all work together? What hats are they wearing? 

Paul Lambert: That's a great question because sometimes we're the individual in there and sometimes we're the whole team and often we're partial. We're showing the value of why, as a customer, you may do well to bring them all together. In a well-run operation from a food safety perspective, you're going to have a bakery or soup kitchen or something like that. We're in this bakery and we're cleaning this place. The person that's in there every single day is going to be the person that sweeps that floor and scrubs that facility. 

If it's a wet clean facility, they're going to go through steps of different sanitation that they're going to do every single night and they're going to hand that plant off in the morning. That person's going to be there every day. Probably on a routine basis, you're going to have a chemistry person that comes in there and looks at, “What type of chemistries are we going to use to clean that facility?” They're going to customize those to fit that customer's need. 

If they've had any kind of issue, some kind of microbial issue that's elevated at some point, either something coming in or out of the plant, they're going to tailor that. They're going to get regular service from that person on at least a weekly basis. In products that often get packaged, shrink-wrapped, and sent out the door, particularly protein products, there are intervention chemistries. Those are chemistries that you and I will consume. They're usually simpler things. 

There are types of acids and stuff that you'll put in there that you would eat. Lemon juice is an acid that will help preserve but there are certain things when there are no intervention chemistries, there are things we do well and you tie those in. How do you use the minimal amount of all these chemistries to have the right food safety product going out the door? If you clean it really well, that solves a lot of the problem. 

If you use the right chemistry, that works another problem. Now you're down to minimizing those preservatives or intervention chemistries and then pest control fits right in. If you don't let anything come in and out of that clean environment, you start to close the loop. On a team basis, all those people are there probably once a week. The sanitation guys are there every day and we try to overlap them on special days like master sanitation with intervention pest control. If a wall comes down, we're going to go in there and we're going to do preventative pest control probably the same time that sanitation is doing preventative cleaning of master things. 

Air ducts are a great example. Getting organic matter out of air ducts that are also bringing in pests that are also causing contamination that teams will all get together through those projects. It's a little bit of both. The key to all of this is the routine of communication. The pest guy calls the site manager that runs that food safety team before they show up every single week and make sure he knows anything that's going on. He deals with it and he calls that site manager after he leaves and tells him what he did and what needs to be followed up on. That ties it all together. 

Patrick Baldwin: What was the tagline again? “We kill bugs, visible and invisible.” 

Paul Lambert: That's right. That is correct. We're all in the business of killing bugs. Some of them, you can see and some of them, you can't. Sometimes it's the ones you can't see that bother you the most. 

Paul Giannamore: I can confirm that. 

Paul Lambert: The M&A side of pest is interesting to me. We don't do that much. We're not doing whole roll-ups here. It is interesting to me working with those business owners, that's a little different. They're much smaller businesses that I've been used to. They are challenging because of that. We've all said in the M&A space that deals are as much work when they're small, sometimes more than when they're large. 

The interesting and exciting thing about this pest space of these small owner-operator businesses is that they're entrepreneurial, they're colorful, and they're passionate. These things are great. They're also messy. The books are usually all over the place. They've run the thing basically on a cash basis. They all think they're worth ten times what they are. All the buyers think they're worth half what they should be. We've got a lot going on in here. It's an interesting space for me and then it's, in some ways, so much less buttoned down to pull this together than a traditional tech M&A process you might be in.

Paul Giannamore: That's why I, for many years, have shied away from small deals because I'm not good enough to do small deals. They're very difficult. 

Paul Lambert: The reason we are together today, Patrick, is that I was asking Seth a few questions because I see what he does as being valuable in this space. Doing that work ahead of going into a process brings tremendous value to both sides. I would much rather pay more as a buyer for a good well-managed and well-documented asset than take the risk to save a few dollars. I look at what he does as being valuable and that's how we ended up in here. 

It was an example of that when I was doing sanitation roll-ups. Some of those are smaller businesses and they would be quite messy, a lot of cash rolling through those businesses if you're not one of the big guys. PSSI is by far the biggest. There's probably one other decent-sized player and the rest of them are small in that space. There's not a lot of scrutiny. They don't have a lot of accounting people breathing down their neck. They don't have INS people on top of them all the time. They're off the radar a little bit. 

When we pull those businesses, they can have a lot of baggage, particularly if they have several thousand workers and a lot of cash moved from different places. We're doing a couple of transactions a year. I can think of 3 or 4 transactions just off the top of my head where we sat down with the group, did our diligence process, and came up with a list of all the things that would hold us back from wanting to move forward. 

We upfront disclosed all that information to the seller and we gave them a playbook, “Here's what we would want,” knowing they were going to build a better business. It's interesting the CEOs of these businesses that came to me. One called me earlier and I haven't called him back yet. He came to me and said, “If I had known everything about my business that you just gave me by analyzing it when I was running it, I would have been so much better at making decisions.” 

In many of those cases, 3 or 4 I can think of right now, we sent them back and said, “Why don't you take a year and figure this out?” We did indeed close those transactions a year later at a higher price point. We let them go fix their businesses and come back. That's an interesting nature of these smaller businesses and what you need is a strategic buyer to get something that works well for you. 

Paul Giannamore: I hear it all the time. Whenever somebody comes to us, we run them through an audit effectively. It's like, “I have an incentive to get a deal done because that's how I get paid.” I would say that more than half of them learn a ton of stuff and say, “I need to work on this for a few years to have a product that's worth selling so that I can maximize value.” A lot of them just don't know and I don't blame them for not knowing because you're an entrepreneur, you didn't go to school for this, and you learn on the job. This is how you learn this stuff. 

Paul Lambert: Sometimes it's not for them. I have a CEO of our most recent acquisition came outta the Midwest. That gentleman has now moved from running his business to just selling for his business. He was at a point where he was done, he was tired, and he had worked hard his whole life. It was always about his guys, it was always about his family, and he was ready to hang it up. 

Now he's sitting down figuring out, “How do I stay on longer? I love doing this. I love selling. I love being in front of the clients. I love not having to deal with that operating side.” In this case, it was a transition that worked well and we found a home for him. Because we're in this growth mode, we have a little more leniency to build spots like that because we so value that 20 or 30 years of experience. To see him thrive afterward has also been a great thing. Seeing the businesses fix themselves and sometimes seeing them join and being like, “You fix it and I'm just going to do why I got into the business,” is also great. 

Paul Giannamore: That's a pretty common occurrence. Guys will sell their business to a financial sponsor or strategic acquirers and think, “I'm going to do this for 90 days or a year and I'm going to be out.” They realized what they hated doing before, which was the myriad of government forms and all this compliance crap and all of this stuff that you have to do in modern society now to run a business. When they can focus on what they love, which is the relationship with the clients and all that sort of stuff, they get a new lease on life. We see that a lot. 

Paul, I'm excited that we were able to get you in here today. You've got an interesting perspective on pest control. What you guys are doing at PSSI, there are a lot of folks out there who will be reading this who have no idea what PSSI does. To hear the story and how important that organization is to food safety in the United States to me was interesting. Thank you. 

Paul Lambert: I appreciate the opportunity. I feel privileged to be part of the PSSI organization and excited to be driving pest control into that space. It's been a great opportunity to do something that is entrepreneurial, exciting, and changing industry, bringing something to the industry with the backing of a significant organization where we can truly have an impact. I expect to see a lot more of the whole industry in the next few years we do this. 

Paul Giannamore: That's fantastic. Track us down if you need any resources as you assess this industry. Anything that we can do to help you, we’re certainly willing to do that. An organization like PSSI and the industry is a great thing. Raise the standards. 

Paul Lambert: So have you. Yes, I'm surprised we haven't engaged your team more. We should do that. 

Paul Giannamore: You guys are fresh into this. 

Paul Lambert: Twenty years. 

Patrick Baldwin: Paul, thanks for joining us. Another Paul, thanks for being here again.

---

Patrick Baldwin: I want to get Paul Lambert back on. 

Paul Giannamore: Why is that? 

Patrick Baldwin: I didn't even know if we got really into M&A. I wanted y'all to talk more about M&A but y'all nerded out about food safety the whole time. 

Paul Giannamore: I remember when you were bringing him on a few weeks ago, that's one of the things you said, “This is an M&A guy. He's got a private equity background. I want you guys to talk about deals.” I don't think we talked about deals at all during the interview. 

Patrick Baldwin: Sorry. 

Paul Giannamore: That's okay. It's an interesting topic of discussion, food safety, because it is a huge portion of commercial pest control. To talk to him as to how they're acquiring those capabilities and rolling them out over PSSI, I thought it was an interesting discussion. Perhaps we will have him back in the future and only talk about deals. 

Patrick Baldwin: If he buys me a barbecue, I'll get him back on next week. 

Paul Giannamore: Didn't he offer you a barbecue in the interview? I thought he did. 

Patrick Baldwin: Didn't he? 

Paul Giannamore: He may have. 

Patrick Baldwin: Maybe not enough. 

Paul Giannamore: I thought I heard him offer. 

Patrick Baldwin: Maybe I can't hear it because I'm pretty diabetic.

Paul Giannamore: Back to your barbecue, Patrick, you might want to slow down on that. 

Patrick Baldwin: Eat slower? Smaller bites? 

Paul Giannamore: Yes, you got it. Eat the barbecue slower. 

Patrick Baldwin: Do you want to talk any more about your Campylobacter? 

Paul Giannamore: I think we pretty much got it all out on the show. 

Patrick Baldwin: I think you got it all out. 

Paul Giannamore: You knew it. I've talked about that before. It was not a good scene. It was a foodborne illness in some way, shape, or form. Not sure how I got it. 

Patrick Baldwin: One thing that stuck out to me was when he was talking about safety and this left-lane concept. It's visual and easy to understand and you've talked about this, are you creating perverse reasons that would cause that issue? It made me stop and think as we're operating pest control businesses or service businesses, are we doing something to create something that is unsafe? At the end of the day, if they're not getting home or if they end up in the hospital on the way home, not a good day, a terrible day. 

Paul Giannamore: That's one of the things that made me think when he said that. When you're looking at financial statements and you're looking at production and you're saying, “How do you make a business more productive? How do you get more stops in? How do you decrease route time?” All those sorts of things. Not a lot of conversations that I have does anyone sit back and say, “Wait a second, are we causing our guys to have to do something that could potentially put them or others’ lives in danger? Are we trying to squeeze too much out of this?” 

It's always like, “We need to do more. We've got to make it more efficient. We've got to make it faster. We've got to make it better.” Not so often that we talk about, “What are we, as management, doing with our goals and objectives and incentives to cause somebody to act against their own rational best interest?” I thought that was an interesting concept that he raised. 

Patrick Baldwin: It makes sense with their client. They are working around in manufacturing facilities. It's a big deal. OSHA, we've got this many days without a safety incident. How many days without a missed day of work? That's a big deal. I remember Brent, who was one of the partners that you saw in the black bear video. He runs a half-million-square-foot distribution center. I drive by it twice a day. 

Paul Giannamore: On your way to barbecue? 

Patrick Baldwin: I wish there was a good barbecue. There's probably a good thing. There's not a good barbecue when you drive. The big old banner on the front of the building says, “We've gone this many years without a missed day at work.” I haven't seen it in the minutes. Hopefully, things are going well over there. Working around that client, they carry that naturally. Their clients are constantly thinking about safety as well, which makes it easy for them. Would you ever put, “This many days of missed work.”

Paul Giannamore: No, but acquirers certainly asked that. We don't get into that on the front end and it's Rentoktil that's focused on that. When I interviewed Andy Ransom on Potomac TV, he started the episode talking about safety. I made the comment to him that Rentokil more so than any other company goes out and does safety audits when they're making acquisitions. 

They go out and spend a lot of time understanding the different safety protocols and they ask about missed days of work and those sorts of things. Not to say other acquirers don't but they do put a loud and vocal effort into it. I'm still not gonna put it in a sim because I don't know if it necessarily changes the value proposition but it's always good to have your people survive as opposed to die. Tangentially, there’s probably some value there, for sure.

Patrick Baldwin: Post-diabetic fall in there. 

Paul Giannamore: You talk about missed days at work. Let's talk about as an employer here in Puerto Rico, should I be concerned about the Mexican's diet? 

Patrick Baldwin: Yes. 

Paul Giannamore: He blames me, he says, “I have to do all these due diligence sessions and I'm always traveling around. I got to go have all sorts of dinners with trust fund babies and all sorts of stuff so it causes me to get fat.” Am I causing the Mexican to gain weight? That's the question. 

Patrick Baldwin: There he goes back to blaming all the chicken collectors out there. You're just paying him too much because he's able to afford all that food.

Paul Giannamore: He doesn't pay for those meals anyway. 

Patrick Baldwin: He has to eat when he's back home.

Paul Giannamore: I don't see him paying for any meals in general anyways. Jennifer Lopez pays for all of that. I don't know. 

Patrick Baldwin: One day, we'll get that Mexican on here. 

Paul Giannamore: We will. We've had many requests. 

Patrick Baldwin: Paul, on your schedule, I hope you know this, August 17th, 2023, we're going to do a live event. We're going to talk about what's your business worth. Are you ready? 

Paul Giannamore: What am I talking about? 

Patrick Baldwin: What's your business worth? 

Paul Giannamore: Okay. August 17th, 2023. What time? 

Patrick Baldwin: 3:00 PM Eastern. Going back to when Bobby and I had our evaluation done and gave us high-level strategy, knew what our business was worth, and told us effectively don't take Jeff's money because things were tight, that gave us guidance on how to build the business in a better way going forward. I appreciate it. It's a tool that we refer to over the years. Having that valuation meant a lot to us and it helped us. 

We've talked about this in other episodes but having that valuation that you do and your team is part of what we do at FRAXN. I'm getting you on there. It'll be you, me, and Seth. We're talking about this and why it's important. What causes these exits to happen? Death, divorce, you choose to, you pass it down, and we're going to get into that. August 17th, 2023, if you want to register, it's free to attend. Email me at Patrick@FRAXN.com.  

Paul Giannamore: Are you limiting this again like you did the last one? 

Patrick Baldwin: We are. We're set up for a hundred seats, so don't delay. 

Paul Giannamore: I was entertained by some of the emails that went through about how you overbooked it and then had to ask people to not show up.

Patrick Baldwin: Maybe. We made up for it. Register now, do that. How's that? 

Paul Giannamore: Okay. 

Patrick Baldwin: Paul, I know I will see you on the webinar. 

Paul Giannamore: That's it, PB, until next week. 

Patrick Baldwin: Paul Lambert, thanks for joining us on The Buzz. Paul G, I'll see you next week. 

Paul Giannamore: Sounds good, brother. Take care.

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Dylan Seals: Thank you so much as always for supporting us at The Boardroom Buzz. We know your time is valuable and the fact that you spend 45 minutes or an hour with us means the world. All the media that we put out from Potomac is meant to honor and celebrate you, the service industry owner. As Paul would say, “Yee who toil in the pest control vineyards.”

As part of giving back, we have this podcast, but more than that, Paul and I have been working our tails off over at POTOMAC TV. We've spent a tremendous amount of time, energy, and resources to build out that platform to bring you market updates, to bring you visual breakdowns of the merger acquisition process, and to tell stories and present information in ways that, frankly, it's not possible for us to do on The Boardroom Buzz.

Adding the visual element takes it to the next level. I want to invite you to go to YouTube and find us, it's POTOMAC TV. Potomac.tv will get you there. Go there and subscribe. Check out some videos and leave some comments. Let us know what you like and let us know what you don't like. Let us know what you want to see more of and we'll see you over there.

PSSI

Extraordinary Guarantees

Mike Rogers – previous episode

Andy Ransom – Potomac TV

Patrick@FRAXN.com

Potomac.tv

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