Ross Treleven: The entire organization at the beginning was like, “Why are we not doing residential?” Now they're like, “We're not going to do residential, this is awesome.” We do one thing, we do it as well as we can, and it's been great for us.
Patrick Baldwin: We've got Ross Treleven, Sprague Pest, a commercial-only business, and now doing over $40 million, covering ten states, and a long-standing family business.
Seth Garber: Patrick, before we dive into this, building a company over a hundred years, which they're coming up on that, do you think that takes a huge level of commitment?
Patrick Baldwin: I'd say so.
Seth Garber: These guys are super committed. I bet they have to do what they say and say what they do all the time.
Patrick Baldwin: I would say so. I'm looking for where you prove me wrong though. I'm waiting.
Seth Garber: I’m getting ready for this episode. After I listened to it, I started thinking about something. I was getting some text messages from some people. A couple of readers sent me some private messages. Commitment matters, don't you think, Patrick? I want to be sure we're clear that commitment matters.
Patrick Baldwin: I'm committed. I don't know where you're going with this. I love it.
Seth Garber: Good. I figured we'd start with a little fun today. Back in episode 97, there was this commitment that was made that we're getting a lot of questions about. It came back to something about Elon Musk not buying Twitter and some type of commitment that you made, right, Patrick?
Patrick Baldwin: Maybe. What's going on?
Seth Garber: Our friend, Dylan, messaged me. Our buddy, Nathan, out there in Vegas, and quite a few other people have messaged me. The question is, Patrick, since commitment matters, you committed to getting an Elon Musk tattoo if he bought Twitter. The question is, are you going to get the Elon Musk tattoo?
Patrick Baldwin: I guess that's commitment.
Seth Garber: Before we dive in, I figured this would be a good one to get out there.
Patrick Baldwin: I'm speechless. We're
Seth Garber: Are going to get the commitment today? Is it a yes or a no? Right here, live on The Buzz or what?
Patrick Baldwin: Fortunately, it's not live.
Seth Garber: I don't want to take away from Ross because he did an amazing episode and I loved it a ton. As I listened to it, I kept thinking about a hundred years of commitment, following through, doing what you say, and all these things. I kept thinking about it. Maybe by the end of the episode, you’d give us an answer.
Patrick Baldwin: A 100-hundred-year-old business and $40 million in revenue. Commitment turns into my lower back. I love it. I love how you think.
Seth Garber: It is your lower back, I wanted to be sure.
Patrick Baldwin: That's where the tramp stamp resides, whoever it is, or whatever face you have. Seth, it's great to see you. You wake up a hundred miles an hour and you're ready to go.
Seth Garber: We're fortunate to have Ross on. What do you think, Patrick?
Patrick Baldwin: Let's step into The Boardroom with Ross Treleven.
Seth Garber:: Let's do this, Patrick.
Patrick Baldwin: Ross, I want to welcome Kate Treleven to The Boardroom. This is a first.
Ross Treleven: Thanks.
Patrick Baldwin: If you could thank us for Kate. You had a newborn, congrats.
Ross Treleven: Thank you. Kate Ilas Treleven, her initials are Kit. We were in between on names, Kate or Kit, so we got a BOGO. I wanted to get one here so we call her a little bit of both. Kate joined us on the 20th of November 2022, 7 pounds and three ounces. We're pretty excited about her.
Patrick Baldwin: That's awesome.
Ross Treleven: She's asleep on the couch adjacent to this podcast.
Patrick Baldwin: If there is crying, it's her, and not you, for the record.
Ross Treleven: Absolutely.
Patrick Baldwin: You have been known to cry on The Buzz.
Ross Treleven: It happened.
Patrick Baldwin: You're on paternity leave. You're taking time off with a newborn and you squeezed us in.
Ross Treleven: I'm trying to represent the behavior I'd like to see from everyone else. If I go back to work the next day, that's the pressure I put on the rest of my team. I'm trying to show them with my values how I'd like this to go.
Patrick Baldwin: What is the company expectation or policy for taking leave?
Ross Treleven: We encourage it as best we can. What I mean by that is a lot of our team, including myself, have worked out a phase of intermittent leave. Right now, I'm only working Mondays and some Mondays, and Tuesdays. I'm trying to fit everything in that timeframe, which is hard because you can't fit 5 days in 2. What it does is it means that I'm available those days and I'm connected.
Also, It's a great time for me to hand over a bunch of these things. Once I've handed them over and people have gotten used to doing them and they're, a lot of times, doing them better than I was doing them before, everybody steps up a little bit more and that maintains. It's pretty exciting for us to have this happen to me and for my team to step up around me. I'm lucky with who I've got on my team so I feel supported by them in this.
Patrick Baldwin: How's it make you feel when your job's getting done? You're taking time off. Is there like, “I'm not needed,” or, “This is exciting, I got the right person.”
Ross Treleven: Amazing. That's awesome. We had a key executive have a baby a few years ago and her team stepped up all around her. She missed it. She wanted to be back in the action and she also wanted to be with her newborn. If we can create a good environment like that on our senior team, it'll make it easier to create that environment everywhere else in our organization. Leading with those family-first values is important to us.
Patrick Baldwin: That's interesting. I usually don't think about family values in commercial pest control but we'll get into that. Sprague has been around for a long time. You're the fourth generation. You took over CEO, if I remember right, on January 1st, ’21.
Ross Treleven: Yes. Let's clarify a couple of things. Sprague is almost 100 years old. It started in 1926. It's been in our family since 1931. We're not the original founders. It was started by WB Sprague right here in Tacoma, a couple of blocks from where I'm sitting. That's pretty cool. We're excited about coming up on 100 years and that's pretty awesome. I took over as president. I don't want to get promoted on a podcast so I want to make sure that we can get that.
Patrick Baldwin: This is the place. You should get on The Buzz to get the promotion. I was helping you.
Ross Treleven: Put in a good word for me. I took over as president at the beginning of ‘21 and I've been here a few years now. I started off working summers when I was 16 in 1998. I was full-time by the time I was a sophomore in college. I finished college with a full route in Spokane, Washington working on our Spokane office.
When I started college, I thought, “I'll never do this full-time. This is a summer job.” Around me were all these people who were making it a career and who were supportive of me. It was like, “I like being here.” Twenty-something years later, I'm still there. It's been a wild ride. I've done about everything that you can do in our company. I've been lucky enough to get exposed to all the different parts of our business.
Patrick Baldwin: If you could go back, would you go back and be a full-time employee and a college student at the same time? That sounds insane.
Ross Treleven: That was hard, I'll be honest. Getting classes on Tuesdays and Thursdays built in an excuse about if my grades weren't great though so I was like, “Dad, I was working.” I worked on half of my parents, just not my mom, but it was good. It was one of those things that were pretty applicable from school right out into the real world. I was a pest control technician. I was trying to figure out how that worked in the world. That was great. When I went to do my grad degree many years later and did that on Fridays, Saturdays, nights, and weekends, I'd already built up the muscle memory so it made it a little easier.
Patrick Baldwin: Did you and your wife meet in college as you were a full-time college student and a full-time technician?
Ross Treleven: No. My wife and I met when I was running the Seattle office since she was working for a startup in Seattle. We moved into rented condos next door to each other. We met in the elevator, at least we knew who each other were. Three months later, she borrowed a cup of sugar, stayed for a drink, and the rest is history so go figure.
Patrick Baldwin: Where's the dad joke for getting the cup of sugar?
Ross Treleven: Exactly.
Patrick Baldwin: Sugar daddy?
Ross Treleven: I like that.
Patrick Baldwin: There you go.
Ross Treleven: All the girls are like, “What are you baking? What were you making?” All the guys are like, “A cup of sugar, huh?” It's great. I love that story.
Patrick Baldwin: Fourth generation. Larry is your dad. Alfie is your uncle. I know AJ, your cousin. There's more family in there if I'm not mistaken.
Ross Treleven: How this all works is my great grandpapa, I’ll do the best I can here, Alfred Herbert Treleven I, acquired the company in 1931 and ran it until 1948. My grandpa, Bob, Alfred Herbert Treleven II, ran the company from 1948 until sometime in the ’70s and ‘80s when he started to hand over control to my dad, Larry. Larry Treleven is the oldest of eleven children in that generation. Alfie, being nine years younger than Larry, joined about ten years after Larry did, Alfred Herbert Treleven III. My cousin, AJ, joined us over ten years ago, Alfred Herbert Treleven IV or AJ, Alfie Jr.
My brother joined us right before Covid hit, the beginning of 2020. My brother had been working up in Seattle for Microsoft and had a long storied sales career. How the business is working right now is that I'm the president, AJ is the head of operations, and Paul is the head of sales. We've got a good balance, different sides of the business. On the senior teams, we have the traditional departments that sit with AJ, Paul, and me. You'd have HR, IT, marketing, and, of course, accounting. We do not want to leave out finance in this one.
Patrick Baldwin: Especially with all the growth and numbers, you're killing it. I think about The Royal Family, here's the succession, and you're next. What were the conversations have been like for years and years now? You didn't even know if you were going to stick to the family business, right?
Ross Treleven: There's even some controversy. We were all supposed to work somewhere else for two years outside of the industry and I never left. There's already an asterisk on my record right from the beginning.
Patrick Baldwin: You're like the Meghan Markle of pest control.
Ross Treleven: I'm the Barry Bonds. They could put a little asterisk. Does the record count? That's one of the things that helps me about the organization and hurts me because my lack of outside experience means that I'm constantly trying to seek that. I never had to go work for some other company. One of the things that they did a good job of, for me at least, is that until I became the executive vice president, I had never worked for a Treleven. I had never worked for Alfie or Larry directly.
I always had a boss and that boss was way harder on me than my family would've been. He's still a mentor for me and a lot of people at Sprague, he's our retired COO, and his name is Jeff Miller. He could hold a line harder than my parents could hold on. Not directly working for my family was one of the best things that happened to me inside the business here.
Patrick Baldwin: You were a full-time college student and a full-time employee. You should double down and get your two years done now, full-time, and do both.
Ross Treleven: I'll take an extended paternity leave here.
Patrick Baldwin: With Sprague, you have 20 branches in 10 different states. You're somewhere north of $40 million looking at some revenue numbers there. It's 100% percent commercial pest control.
Ross Treleven: There's not a single residential customer. Asterisks again.
Patrick Baldwin: Here we go.
Ross Treleven: If your estate is large and you have a house manager, we technically think of you as commercial. There are some pretty large mega estates that we take care of that act like commercial property but that's about as close as we get.
Patrick Baldwin: It’s based out of Tacoma. You built a big Denver office or redid a big Denver office and I was thinking you have these two big HQs. You have 20 branch offices in over 10 states. As you're thinking through expansion, what is that? Compared to density and doing more services and more area, you're thinking, “Are we going eastward?” Where are you thinking as far as strategy goes?
Ross Treleven: Our story is similar to what most pest control companies are. If you do a good job in one city, you end up with a customer who has a place somewhere in the next city over and that's how our growth started here in Tacoma. Now, we need to be in Seattle or now we're covering the Puget Sound area. I hope that somebody has a place in eastern Washington, which is a mountain pass away from us. That's how we got into all of these different markets.
As we got bigger, instead of being drug in by one customer, which is a difficult way to go into a new market, we started being a little bit more deliberate in trying to buy our way into the market and find a commercial-only pest control company that we could use as a foundation so that we could start from more than 1 or 2 accounts.
One of the things that happened to us over the years and might have even slowed our growth into new markets was our relationship with Copesan. The reason I say slow our growth is that this goes two ways. We went places for Copesan but then we didn't go places where we had good partners. We took a long time to go to California because we weren't a Copesan partner but it didn't take us long to go to many other states. It was interesting how that relationship helped us with our growth and also slowed us from growing in some areas too.
Patrick Baldwin: You were limited or restricted as you got in certain areas.
Ross Treleven: Not limited or restricted, it’s more like if this new account has a new location in California, we'll sell that as Copesan and have our partner take it. It was an interesting relationship. Still to this day, I've got some shared accounts that we service as Sprague that are also serviced as Copesan by the Copesan-Rentokil-Terminix network. It's an interesting expansion, how that's happened for us over the years.
Patrick Baldwin: What's it look like today then?
Ross Treleven: We cover 10 states but 2 of them with subcontractors. In Wyoming, we're licensed. We go to Montana, we're licensed. The majority of our work in those states, we subcontract that out and we've got great subs in those areas. That helps us where we don't have as much density for our accounts.
In the other eight states that we operate in, one of the reasons why we have several offices in California, Nevada, and Phoenix is because these accounts that we've been servicing regionally continued to expand as well and have pulled us into these other markets. We're thrilled to be operating in the Southwest now and that's been quite the growth over the past five years for us. We're pretty excited about that.
Patrick Baldwin: Are you headed eastward? What's on the radar?
Ross Treleven: Right now, I don't want to have any extra miles of our service or reach. Right now, I'd love for us to focus on the areas we're in today. There's also this beautiful city 2.5 hours away from us called Vancouver, Canada. It would be a great place to go if I could figure out the right company, the right fit for all that stuff. Yet, international taxes, etc., might not be the right move for us.
There are lots of opportunities to expand but can we expand fast enough and get enough people, enough trained people, and make sure that we're going to deliver that quality service into all of those new markets? Right now, we'd like to focus on making sure that we're best-in-class in the areas we're in and not lose that advantage. Right now, we're looking to stand pat in regard to geographic expansion and not reach any further yet.
Patrick Baldwin: Expansion is exciting, growing that footprint. Right now, you've got the reins pulled back up, “We're not doing it again.” What does that look like for that domino to fall and you're like, “This is a market.” What metrics are you looking at before you decide to pull the trigger and get into a new market?
Ross Treleven: We look at markets from the commercial side a little differently too. When we think of the state of Washington, it has two distinct sides of the state. We have a metropolitan side of the state here on the west side that I live in. The east side is a little bit more rural but that's where we grow everything in this state. As a commercial pest control company, some of the biggest and most important work that we do is east of here. We can be just as big in some of these rural communities.
We look at it from where are things being manufactured and where are things being grown and that's how we target those areas. When we think of Los Angeles, we think, “That's such a huge city.” We look at stats like, “How many manufacturing jobs are in LA?” We know they don't grow as much in LA as they do make things. There are more manufacturing jobs in LA than there are people in Tacoma. We think, “That's probably a good market.” We look at the demographics of the economy as much as we look at the population.
Patrick Baldwin: Got it. You do agricultural pest control.
Ross Treleven: We are not doing crops but we're meeting people in the sheds and storage. We're farm-to-table in regard to how we track everything. From where it's stored, transported, processed, etc., all of that is big for us as any other market we have. Food processing and distribution are the two largest market shares that we have as a company.
Patrick Baldwin: I think of flies around cows. Maybe this is me nerding out. You're on the farm doing stuff, just not the crops.
Ross Treleven: Yes. Fly control is one of the more important things that we handle, from helping out on family farms, which is something that we do, and trying to create fly control there to going to slaughterhouses. They call slaughterhouses animal disassembly plants now. Trying to figure out fly control there, which is pretty complex as you might imagine. That's a huge market for us. Where their environment meets their business is usually where they have a lot of stress and that's where we come in. There's a lot of outdoor and indoor pest control in the same account.
Patrick Baldwin: In these different services, you've got fly control at animal disassembly plants. You've got fumigation. You're doing all things commercial as I think relative terms. I've asked other guests and I've thought about it myself for a long time, residential versus commercial technician. At one point in time, we split it out, which is residential techs and commercial techs. Are your technicians focused on certain industry segments within commercial or can one technician do it all?
Ross Treleven: We train everyone to do it all but we have specialization in any office as you might imagine. Let's go to a market that's got a little bit of both. Let's go to the Portland market where you've got Salem and you've got some of these areas around where things are made, manufactured, grown, etc. You've also got downtown Portland where things are more hospitality based. Anybody in our Portland office, which was 2021’s branch of the year for us, can do any one of those facilities, accounts, etc.
We have people who get good at some of that stuff that we try to shape their route around some of the more complex things or some of the things that are all similar. If your route is heavy in food processing, that might end up being how you are specialized. As an organization, we see everything through the food processing lens first, and then we look at everything else second. That's hurt us before but it's like this documentation-heavy. We then realize we're bringing all of this to somebody who doesn't value that and they don't pick us.
We sometimes go too hard at food processing as the only customer, it's how we talk about our customers, and then we realize that it is our largest market segment but it is not the only thing that we service. Being commercial-only sometimes makes us specific in our minds about what that is. Our minds naturally go to the most complex environment and not to the macro environment. There's so much variety to what commercial pest control is.
Patrick Baldwin: Food processing is your biggest market share. It's the most complicated to sell and service.
Ross Treleven: I would say so.
Patrick Baldwin: You've got a lot of technology to pull that off.
Ross Treleven: When we think about how complicated it is, pest control is only part of it, and that's what's interesting. With a food processing environment, it's all of your GMPs and all of your documentation that goes with this. Being able to solve the mouse problem, the ant problem, or the fly problem is only part of the job. That's why it requires so much more because all of our team also has to be detail-oriented on how they're doing the paperwork.
They have to understand the client's requirements. They have to understand the larger picture because we have done residential pest control before in the past. As long as your customer is happy, then you're good. That's not the way of the world in commercial pest control. The customer might be happy, the mice are gone, and until the audit comes and they realize that you didn't do the documentation right, they're not happy with it. It's a more complex job than your traditional residential pest control.
Patrick Baldwin: Outside of food processing and the things that are less complicated, are you saying that they don't get the same attention or it's harder? It's a mindset shift, like, “You're doing a hotel. You don't have to treat it like a chocolate factory.”
Ross Treleven: A lot of times, when we talk about our customers, we do the same thing with food processing. We want to bring that level of documentation to somebody who doesn't value it or that level of thinking to it. Sometimes it can cut us both ways. Because we have all of that figured out for the food processing industry, that's why distribution and healthcare have been such a big 2nd and 3rd market for us because of all the same skillset. It's process, procedural, and documentation for solving the problem and solving the problem. It's not just one or the other.
Patrick Baldwin: Let's talk about Portland. Congratulations, Portland, you are the branch of the year for Sprague Pest.
Ross Treleven: They're awesome. Great team.
Patrick Baldwin: I heard they’re phenomenal. That's a tough decision, twenty branches. What made you pick Portland?
Ross Treleven: How we do that is we use the data of their efficiency, their retention of customers, their new sales, their quality, their net promoter score, and all the ways that we measure how somebody can be productive or successful. We use an algorithm to create a running list of the top three. It's top 1 to 20. We only release the top three because we're not trying to be like, “You're branch twenty.”
We've all been branched twenty before. Success is one of those things in any industry where sometimes you're riding on top and sometimes you're rebuilding a little bit. There's always a little race for the top three. We then vote as a steering group, which is fifteen people that run all the different key areas of our business.
We vote from the top three who had the most impact on the organization. It can be a little heated and contested in those votes because it's a couple of different rounds of voting with lots of people advocating for who they think it was. Portland missed barely in 2020. They were in the top three but in ‘21, they brought their game to a whole new level. Of course, guess who's been in the top three all year? Portland. They'd like to be the first-ever repeat branch of the year winner. They're gunning pretty hard.
Patrick Baldwin: In almost 100 years. Has the decision been made?
Ross Treleven: No. We wait until we'll have all the final stats. They've got another 23 days to compete with each other and then we'll compile the stats and that'll create the top three. We'll have some voting here before our big super meeting, as we call it, coming up in February 2023.
Patrick Baldwin: You've got data, it's analytical and precise. You've got algorithms, mathematical. All of a sudden, it goes, “We're going to get humans involved in making a decision.” It's like going from AI to, “We're kicking the AI out of the room and we're making this decision with humans.” What do those conversations sound like?
Ross Treleven: The data can get us so far. If I have an office with only one technician but, the following year, they have two technicians, have they grown by 50%? Maybe. Am I going to recognize them as the fastest or largest growing branch in our office? I might not. That's why we use the data to get us halfway there and then we talk about impact. An impact can come in many different ways.
One of the reasons Portland was successful and why we were thinking so highly of them is that we acquired a company in June 2021 in Phoenix. When you acquire a new company with six new employees and you're trying to teach them all the different things about Sprague, you need more than Ross to come down and be like, “This is how we do it at Sprague.”I can't have enough of those conversations.
Portland and many other offices in the organization sent a ton of people down to Phoenix because they were here to help and that meant sacrifice on their side. Over time, they get some of the work done in their offices. They send technicians, specialists, managers, you name it, down and taught the team in Phoenix the different ways about Sprague and created new contacts for them so that they weren't just on an island.
It's that way of impact. How can they impact the offices around them? How do they impact Sprague? Those are those things that are hard to measure but you certainly know who's having an impact on the organization. That's how we determine our tech of the year, our branch of the year, and several different awards that we have.
This year 2022, for the first time ever, our sales award is going to be done that way as well. It's not just going to be who sold the most, it's going to be in the top three with a few different algorithms including the number of accounts as well. If you sell hundreds of locations, that might have as big of an impact as if you sell hundreds of thousands of dollars. We're looking at a few different ways and then the vote will come down to who had the biggest impact on the organization from the top three.
Patrick Baldwin: I love it. Portland and maybe other branches volunteered or they saw a new opportunity, “We just acquired the Phoenix branch,” and they need to get up to speed on Sprague. I love that idea.
Ross Treleven: We've got so many great people here who care not just about Sprague but about how other people are going to be successful here in the company. It's great to have all these volunteers. We'd like to have some volunteers who can go help with some of these new things. When we've gone into new markets, we send people from Sprague down who have been here a while, understand us, know the nuance of our decisions, can teach that, and create another contact.
If I'm there quite a bit at the beginning, it can be intimidating to ask the president of the company a bunch of these questions, especially questions we think are silly. If one of your peers works in another office who you've spent three days with, riding along, and they're telling you about how Sprague does it versus how you do it, you're comparing notes the whole time, and you got a “silly” question to ask, you can fire off a text message to that person. ask them any question because you're just trying to create nuance and trying to figure out who we are.
“Who's this new Sprague company? Are they some sort of big overlord? are they going to make me redo everything that we're going to do? Are they like us?” A lot of times, when we buy a 100% commercial pest control company, we're just like them. We might dot the Is differently and cross the Ts differently but we're after the same things. It's trying to create comfort so that the clarity of the future looks a little safer and easier for them.
Patrick Baldwin: Are you saying the capabilities and the acquisitions you're doing are commercial-only businesses and their capabilities are pretty similar?
Ross Treleven: Yeah, I would say so. I'd be careful not to disparage our team because having 300 people doing so much complicated work, I would say that we're certainly more capable than the companies that we're targeting. We have more resources and we have more technical expertise than anybody that we're looking to acquire. I'd say that our talents together make more.
These companies we're buying have created a specialty and they've taken care of these customers so well. We come in and we overlay the last couple of percent that they didn't have as an offering in their company. There aren't companies of our size that normally have 5 or 6 BCEs on the team and 30-plus ACEs and have all of this technical knowledge surrounding and all these protocols and all this history of doing it a certain way in solving complex issues.
Patrick Baldwin: Even that question was complicated. You managed to get through that and keep everyone happy, I don't know how you do that. I hear what you're saying. They're servicing the same clients in a different market or a new market. They're getting the job done and you're making some tweaks here and there and stepping up service to get on the same page. I heard what you said, you said it nicely though.
Ross Treleven: We'll just pick on Phoenix. We don't have a lot of mega-resort hotel complexes in a lot of the areas that we operate in and they do. If that's their specialty, they get to teach us how they manage something like that, a place with 10 pools, 100 casitas, and as well as the main hotel. How do you manage and create pest control in that environment? I don't know.
That was not something I knew going in. I remember the first question we got when we went into Las Vegas, “How do you kill scorpions? We don't know how to do that yet.” They're operating in Vegas and it's like, “We do know how to do that. We've already learned that one.” It's an interesting thing the way that we can help each other.
Patrick Baldwin: Are there parts of structural pest control that you stay away from?
Ross Treleven: More and more, we're staying away from bedbug work, which was not the way that we used to be. If you go back 2008 or 2009, we were in the thick of it the way everybody else was. As the business emerged, we got into heat, we got into all sorts of things, but we also had a large account base of low and medium-income apartment businesses in Seattle, at the time, and that was ravaged by the new bedbug outbreak.
We were huge in that market and it's become valued less. Science has caught up with it. There are faster, cheaper, and easier ways to handle some of that stuff. Some of the margin and some of the expertise have shifted from companies of our size to the whole market. It's harder to compete in that. It's one of those ones where if you're going to do something for low dollars, a lot of times, you want it to be fairly easy.
There's nothing easy about bedbug work. You don't hard work for low dollars. It's been less and less our market share. I would say that's the only thing we're shifting away from. We're not going to treat crops. My cousin, AJ, is a pilot but we're not going to get into crop dusting for instance. I'm sure he'd loved that but that's not going to be our thing.
Patrick Baldwin: With that, the restaurants or multi-family tend to be a bottom dollar, especially in metro markets. Do you avoid them or do you compete?
Ross Treleven: Sort of. I would say that our sales team doesn't actively call on a lot of the restaurant work unless it's a chain of work. Whether it's a franchise group or something along those, we're a lot more apt to work in those environments where there are a hundred locations rather than a single location.
Also, a key to some of our retention is to unwind us across a hundred restaurants is much more difficult than unwinding at one restaurant. It’s important to make sure that our contract base is growing and that we have the opportunity to save it. If we have a bad experience at one location with a customer, we can fix it because we've got 99 others at stake. If we have a bad experience with one customer, we might never see them again.
Patrick Baldwin: With 20 branches, I'm assuming you have 20 branch managers. Call me crazy but I'm doing simple math.
Ross Treleven: Plus or minus.
Patrick Baldwin: You've got a steering committee, you said fifteen people on there. As a president, what does that look like as far as your management structure design? Also, what does a weekly or monthly cadence looks like with management meetings?
Ross Treleven: Cadence is an important word for me and establishing our cadence has been one of the more important things to me. The rhythm of how we make decisions and when we get the groups together to make the decisions is important for an organization so they can see that out. My senior team gets together every Monday morning. We start at 8:30 and finish at 11:00. That's your business plan review meeting or BPR.
With a caveat, we start with the curriculum. Everybody's got their version of an icebreaker. On Monday morning, at 8:30, not everybody is ready to be sharp on whatever subject we're trying to do. People have their weekend going, that horrible drop-off with their kid that day. Whatever it is, nobody's ready for that.
Instead of asking everybody how their weekend is and getting BS answers, we start with a book. The book that we're reading together as a team is called Triggers. Triggers is a Marshall Goldsmith. It's about behaviors and things and it's about the environment. It's about creating behaviors that make us successful in the world. How we do that is we read a couple of chapters at a time.
Next week, it’s my turn to facilitate. Last week was London's turn to facilitate. The week before that, it was Allison's turn to facilitate. We share the facilitation. One person is ready to ask us all questions about how we relate it to the material, we've all done that. Every single person has talked and we've shared and we've connected on something that's not threatening. Learning is not threatening. This project that I want you all to approve we're doing can be threatening.
We start with that and we get a little coffee break and then we get into the details. Where are the sales numbers? Where's the revenue going? What is this forecast going to mean for the next quarter? How's this impacting that? What are the big projects that are going? Are they red? Are they yellow? Are they green? If they're green, we move on. We don't even talk about them.
If they're yellow, that means we've got something we've got to chat about because it's about to maybe get red. If it's red, that means, “Stop the meeting. I've put slides at the end of this PowerPoint and we're going to go to those slides now and we're going to get through it because we're stuck. This project is stuck.” We're going to try to solve that right then. We then get back on to the next project, etc. That's how we keep track of things at the senior level.
The steering team level is on the third Tuesday. It's amazing how many companies have a third-week cadence where they all have to go to the home office in the third week, etc. We do the same thing so we've got some people who travel in. Our regional managers travel to the home office that on that third week. It's either a 1 or a 2-day meeting depending on the season and depending on what we're going through.
We work on larger projects and longer-term projects where we're working on how we're going to influence a decision or how we're going to come to a decision. Maybe it's voting on who's the branch of the year. That's going to be a big meeting there at the end of January. We do two steering meetings in January, one to do our normal work and one to do all the voting and try to figure out the super meeting.
That's our cadence internally. My one-on-ones are weekly with my team, weekly for 30 minutes, or every other week for an hour. I'm going through a phase of trying a couple of different things there. I did years of every week. If you worked for me, you got 30 minutes. Some people wanted more time and some people wanted less time. I've tried one hour every other week. I'm not trying to change it up every year but I'm trying to find what's going to be valuable for what we're working through.
Our annual super meeting, I've mentioned this a couple of times, was called the Super Manager Meeting, that's its official name. Years ago, we hadn't brought all the managers in the organization together in a long time and we didn't know what to call it. It wasn't a branch manager meeting, it wasn't an ops manager meeting, It wasn't a regional manager meeting, so we called it the Super Managers Meeting, and that stuck somehow.
That's our big meeting of the year. It's our award ceremony. About 150 of our team get together. You can earn your way there in a lot of ways. Positionally, if you're a manager, you're coming and you're required. We release the date almost a year in advance so you know that you're not supposed to be on vacation.
If you're not a manager, you can earn your way by making the top 10% as a technician. There are lots of different ways to qualify. We're coming up with some new ways to qualify, which, hopefully, we're going to announce soon. If it's been a while since you've been to a meeting and you've been at Sprague for a long time, we're going to try to figure out a way to get you in there on seniority.
Patrick Baldwin: I love it. You're a reader. Uncle Andy said you're the smartest man in pest control.
Ross Treleven: Andrew Klein is the best hype man in pest control. If you want to feel good about yourself, ask him to refer you to anybody else. I love Andrew Klein, a great guy.
Patrick Baldwin: We call him Moses around The Boardroom. I heard he sent flowers to the newborn.
Ross Treleven: He did, I got them. I haven't even sent a thank you note yet but that'll be coming shortly.
Patrick Baldwin: I don't think they were for you. There's a wife and a baby involved.
Ross Treleven: I do believe, yes. It'd be unlikely for those two to have his number. The thank you note will still come from me.
Patrick Baldwin: Now I know you’re a reader because now you're going through Triggers. You got the book club going on your Monday morning meetings, which I love. You're grounding them and you're having a congruent conversation and it's led and you pull out the application. As a team, you get a book and maybe 20% of it's good or 80% of it's good or maybe you should only apply 5% of it. How do you make sure that the team isn't distracted by the fluff or the non-applicable things or the things that they should not take away?
Ross Treleven: I heard a phrase that I reference every time that I hear that, “What do you do with all the fluff in a book?” This gentleman worked for us for 30 years, his name is Ray Mannello, and he works for Copesan now. He was the most successful salesperson in Sprague’s history and the most successful salesperson in Copesan’s history. When we went through our awkward breakup, it made more sense for him to work for Copesan. We miss Ray, he's great. He told me to swallow the meat and spit out the bones.
A lot of times, a book, especially a business book, is going to have key points buried in some stories, and some of those stories are going to be relevant to you, and some of them are not going to be relevant to you. If I read chapter three and chapter three is garbage, do I discard the whole book? No. I read chapters 4 and 5. If chapters 3, 4, 5, or 6 starts to be garbage, I'm okay quitting.
In fact, there's a Seattle librarian who said, “You only have to read 100 pages minus your age.” I only have to read the first 60 pages of a book before I'm allowed to give up technically. I don't bring every book that I read to my team either. When we think about this, there are parts of triggers that are not tremendously applicable to me, the person, but they might be applicable to somebody on my team.
That shared facilitation means that I don't get to choose every lesson. I've got to rely on when it's AJ's turn or Paul's turn for them to pick the lesson that resonated with them and ask all of us about that lesson. That's where it becomes a better book because, in that, there’s going to be some fluff in that, and there’s going to be some stuff that we're not going to want to talk about.
It's not like social studies where I'm going to be tested on every lesson that was in that book but it is going to be these three ones are the key ones and we're going to remember that. The team, of course, has a shared vernacular that when we refer to something, it's easy for us to then have all the stories and background for what comes with that.
The book we're going to read next is a book by Eric Berne and it's called Games People Play. It’s about sometimes, in relationships, people are playing a little bit of games, the whole parent-child relationship, etc. There's a game in there that I know will become some of our common vernacular because it's catchy. The game is called I Got You Now, You Son of a Bitch. It's this idea of asking or putting somebody in a position to be caught. It's this way of backing somebody into a corner so that they have to agree with you.
It's a game that we see happen when we're having normal conversations. It's a game where we, instead of accepting that somebody's having an issue, try to make it their fault. There are a few things in there that once we have labeled that behavior with something as catchy as that, we'll be able to talk about it openly and be like, “They're playing that game,” or, “The relationship was this way.” It helps us quickly as a team and effortlessly talk about scenarios so that we can all be on the same page.
The hardest part is when we have a new person and they haven't read the hundred books that we read already as a team, that can be the hardest thing. It's like, “How do I catch up?” It's like, “You can't ever catch up. You can only learn what we're going to do going forward.” We vary this. One of the books that we've read is American Icon, which is about the Ford story. It's really about Alan Mulally. It's where our VPR process business plan review process comes from.
There's a book by Reed Hastings about Netflix and some of the things were interesting about how they were doing different business processes that some are not applicable to a company that has different margins than Netflix does. It was great to be thinking through business in a way that we would never think through the pest control business because some of those things are still relatable to us on a different scale.
As well as things like Justice by Michael Sandel, which is a Harvard class. How we make decisions, how we're deciding to make decisions, and how we're going to treat people is more than the writing on the wall. It's about affirming those decisions and affirming how we make those decisions by being challenged by the curriculum. We try to do something different than the project we have to start our meeting. It’s an important way for us to keep learning that way.
Patrick Baldwin: I love it. I imagine onboarding is like, “Read these 100 books and then you can start to go to work.” When I asked you about acquiring a new business and integrating employees and their capabilities, I was not trying to play a game with you and I was not backing you into a corner.
Ross Treleven: You're good.
Patrick Baldwin: That's a sincere question.
Ross Treleven: I love it.
Patrick Baldwin: My friend, Ian, sent me sketches and one of the things that he sketched out was to get to a yes, you've got to say no to a lot of things. You focused 100% commercial business. What was it like to make the decision to get rid of residential pest control?
Ross Treleven: I was only there when we got rid of it the second time. We've sold our residential business twice. The 2017 transaction of our residential business to Orkin was interesting, it was definitely something I was pushing hard for. We got into residential over the years by doing friends of Larry's. Here in Tacoma, my dad knows everyone so it’s like, “We'll do this house,” or, “We'll do it three times a year.” We had a few hundred thousand dollars worth of residential here in the Tacoma area and that had bled into some stuff in Seattle and some stuff in Spokane. There’s some legacy stuff.
When we acquired the southern half of EnviroPest in Denver in 2011, that was mostly residential business, the part that we acquired. It was residential and Copesan, frankly. It was our entrance to the Denver market, it was this way of going into that market, which we coveted a way in there. We had a good friend in the industry there, Marc Dykstra, and he did not have a lot of love for the Denver area so we came to a deal. He kept EnviroPest up in the love land area that Kevin Lemasters ended up running for a long time, another great guy in the industry.
We had all this residential in Denver. We had this residential in the Tacoma area. Even when we moved into California, we had maybe $40,000 of residential stuff, nothing that mattered in regards to the overall volume of work. It messed up our marketing strategies. We had to market for residential in some areas but we did one of those brand attributes in other areas where we weren't performing the services.
The pressure that a residential customer puts on you when they have an issue versus the pressure that you have from a company is different. The skillset that we want from the technician is different. It didn't make sense. It was 2.9% of our revenue and we decided, “It’s 50% of our distraction.” We're not saying no to anything. We're taking it all. It's time that we said no to residential and do commercial only.
We transacted the business to Orkin. Matthew Whiting was the acquirer of that. They said, “We would like a five-year non-compete.” We're like, “Cool.” They're like, “Really? We figured you'd push back.” We’re like, “We’re serious.” We didn’t tell everybody, “Five years we can't do this.” The five-year anniversary hit and we didn't even notice. The entire organization at the beginning was like, “Why are we not doing residential?” Now they're like, “We're not going to do residential, this is awesome.” We do one thing, we do it as well as we can, and it's been great for us.
Patrick Baldwin: That's exciting. I'm thinking you've probably got employees coming to you like, “We should do residential, it's exciting.” You've got customers calling you, “You do my business. You're doing a great job. Come take care of my home.” Let's say they don't have a house manager.
Ross Treleven: There was an eccentric billionaire in Seattle that has a staff of 65.
Patrick Baldwin: First property?
Ross Treleven: Yeah. To us, it was like buying commercial. It didn't make sense. We have some of those accounts in some other areas. There's some stuff that's bigger so we don't consider that residential.
Patrick Baldwin: I'd say a staff of 65, they're doing okay. That's probably a good property.
Ross Treleven: Good size.
Patrick Baldwin: As you're looking at targeting acquisitions, let's pretend you're not doing any geography expansion. I see this line going with the ten states that you're already operating in. Staying on the west side of the US, what are you looking for when it comes time to acquire a business?
Ross Treleven: We are looking for a 100% commercial business. More and more of those businesses that are 100% percent commercial might have only been a 1 or 2-route company. A lot of times, in California, we've met these wonderful people who had gotten burned out somewhere but still liked the industry. They found themselves a niche of commercial stuff.
You guys referred to me somebody in Sonoma, Blue Heron, that was a wonderful gentleman and his wife who had created, in one county in California, a full route of commercial-only pest control. It was wonderful. That's an easy thing for us to say yes to because we can staff it, we can service it, and we can retain it.
Of course, a lot of times, when it's only one route, people are picky about what they pick up. They don't want to keep stuff that's troublesome. That one's been sticky for us. We find a lot of that in our acquisitions. we've done about twenty in the past 10 years. Most of them you've never heard of because they're small. Those for us are great because we can build some density and some efficiency in some of those markets. Sometimes we can get into some accounts that would take us years to get into. When we can acquire some of that stuff, we can build the relationship from there.
Patrick Baldwin: We've talked about the Phoenix acquisition happening. We talked about Blue Heron. In case of Blue Heron, we're ready to retire. Sometimes the sellers aren't ready to retire. I wonder, when it comes to promotion management, bringing on new companies into the Sprague mix, what does it look like as far as retaining and even training your employees? Are you hiring from within? Are you finding other talents in those markets? Are you keeping people as you do an acquisition?
Ross Treleven: One of the more important things, when we're going through due diligence, is meeting the team for the first time and learning who's on. We're lucky in that Mastercare acquisition in Phoenix. We still have everybody that was there before and many of them have grown with us. One of them became the salesperson and one's become the branch manager. We've had people in our leadership development programs.
I touched on leadership development earlier, it’s one of the most transformational programs we ever instituted at Sprague. 100% of our team has gone through leadership development. 97% of our managers started as a technician at Sprague and grew their careers through leadership development and other programs at Sprague. It started as management training in about 2005. Jeff Miller, our retired COO, and Alfie Treleven, our CEO, my uncle, and godfather, saw that our growth in the future was going to be hamstrung by the development of our managers unless we did something about it.
They created this management training program that became leadership development, which you had to apply for, you had to want to go do, and this is where I got this idea of shared facilitation book clubs from. I was in class 1 or 2. The archives are fuzzy on which class I was in. We went through some of the John Maxwell stuff and some basic ideas of how to lead, how to manage, and how to be a manager. It's become the launchpad of people's careers here at Sprague.
Over 97% of our managers in this organization started as a technician or a salesperson or VAC. For us, that's important. They came here, they learned the skills, and they've developed themselves into a career. One of the most important things we can offer out there to the world is this ability that when you come to Sprague, we can give you the skills that are going to make your life better. Even if you take those skills somewhere else, you got better while you were here. It's important to us and our family.
Leadership development is maybe one of the most important things we ever did because it's impacted our values and, in some cases, it made us better people. We measure our impact differently now that we all have some of the same common traits that we learned in leadership development. I could talk about it forever but I'm proud of that program. We have leadership development 2 and 3 now, advanced courses. That's one of the things that if you want to grow your career at Sprague and you get in here, you apply for leadership development, you get into a program that's going to teach you some of these skills, and the rest could be history.
Patrick Baldwin: Can I apply?
Ross Treleven: What's funny about that is people asked if they could send managers through it, etc. Even a family member one time asked if they could go to it. They'd heard so many good things about it. For us, trying to create these sacred cohorts inside of that where you can do some learning and creating all that trust is important that we have not let anybody from outside join them yet. Who knows? Maybe down the road.
Patrick Baldwin: Even in recruiting, you're showing people the upward mobility and their opportunities and personal development.
Ross Treleven: Absolutely. The skills that are in this program, you don't have to become a leader afterward for the skills to impact you. Many people have told me afterward that it improved their communication with their spouses. That is just as important. If we can make the relationship at home better, what a great skill. That is worth doing the whole program over that.
Patrick Baldwin: Can't put a price tag on that. Going back to family and succession, now you're holding the fifth generation in your hand. Even passed as far as leadership to you and AJ. You said you want to throw some shade AJ's way. I don't know what that means.
Ross Treleven: No, I don't want to throw any shade AJ's way. The fourth generation, it's fun for us to be emerging right now. What I mean by that is the three generations of ownership that have gone before us have set us up to bring us to this point. They're turning over a company of 300 people, $40 million, and covers 8 states and 10 if you count our subcontractors. We get to add to that.
There are so many things that we are not going to have to go through that they have gone through on our behalf. Growing a business is scary and they've grown it so big that now we get to add our spin to it too and we get to take it to our next heights. It's cool. It's one of the reasons why that you see market multiples out there like crazy on some acquisitions, etc., and people are always wondering why we haven't sold.
We like each other, that's a good start. Everyone in my family, and I'm lucky that this is the case, are talented people who care about the employees at Sprague. I don't just mean the ones that work there, I mean the ones that are part of Sprague through ownership or family in any case. They all care. The business matters to us. We're making a positive impact on the world. We look at generation 5 and we think also about generation 6. How do we make this so that our family can be in this industry creating a positive impact for the whole industry for generations?
This is not something that I thought of, this is something that Larry and Alfie have been talking about and teaching us for 20 and 30 years or more. My sister's initials are Ant, which was done on purpose, and mine are Rat, which was done on purpose. They were thinking about the next generation when we were born. I would say that it's something that they have done such a nice job of planning the future before the future emerges.
A lot of people could sail off in the sunset. They've been unbelievably successful and they could but they're still passionate about it. It's nice that they're still passionate about it and that they're turning over day-to-day control to the next generation and that they've equipped us to do that. We're lucky. That's where we're spoiled is the fact that we've been groomed to do this for years.
Patrick Baldwin: Are there difficult conversations that are had around succession?
Ross Treleven: Yeah. The business is large enough that we can't buy it from each other at market rate if that makes sense. How do you determine what's enough money for somebody who's retiring? I would say that ownership in our generation will not be equal. Larry and Alfie, 50/50, that's pretty easy. There are six kids in our generation, three of which who work in the business. How do you determine that? If you work in the business, should you get more or should you not get more?
That decision isn't a company decision. That's up to my parents. My parents are Larry and Jane. AJ's parents are Alfie and Carolyn. They're making that decision for their three kids each. The spouses count in ownership and all that stuff. It's interesting to go through that. Those are hard conversations but ones we've been having for years.
When you start those conversations when you're young and there are some ideas around the rules early, it makes them a lot easier to handle when you're older and they're more real because they've set the table for us on how that was going to happen for decades. We are lucky in our generation that our parents were forward-thinking to put us in a position like this.
Patrick Baldwin: Here we are sandwiched in the holidays, Thanksgiving is behind us, Christmas, Kwanza, and Hanukkah.
Ross Treleven: All of them.
Patrick Baldwin: On the other side, do these consume family dinners and gatherings?
Ross Treleven: Not really. We've done a good job of creating a space for all that so that we don't have to have it be the conversation at Thanksgiving. We have some cadence for that as well. We have our family meetings and we have our board meetings. We have a monthly meeting for the Treleven family members who work in the business. We also have a planning trip that we do, which is almost always to a ski resort in February where we plan out within the coming two years.
We have many opportunities to have these conversations that we try not to bring them to your Thursday night dinner or your Thanksgiving dinner, etc. We try to separate those things. Of course, we all have a moment where're like, “I got to update AJ on this real quick,” or, “I got to catch Paul for five minutes before this dinner gets started because he needs to know this.” It's rare. The only thing that we would ever do that is for things that are important. It wouldn't be like, “I've been thinking about this.” It's not about that. We've done a good job of carving out the right amount of time to spend on those things so that they don't trigger us in other places.
Patrick Baldwin: You're active in NPMA. You've got companies of various sizes, some larger than you. Ecolab plays in the 7% maybe if their revenue is pest control, I don't see them at NPMA, for example. Smaller guys that are getting up and running don't have it in the budget or they don't know the benefits. As involved as you are, why is it important to be involved?
Ross Treleven: There are some companies like Rollins and Orkin, they do a nice job of connecting to a lot of the state associations. Of course, I only see the ones out here. I don't see them across the country. What I see is participation from some of the larger companies is important. In some of the states we operate in, we're probably the largest pest control company. If we don't participate, who's going to have the back of the industry? If the largest company in the state doesn't participate, who's going to?
It's important to us to be participatory in each of the state organizations to advocate on behalf of our industry and create awareness of that. As well as the national ones at both NPMA. I'm on the board of PPMA now and trying to make sure that our industry gets the press that it deserves. I do think that the larger you are as an organization, the more you owe back to the industry and to the communities that we operate in some participation in how our industry is governed and how our industry is regulated. Some companies are absent and it's obvious.
Ecolab, you brought them up. If pest control is 7%, they are the largest commercial-only pest control company in the country. You think of Ecolab sometimes as being the gold standard of 100% commercial pest control companies. I've never met anybody from their teams in any of these state associations. Maybe they participate in other ways but they're not visible. Their influence in the industry is lower because of that.
Terminix pulled back years ago and they weren't active and then they came back. Their participation has been pretty good in recent years and I expect Rentokil and Orkin to continue to participate. It's important that we get participation from the larger companies because we're all benefiting or reacting to what's going on in the industry and we need all hands on deck on that.
Patrick Baldwin: “We're all in this together,” to quote my favorite musical. As an industry, what can we do to better work together?
Ross Treleven: One of the things that we try to do with anybody who asks, and we try to make ourselves available to people all over the states that we operate in and sometimes people come to visit us from outside of the areas that we operate, is if you need help, we'll help you. We have ideas. We've got some smart people if you want to spend some time with them. We have so much to give back in our industry because we have many people who helped us become successful. This is a happy accident for us. We had a lot of talented people but they got a lot of help. There are so many people in our industry that have helped Sprague get better.
One of the early advantages of Copesan is we had all these small regional companies that created a forum that could talk and share ideas. Suddenly, everybody's marketing director had twenty other marketing directors they could reach out to when they were stumped. It’s sharing of information in our industry. Nick Varty was the head of Terminix, he could not believe how much people shared in our industry with each other. He's like, “Never have I seen an industry that cooperates so much.” We intend to share and try to help the industry and the people in it. That's how we can give back. We have a responsibility to do that with each other.
Patrick Baldwin: I heard what you said. I'm going to summarize it real quickly. You have a skiing retreat with leadership that you've invited me to and you put me in the leadership development program. That's all I heard.
Ross Treleven: It's basically what I said. Now, I just have to tell you where that retreat is and it'll be one resort over from where we are.
Patrick Baldwin: Close enough. Ross, this has been phenomenal. I appreciate your time. You're in the middle of paternity leave.
Ross Treleven: Kate sat with us most of the interview and she was pretty well-behaved. That's the best-behaved Treleven so far. I mean to take all that shot at all my family. It's a pleasure to tell the Sprague story. I'm lucky to have a story to tell. I’m lucky to be in the position I'm in and to be around all these wonderful people. Thanks for asking me to tell our story. If I left out anybody who I should have, I'm sorry to them too.
Patrick Baldwin: It feels like the award ceremony. When the orchestra is playing, it’s like, “And Everybody else."
Ross Treleven: I forgot to thank my agent.
Patrick Baldwin: Thanks so much, Ross.
Ross Treleven: Thank you.
Patrick Baldwin: Speaking of commitment, Seth, I didn't know where you were going with that earlier. I appreciate it and I am accepting sketches, any sketch art you have. Maybe I'll take votes on that or I don't know. It is my back. I feel like I should have some kind of decision power over what goes back there. It's shaved, it's wax, 1 of the 2. I don't know.
Seth Garber: Wait a minute. Did you commit that it's your back so you should have a say on what goes back there? That's what you said.
Patrick Baldwin: What goes back there?
Seth Garber: What goes on your back? You might have committed.
Patrick Baldwin: I didn't say I didn't. Maybe there's a commitment there. I'm thinking 100% commercial with Sprague. There are two ends of the spectrum here. We've got a handful of 100% commercial pest control businesses looking at the PCT-100. For what it's worth, those that report on the PCT, we know it's not everyone, Ecolab, 100% commercial. We've got Sprague, 100% commercial. We've got Versacore right here in my “backyard” up in South Lake, 100% commercial. Brown's at the top 100 doing $7.5 million, 99% commercial. Let's go ahead and say that in that 1%, they have house managers. Maybe they just miscategorized that. 100% commercial.
Talking to Ross, you've got these 1 or 2-man route businesses. Now you have $7.5 million, $20 million, and $40 million. Ecolab, at the top end, doing $600 million and some of that in pest. What does that mean when it comes to making the decision to go commercial only? If I commit to commercial-only, I'm looking at a couple of routes or I'm looking at a $7.5 million business.
Seth Garber: I'm fortunate that some of the people that you named, we support and I'm familiar with their business. The commercial component is no different than residential when it relates to the math because the math of a commercial route is similar. You still have your targets. You still have the production values. Maybe some are larger and some are smaller.
It's more of a true strategic decision on where you want to spend your time. Ross said 2.9% of their business was residential before they had gotten out of it. It took a lot of his focus. When I heard the word focus, what I thought was, “What is our strategy? Who is our target market?” There are probably a lot of companies in between there, between 1 or 2-man operations up to the top.
The ones that we see that are the most successful come back to their sales process and how they effectively sell into niche markets, which is exactly what Ross had talked about. It's more of the business strategy related to it and then you can add on routes like you would as long as you have a strong sales process in these niche markets. It's the most important.
Patrick Baldwin: I am only giving two sources of information here. Ross's experience with M&A and also the PCT-100. I know there's in between two routes and $7.5 million. I know that exists. I wondered if scaling a commercial pest control business becomes more difficult to do than residential.
Seth Garber: They're probably equal depending on the strategy. At the end of the day, it's a sales process. From my perspective, the way that you choose to create your sales infrastructure determines that. In my organization, we were great at the commercial side, and then residential was something that we did. We focused on commercial. We focused on niche markets, that's what we did.
The strategy that Ross laid out is probably one of the more unique ones that I've ever heard and I never have thought about it. He talked about the farm-to-table approach where they're working in the food distribution sector but, in my mind, they're also saying, “We want to control it from the raw material all the way.” My guess is probably all the way into the grocery store.
That strategy is one I've never heard and it's difficult to do it but if your sales process is right and you sell the distributor and then you take a step back and you sell the manufacturer and then ultimately if you have the manufacturer and distributor, it's a pretty simple discussion to go into the grocery store or the end. It's an incredible strategy. If the salespeople are good, those salespeople understand how to get those relationships moving and how to show that creates a safer and healthier product. I bet that's what they do.
Patrick Baldwin: There you go. I love it, the upstream and downstream. In commercial business, your referral source begins to be like, “Who's the next channel partner?”
Seth Garber: It's amazing.
Patrick Baldwin: You get the raw product, you manufacture it, and then it's got to get stored, and then it's got to get shipped. I love it.
Seth Garber: One of the things that I've thought about years ago when we built our business is we had a strategy that wasn't farm-to-table. One of the strategies that we would deploy is that we would look at the health systems. If we were able to secure a large health system, it was easier discussion to then go to the physicians or the physicians’ groups that were associated with that healthcare facility and then sell them as well.
I think about how we operated. This would be different than Sprague but then we would go into those offices of the healthcare professionals and then sell the residential business to the employees. At the end of the day, our approach was a little different but it had some of that in the healthcare sector where it would be the houses, the offices of the doctors, the network, and then the hospital system. We went down market.
It was a lot easier to use the hospital as a reference than it would be to say, “Dr. Smith’s house is our customer and that's why we should do your hospital.” It's a lot better to say, “I do your hospital and you're going to get the same quality of service the hospital gets at your home.” It's a little bit easier discussion.
Patrick Baldwin: I hear you. Let's say someone comes to you and says, “Seth, I want to do commercial-only pest control. I’m 50/50, residential or commercial. I've got a $5 million business.” What conversations or questions are you having to make sure that's the right decision?
Seth Garber: The question is if a company is $5 million, they're half residential and half commercial but they want to shift and they want to follow Ross’s methodology, the initial discussion that I'm going to have is going to relate to the sales infrastructure. If you're going to do it, you have to be willing to scale up sales. You have to be willing to make a financial commitment to the sales organization to let them build the pipeline so that they can then secure the business. It takes about 90 to 120 days and the new sales team may not perform.
Ross laid it out perfectly. If that's what they want to do, they're going to take the exit on the residential business. Their business is going to look tremendously different. Probably less infrastructure from a customer support standpoint. The staff would have to go through different kinds of training. They would have to understand some of these auditing bodies and some of the environmental initiatives. They would have to get good at that.
The way I think about it from a service technician standpoint is there are commercial technicians, there are residential technicians, and there are specialized types of commercial technicians. When you boil it down, we're using similar products. The way we're treating the facilities is similar to the way that we treat residential houses but at a larger scale. If you're getting into food processing and some of these audited locations, there are additional things you have to learn related to documentation that you don't have to do in the residential sector.
At the end of the day, the technician side is the easier side whereas the business infrastructure is where it becomes more challenging. For our clients, when these questions come up because it does, where should we focus our time? We look at it and we talk about it. Usually, the election that go to commercial says, “We can build the company faster with less customers.” That's usually the real decision. We're going to manage less customers and build faster. We're on the residential side, we're going to manage more customers, and we have to invest a lot more into marketing and things like that. That's what it comes down to, at least from my perspective sitting here in December of 2022.
Patrick Baldwin: If I get commercial-only, there are a lot more residential-only businesses out there, especially on the doors. You were talking about the healthcare you sold to the doctor's office. You could sell the doctors and nurses pest control. In this case, if I’m commercial-only, they're residential-only. Does that become a strong referral source where it's like, “You're only going to do residential. I'm only going to do commercial. Let's commit to partnering up if you will and being a good referral source for each other.” Is that doable?
Seth Garber: I have never seen a residential pest control company referring business to a commercial company or a commercial company back to a residential company. I'll tell you why it's not super prevalent. I'm sure there are companies out there that do it. Companies have to stay focused on what their core business is. The core business of a commercial pest control company isn't necessarily to be a referral network partner to a residential company. Whereas a residential company tends not to think about how to get a commercial lead.
I would probably argue that the companies that call themselves residential-only and if we looked at their portfolios, they would be residential-only with a handful of what I would call the lower-end commercial accounts or one of their customers has a commercial operation that they happen to do. On the commercial side, it would be interesting if they did it if there was some type of revenue share relationship.
I haven't seen it but the place where I could see it working is if it was a managed approach to where the commercial company set up dedicated programs with a residential company where the commercial company was going to their clients and saying, “We have a residential service offering. This is the company that we would do that with and create that real partnership.” I wonder if the juice is worth the squeeze in this for either one of the businesses.
Patrick Baldwin: Good point. It’s probably super hard to scale is what I'm hearing. Can't depend on that for growth.
Seth Garber: I think so. It does happen in other parts of our industry. In the wildlife world, it's common. Restoration and some of these other industries, this is common. It is pretty really difficult to scale.
Patrick Baldwin: I know you're big on coaching, management, leadership, meetings, committees, and all that people jazz if you will. Ross has got branch manager, steering committee, executive team, and all that structure with all the branches. What's your take?
Seth Garber: From a company of his size, it makes logical sense. If you think about leadership teams and guiding bodies and these different boards and committees and being a family company, you don't have a choice. There was something that he said that I thought was interesting. He talked about the fact that they determine the amount of time they spend with individuals. They looked at spending half an hour with people and then an hour with people and then maybe two hours sometimes.
I thought that was an interesting approach because when we build up these companies, we focus on these rhythms. How long should a one-on-one be? What does a perfect meeting look like? Regardless of which programs we're putting in place. I thought that was interesting that they evaluate the time that they're spending as individuals. As the head of the company, they evaluate the time that they spend and they make changes to that. I found that interesting. A company that size that they're executing that well, that's probably why they've been able to do what they've been able to.
Patrick Baldwin: Have you found success one way or the other? Let's say 30 minutes, one-to-one weekly versus one hour every other week.
Seth Garber: I have. The cadences that we tend to coach and that we put into these companies is that we tend to try to keep them to half an hour. The reason that we do that is that allows the team member to have dedicated time to meet with their leader. That's their time, not the leader's time. I've found that has tended to be the best because everyone's moving at a fast pace. This way, we don't end up in a two-hour meeting every week. We end up in a 30-minute meeting and we can get moving.
Where it has to be managed isn't necessarily at the leadership level because the leaders tend to be pretty good. Sometimes it starts to break down at the service level and the service management level or even the branch management level. What happens is we get the technicians in and the technicians have a lot of fires that they want to put out or things that are going on and they want to talk about them during that meeting versus that meeting being about growth and development and direction and how we're hitting goals and things that they need help with.
A lot of times, we hear, “This account…” That eats up a lot of time. The part where we find the biggest challenges at the branch level or at the service management level to keep those rhythms of those one-on-ones at 30 minutes, it's probably where is the most challenging. I can imagine if we ask Ross that same question, my guess is that he probably faces that same thing.
Patrick Baldwin: I was speaking with David. He listens to The Buzz. He's been with a couple of the larger companies that might now be one company, I'm not naming names, and even distributors. He's saying, “When you get to those large businesses, it's hours and hours of meetings.” Do you see that on the smaller end of things where it's like, “You're spending too much time in meetings and not enough productive time outside of meetings.”
Seth Garber: I see it 1 of 2 ways. I'm going to put some arbitrary sizes out here. If we looked at a sub $5 million company, I tend to see the fact that they're not having the right meetings a lot or they're not meeting at all. The larger companies have a lot of meetings just to meet versus meetings that are very focused. I'm not a huge proponent of tons of meetings. I'm a huge proponent of rhythms within your week so that you can avoid meetings unless they're necessary.
As you get into the larger companies, I tend to feel like everyone's in meetings all the time about things that they probably shouldn't meet about and people should make decisions on. Growing companies don't have enough time to stay focused and they have almost blinders on to what their day-over-day looks like versus what their quarter-over-quarter or year-over-year looks like.
Patrick Baldwin: Good stuff. I love it. Seth, you were at Pest Management University. You're talking to a lot of heads of association and executive directors. You're going to Indiana. When it comes to a conversation I had with Ross about associations and involvement, what does that look like?
Seth Garber: We deal with associations all the time and we have a dedicated team member whose sole responsibility is to work with the associations. He hit the nail on the head. The state associations are looking for the participation of these larger organizations or the largest organizations to get more involved to help our industry grow. You see it sprinkled throughout the markets. You go to Florida, Texas, or some of the big states. You see the big nationals getting involved.
When you start getting into some of the smaller state associations, they need this large company participation. We don't see a lot of it. He called it out and was 100% right. If we're going to move the industry forward, the biggest, richest, and best companies, I'd love to see a lot more participation by them. They have the budgets and they can get these associations some real horsepower that can ultimately help the growing operators.
With the big companies being in place, it sets up these growing operators for potentially an exit to these guys. Some of the large organizations that aren't participating at all, I would love to see them participate, and put some budget behind supporting the state associations on a lot greater scale. I even think about our growing company. When I can go into an association as a growing company and we can be a top-tier sponsor and the only other people there are the distributors and the large companies aren't doing it, I'm going, “Why aren't the large companies putting their names all over these things?” I agree with Ross, 100%
Patrick Baldwin: Good. I love it. You got me fired up about associations. Let's do it. Ross, thank you for joining us in The Boardroom. I love it. From people, making me think about commercial-only, and associations, I learned a lot.
Seth Garber: I thought Ross killed it. After I went back and listened to the episode a couple of times, there was a lot of nuance to this one. Any operator or any manager reading this, there's a ton to learn from someone who grew up in the industry, who's done it for twenty-plus years, who's multi-generational, who has the future in mind, and who is focused on growth. The stuff that he laid out in this thing is brilliant. If I was a reader, I'd probably go back and read this one again for the nuances. It was pretty awesome.
Patrick Baldwin: I couldn't have said that better myself and I mean that literally. Seth, thanks for joining me here. Ross, thanks for stepping into The Boardroom with us. Have a great week in Indiana. I hope it's cold.
Seth Garber: Thanks. It's going to be freezing.
Patrick Baldwin: See you.
Seth Garber: See you.
Dylan Seals: I want to remind you to go ahead and subscribe to The Boardroom Buzz. We have got some incredible episodes coming up that you're not going to want to miss. Also, if you've enjoyed the podcast, please go to the Apple Podcast app and leave us a short review. We'd love to hear from you. Thanks so much again for reading and we'll see you next episode.
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