Ep 25 - Anticimex Acquisition Bellwether JP McHale Pest CEO Jim McHale

Patrick Baldwin: Paul, I'm glad you remembered me. I know the Buzz doesn't pay the bills but you've been busy.

Paul Giannamore: Indeed I have. It's been a wild Pest Control M&A Season. Things open up on October 1st, 2020. Start of getting the first wave of the pre-COVID deals that were on hold done. We got a PCT top 50 or 60 on the old 100 lists done. We got a handful of them closing at the end on this one. It looks like Q4 will probably be the busiest Q4 on record as folks rush to the exits with the political and economic uncertainty in the US. There’s a tremendous amount of backlog because no one's been able to do anything as we suffer through COVID. It’s been busy, Patrick. 

Patrick Baldwin: Are you going to keep teasing these PCT top 100 and I have to wait till January 2021 to find out who they are?

Paul Giannamore: That's exactly right because we can't announce anything until the beginning of 2021. I've been told by the acquirers to keep everything quiet because some of them have spent a lot of money and are supposed to essentially still be in cash preservation mode, so to speak. We have been told to keep quiet on transactions until January. All of these deals are done here in the fourth quarter. No announcements from us. The publicly-traded companies want to kick everything into 2021 before they make announcements.

Patrick Baldwin: I don't want to keep us from this long interview with Jim McHale. I'm glad you know this guy because now I know this guy, so thanks. I feel like I've got to reach into your Rolodex and have a great conversation with a good friend of yours.

Paul Giannamore: I'm glad you're meeting some high-quality people here as the producer of the Buzz, Patrick. Jim McHale is the cream of the crop as I told you before. I wasn't ready for Jim McHale and I'm not sure if we're ready for him yet, but here we had him for round one. I know you were super excited after we did this interview. It looks like we might be going to New York for a round two with Mr. McHale.

Patrick Baldwin: I'm excited about that. For the record, you've said that all along. On the record, off the record, we're not ready for Jim McHale and now I know why. He's amazing.

Paul Giannamore: The guy got so much energy and he's been at this so long. He is a hard worker and has done some cool stuff with that business. That was a fun transaction. I got an opportunity to work with him and his brothers for a full decade as we prepared that thing for what was a blockbuster transaction for his family as well as Anticimex. I’m super excited to have him on. We should probably get this party started and do a little chit-chatting on the backend.

Patrick Baldwin: That's great. Let's step into the boardroom with Jim McHale.

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Paul Giannamore: Jim, welcome to The Boardroom Buzz. This is an episode I've been waiting for for a long time.

Jim McHale: Thank you so much for having me. I appreciate the opportunity to come out and speak with you guys. I've listened as you guys have interviewed all the titans of the industry and I'm excited you got down to my level. I was always at the bottom.

Paul Giannamore: I said from the beginning, we're working up to you. We got Jarl on first as a prelude deal.

Jim McHale: He opened the door for me. I'm flattered.

Paul Giannamore: I'm going to butter Jim up here on the front end of the episode. Jim, I've heard this story a lot but I never get tired of it because you're animated when you tell it. This business was your father's business and you joined it with your two brothers. I love the story of how your father worked at Sing Sing and got into this. Can you take us back to 1970?

Jim McHale: This is probably the late ‘60s. Dad was a prison guard down at Sing Sing Correctional Facility. He was in the maximum-security prison for 30 years. He did it on the right side. All those guys were entrepreneurial. There was a carpet cleaning guy, a plumber, a pool service guy, and they all had the side hustle going on. Dad got into the beer tap cleaning business. Being from Ireland, he cleaned them out of both sides probably but he did the cleanout one side. He used to go around to all the bars and restaurants and clean out the beer taps. He had a nice little business going. 

There was another guard by the name of Patrick McCauley who owned Ossining Exterminating Services. They used to cross paths at the common clients. At one point, Mr. McCauley said to my dad, “We're at the same accounts. Why don't I pay you? You take the can and you could do both jobs.” My dad was like, “Yeah, sure. That sounds like a great idea.”

My dad did the beer tech cleaning business and the pest control for Mr. McCauley simultaneously as he did his route. It was good networking. He networks with the other guards, the plumber, the pool guy. I'll never forget the carpet cleaning guy. He's a good guy. We used to refer him after a flea job. We would bring him to clean the carpets, the couches, and stuff. It was a nice little network of people he had there. 

At some point, Mr. McCauley's daughter got married and told my dad, “I'm going to take the business and give it to my son-in-law. He's going to support my daughter. This could be a good opportunity for him.” It was two weeks and the kid saw a rat or something and he was like, “I’m done. I don’t like this business. I'm out.”

Mr. McCauley gave it back to my father and they worked out some sort of an agreement. I know we used to get a big crate of oranges every year from Mr. McCauley. Whenever the old man was sending them, it was good. He moved to Florida and he'd send up a big crate of orange right around the holidays every year. They remained friends forever. We still have clients on the books that are children of people that were serviced by Mr. McCauley. We did a great job of retaining the clients, building relationships. 

As you know, Paul, this is a relationship business. This isn't about killing bugs. This is about the client’s experience and relationships with people. That's why I gravitated towards the business because I like people. Dad took it back over and incorporated it in ‘71. I joined in ‘88. Around the early ‘80s, I went with my dad to a conference up in Albany at the turf in the New York State Pest Management Association. All the icons in New York were there, Bernie Herman, Bill Thompson, Bloom from Standard, and all those guys. They were all there and they were going to eliminate chlordane. It was this big uproar. All these guys were upset. Austin Fishman was there. I had met him a couple of times. What a smart guy, what a great guy for this industry he was and continues to be. 

I never forget having this discussion with him and him telling me, “You see all these guys here? Don't listen to them. They have no idea what they're talking about.” He goes, “They eliminate chlordane. They're going to give you a product that's going to break down in sunlight.” He goes, “What do you charge right now for a termite job?” I said, “We charge $800 and we kill all the termites and we never have to go back.” He goes, “Now, you're going to charge $1,200, and then the product breaks down in sunlight so you're going to have to go back every year for $125 a year. That's called a reoccurring revenue model.” He goes, “You should stay in this business. Don't listen to these guys. It'll be the best decision you ever make.” That guy was spot on back in 1983. 

I ended up going to Cornell University for entomology. Part of the reason is because Austin went there. Right then, the DEC was being formed. They were outlawing all the hydrocarbons. He was right, the level of professionalism was elevated. It became a real business and we were able to charge more. Connecticut had an oral exam. They weren't going to make a test that I couldn't pass. I was like, “This is great, an oral exam and a written exam.” It’s a fortuitous timing coming in contact with the right people, and then my two brothers joined me. I joined in ‘88. Doug joined me in ‘92 and Rich came around in ‘96 or ‘95.

Paul Giannamore: Jim, when you got involved in ‘88, you were what?  

Jim McHale: 22. 

Paul Giannamore: You were already done with school?

Jim McHale: I graduated from Cornell in December of ‘88. In January of ‘89, I started full time but I didn't go on spring break. I worked summers. I love the business. It was a people business. Who sells monthly residential anymore? But I sold monthly residential pest control programs 8 to 10 a day. It was a challenge for me. I liked it. I liked the relationship portion. I like routing the work. That's how we grew the business.

Paul Giannamore: Before you went to school, you intended to go back into your father's business? 

Jim McHale: Yeah. When I was a kid, on Saturdays, I would ride with him and we would go around to clients. I would see how he would interact with the clients. He was a people person. It was all about the relationships he had. We went to places that had these excessive pest problems and the clients didn't care. They make coffee for him sitting down and I’m like, “That’s going to fall down with termites. They love you. I don't get it.”

Paul Giannamore: “There’s a job to do over here.” 

Jim McHale: One of the things I did was increase the quality and the technical expertise on the teams we got here because you have to solve the pest problem at some point. It was amazing how he knew how to handle people and people liked him. He continued to build relationships. People would give him a call before they were going to terminate the service and he would straighten it out. That's when I learned quickly that this is about people. This is not about killing bugs. That's been my focus for many years.

Paul Giannamore: If I remember correctly, you had worked with your father for years but by the time you took it over, it was doing about $1 billion a year in revenue.

Jim McHale: One of the things my dad had, which were fortuitous, was access to other prison guards who wanted to work part-time. These are guys that were de-escalating serious situations inside of prison all the time. Dealing with a homeowner with a wasp problem or chaotic situation with a rat running around the house, these guys knew how to talk to people. They knew how to calm the situation down. They knew how to handle themselves.

He also had a couple of part-time firemen that worked on the team. These guys were phenomenal with the clients. These people would be hysterical when they call. Maybe they talk to another service provider prior to us and we would send these gentlemen out. They were fantastic at defusing the situation and explaining the situation. 

When I came on with my Cornell degree, I added a level of professionalism to it and elevated the bar for everyone around. I'm big on customer service. I was the first pest control company in my area to work on Saturdays. I got phone calls from competitors like, “What are you doing? This is crazy.” I was like, “At the time, both of my parents were working. Saturday was the only time we could meet and Saturdays became a huge day for us.”

Paul Giannamore: Is it true that you went to Cornell because of the food?

Jim McHale: I was a wrestler so I wasn't even allowed to eat the food. I was running those hills up there. It was not the most enjoyable experience. Overall, Cornell was good to me with the relationship I've developed over the years. Paul, you were a Cornell graduate so you understand exactly what I'm talking about. 

Paul Giannamore: Those hills sucked. I hated that. 

Jim McHale: It was Willard Hall where I did have breakfast when I was allowed to eat in the offseason, and then all my classes were right there at Comstock Hall, the entomology building. Wrestling practice was in Teagle next door. We used to run laps in Barton across the hall, across the street. I go to plant science once in a while for a couple of classes. 

Paul Giannamore: I remember every year you would go down there and speak. Did the ag professor retire, the one that you would go and do the presentations for?

Jim McHale: Dr. Jeff Scott was still there. He's probably the last professor that I had. He holds a class every other year. Right around Thanksgiving, I go up and I do the lecture for him and then I'll swing by see the athletic director, my former wrestling coach, and the current wrestling coach. My son plays football for Georgetown. I got another trip up there because Georgetown played against Cornell. I had to wear my Georgetown sweatshirt. I don't think my coaches were happy with that. Georgetown did win. I do the lecture every other year but I did learn from Dr. Scott. Due to financial reasons, that class has now been terminated. They are not offering that class anymore. He is close to retirement as well. He was a young guy when I had him.

Paul Giannamore: Your topic was typically urban entomology, right? 

Jim McHale: Right. I was a unique student at Cornell because most of the students, my colleagues up there, were graduate students. The undergraduate students were either going into the agricultural marketplace or they were going to go into third world countries to solve diseases like malaria, or maybe they were going to go into the teaching profession. 

Paul Giannamore: They were going to New Jersey?

Jim McHale: That’s right. I had a specific interest and I knew what I wanted to do in urban pest management, plus I was an athlete. There weren't a lot of athletes in the entomology department. I got special attention from some of the professors and some of the TAs there that had an interest in seeing me move on. Dr. Raffensperger was my mentor. He was an advisor to the baseball team. He loves sports. He used to come to my wrestling matches. There were so many different experiences add up there. A real wonderful staff up there at Cornell University entomology.

Paul Giannamore: You take the business over and it's doing about $1 million in revenue. Your brothers joined you shortly thereafter. You effectively grew that business to $26 million by the time you partnered with Anticimex. How the hell did you grow it, Jim? At the time when you sold that business, you were the largest independent pest control business in the New York metro.

Jim McHale: It's about culture. Employee engagement is near and dear to my heart. They're the brand. When they go in front of the client, they're who the client sees and that's who the client buys initially. Either it's your sales rep or a technician, a hybrid technician, what have you. They're the face of the brand when they show up. Nobody can tell your story better. Nobody can help you when the talent war is out there for other technicians. Nobody can recruit their friends and talk about you more frankly than your client-facing teams.

Employee engagements have always been important to me. I was always stopped down and sat in the technician room when these guys would come in at the end of the day, joke around with them, and talk with them. I was involved in the meetings. I was trying to inspire them. When you're in a commoditized business market like us, marketing, branding, and innovation is the only way you can differentiate yourself. 

I was the first one around here to go on TV and do local cable, spots, and radio. Pressing the flash at all the trade shows, the PGA, and Met Golf. We did a lot of marketing and then we embraced all technology as it came out in the industry. Our industry was lagging in technology for quite a while but when the technology did come out, we tried to embrace it.

I looked outside the industry for a lot of my business acumen. Whenever I went to the pest world conferences, I always went for the technical track, for the business track. I always went outside and tried to bring intellectual property from outside the industry into my business to see how you look at things differently and out of the box.

You get a lot of relationships. Westchester is a small town and a lot of people go into Manhattan in New York City from there. Lower Connecticut is small. Fifty miles around New York City it's a wealthy area. We networked our way into that area. We got into the golf clubs. We positioned some print ads in magazines, Westchester magazine and Greenwich Magazine. We put ourselves in front of this higher-end and then we delivered a boutique service.

Paul Giannamore: I want to talk a little bit about some of my observations. I met you a good decade ago or so. The opportunity to hang out up there.

Jim McHale: You’re still talking to me unbelievably.

Paul Giannamore: I could have said the same thing, Jim. One of the first things that impressed me about your business is, after the first couple of phone conversations we had back in the day when everyone wasn't using cell phones for everything, I called your company. I was greeted by your voice on the switchboard. “Hi, this is Jim McHale. Thank you for calling JP McHale.” An excited Jim McHale welcoming the customers. It was your voice.

After I got to know you, the other thing that impressed me, and you guys started this a long time ago, when I think you, Jim, I think of a couple of things. I think of what you've done in the marketing and advertising segment of your business but I also think about how you've innovated with regard to service offerings, one of which is the concierge service that you started over ten years ago. 

Jim McHale: Our Inner Circle. 

Paul Giannamore: Let's talk a little bit about your inner circle. Now, I see other folks trying to emulate this, but this was the first time I'd seen it in the industry.

Jim McHale: One of the things I did to differentiate ourselves is hard. It's a commoditized business, with low barriers to entry. How do we differentiate ourselves? How do we make a better offering? What are the things we did? We bundled up a lot of programs. We were the first ones to bundle up Sentricon with our general pest control. We call it our Guardian Program. When JR Lofton saw us do that, he rolled it out to all the other companies. We created this Inner Circle concierge for our top 500 residential clients. 

You get a dedicated CSR, advanced notifications of any discounts, and you get priority scheduling when you call. What we learned quickly was that the clients that have used all our product lines, 3 or 4 services, maybe have an annual spend of $4,000 or $5,000. I have people in credits spend $27,000 in a year.

These people don't call you to complain. If you screw the service up, they just go get somebody else. They're not going to call, scream, and holler. They don't want to be talking about their pest control company. If they're talking about you, you're doing something wrong. We should be like referees at a basketball game where you just stay in the back and make sure everything's taken care of, but you don't determine the outcome of the game. That's how I want our team to look at that service line. 

These dedicated CSRS, we have a customer success manager, Shaun Coen, who handles it. He does an account review every month. He makes sure they got all their services, make sure their card has been charged, and make sure if they have a service need or anything that's identified, were immediately out there. We build a fence around these clients. We want to make it as Chase Bank does to me. They have my checking account, my savings account, my HELOC, my mortgage.

I opened my eyes on the first of the month and I got a deck like you wouldn't believe. The thing is I get upset with them and I’m like, “That’s it. I'm going to fire them,” and then I start thinking about, “I got to unwind this HELOC. I'm going to give them another chance.” That’s what you want to do. You want to build a fence around your clients and deliver the service.

You're on somebody's property 10 or 12 times a year. There's going to be a problem but as long as they have an avenue where they can call and give you the option to straighten it out, we're strong on the NPS surveys with the clients. We're also strong with the eNPS because we want to make sure our team members are happy as well especially during this pandemic that's been disruptive. 

That's our Inner Circle program. It's for clients that have 3 or 4 more services and spend $4,000 a year. The accounts are constantly reviewed. We move them in, we move them out according to our relationships because you have a residential person who owns a business so you’ll link those accounts together, or someone who owns a lot of real estate properties. You want to make sure you know exactly who you're dealing with. You don't want to have a problem at somebody's house, and then find out that they own twenty buildings that you do. Next thing you know, you lost a huge account without understanding the nature of the relationship.

Paul Giannamore: When you talk about bundling services, it cuts both ways. You and I went out to Ohio and spent some time with the ScottsMiracle-Gro guys as they were getting into the pest control industry. I remember one of the things that you said is the extreme majority of your business was general pest control, but you also had at the time maybe $2 million or so in lawn care, which I know you were never thrilled about lawn care. I remember you saying the complication of bundling lawns is lawn care customers can be fickle. They're looking for the green lawn, so on and so forth, and you risk bundling those services. If they cancel your lawn, they're going to cancel the pest control as well.

Jim McHale: That's another reason why we did the Inner Circle. The people who sign up for this service want a perfect lawn. These are fanatics. As we all know here, in general, in pest control, someone has an ant problem or a wasp problem, or any kind of problem. You go out there as long as the answer is gone, you didn't hurt their children, you wipe your feet, you turn the lights off, you left the place better than it was when you arrived, everybody's happy. 

In lawn care, you're always on stage and they look at their lawn on their hands and knees. They look at their lawn for any kind of weeds or dandelions, and then they look at their neighbor's lawn from 500 yards away and then they say, “His lawn looks better than mine.” You got to go walk them over to the neighbor's lawn and be like, “You get on your hand to these over here. I'll show you the dandelions and the crabgrass over here.”

There are a lot of things out of your control. They're not watering the lawn. When we leave little leaf behind and say, “It's August, these things are exceptionally hot and dry. Make sure your landscaper leaves the lawn an extra quarter inch.” The landscaper is like, “What are you talking about? I got 50 lawns to cut this week.” He's scalping the lawn so he doesn't have to come back. You have some competing interests. You have some things out of your control. It's a difficult service to manage and you try to overcommunicate. You do the best you can but the turnover rate on lawn care is significantly higher than pest control and the profitability is less as well.

Paul Giannamore: Jim, you cover the greater New York metro area. Your headquarters is in West Chester and Buchanan and you've got some high-profile customers that you service. I’ve seen you guys servicing past US presidents, governors, celebrities, movie stars, the whole nine yards.

Jim McHale: Sports icons. 

Patrick Baldwin: Jim, when your brothers came in the business, did you all divvy out duties like, “Doug, you do something. Rich, do something,” and you oversaw something else? How did you break that out?

Jim McHale: My brothers were great. They were always deferential to me. When they came into the business, I'd learned quickly that the way my dad had set it up, we were equal partners. We had an understanding that I was going to run the company. We got into the lawn plant health care business for my brother Douglas who took an interest in that product line. That's why we started that line. He ran that.

I didn't want to get into a lot of ancillary services that weren't tied into our core product line so we started a separate division called Envirocare. Rich was in charge of that. That was all the services that circled the core pest control brand, but you can always tie it back to pest control. We did a crawl space encapsulation where we would clean out crawl spaces, replace the insulation with soiled urine and fecal matter, put this clean dry liner where there was none, and clean dry storage space. That would be an add-on to our existing rodent program, so to speak.

Also dehumidifiers. We would power wash and seal decks. We would do rodent exclusion, seal up the pathways and avenues of entry where rodents would come in. We did these one-offs that tied into pest control. We would never get into plumbing or electrical work and stuff like that. It had to be close to our core business, so to speak.

Rich was in charge of those job shops where we did these one-offs to our existing client base. We didn't market it outside our existing customers. We walked in it only to the installed customer base. Doug's services, we marketed the lawn care to our existing installed customer base. However, as we went out and the trucks got visible, we did get clients who came in under the lawn for the plan healthcare division that then converted over the pest control. That was a win as well.

Patrick Baldwin: Did you decide to keep the beer tap cleaning route though to yourself?

Jim McHale: No, my dad sold that off to Frank Trediti and he sold it to another guy who is still in business today. I met the son. That business is thriving. I'm sorry my dad got rid of that business. He couldn't do both. He knew the pest control with all the regulatory guidelines that were coming down for the DC. He knew it was going to be a  better and more profitable business. His name is Mike Palmietto. He still runs the business and it's successful.

Patrick Baldwin: For those that know Dr. Austin Frishman, this question goes to you, Jim, did he have a bolo tie that he donned in the 1980s?

Jim McHale: Yeah, he still has it. I saw him at PestWorld a couple of years ago. 

Patrick Baldwin: That's iconic. 

Jim McHale: He used to come and have training seminars here. He was such a wonderful guy. He knew how to bring the technicians and raise the level of professionalism. We always had a good time. I’ll never forget he came one time and we had the meeting. My father had been out for lunch and had a couple of beers. I showed up at the training seminar and I'm getting all the techs lined up. My dad showed up. Austin comes over to me and he's got this look on his face. He's like, “Jim, I got to talk to you right away.” I go, “What's up?” He goes, “You got a technician here. I think he's been drinking.” I go, “Really? Show me.” He’s like, “Let me find him.” He's looking around, “There he is.” He points right to my father and I told him, “That’s my dad. Don’t worry about him. He doesn’t work anymore.” He was all over it. It was funny. He doesn’t miss a trick lesson.

Patrick Baldwin: I like that we were talking about getting out of the pest control realm and looking at other industries that are innovating and how can you bring that into JP McHale. Did you have examples like, “That's cool,” or, “That's a piece of technology that we don't have pest control.”

Jim McHale: It was more of a business strategy. I read a lot of books, Execution by Bossidy.

Paul Giannamore: Competing Against Luck was one we talked about. 

Jim McHale: Andrew Grove from Intel has a great book, High Output Management. He talks about the limiting step. He talks about comparing your business to making breakfast. I thought this was interesting. You have to boil an egg for a client. The limiting step, the part that takes the longest is boiling the egg, and then you have to time the toast and the coffee to line up with the completed project. The egg takes the longest. How you're going to prepare that egg and how you're going to get all the breakfast out at the same time so the coffee is hot, the toast is hot, and sides are hot, that's how you need to think about your business. 

When you think about our business, the limiting step is the technician. He talks about, “You need to find the bad egg. If it's bad, you don't want to put it through the cycle and boil it. You want to find the bad egg because that's at the lowest acid value.” Then what's that say to us? The technician is our boiled egg, so to speak, that's the limiting step. You need to do a better job screening and recruiting so you get the better eggs, and then as they're boiling, you add in the training.

At the end of the day, you have this product that's worth something. You have this technician that's now worth a lot of money because you've invested money to train him or her. His big thing is, “Don't be a job shop. Be a factory, be an output. Produce things.” Those are some of the things that I've always thought about, employee engagement, this eNPS.

Patrick Baldwin: Tell me more about the eNPS because that's the first I heard of it.

Jim McHale: Three times a year, I used to do it, not formerly. I'd sit in the tech room and a lot of these technicians are great guys. They used to love coming to work here because I would structure their day. They come to their first stop at 8:00 AM. “You do all this. You have your lunch. You finish up and you go home at the end of the day.”

A lot of these guys outside of work have some chaotic lives so they appreciated the fact that they had structure here and they had a good experience. I’d come in, sit in the tech room, and I start to give them a hard time and tell jokes. They appreciate. Even if I’m being a little aggressive with them, they thought that was great. 

In so many ways, I would tell them how much I appreciated them out there. I go, “I was out there. I was in these crawl spaces. I ate those cobwebs. I banged my head on those beams with the nail and the rat slabs on my knees. I've been there. I know what you're doing. It's not an easy job. You're up and down in ladders. You’re reaching out windows to get wasp nests. You're up in the attic, walking on the beams, trying not to go through the ceiling.” I always try to empathize with them but now, unfortunately, I do it when I can. 

Now that we're growing and we've integrated a couple of companies, we do this eNPS where they ask basic questions and how they respond. At the end of the day, anything over 30 means your employees are generally happy and successful. We've had over 30 a couple of times and we had below 30 during COVID. A lot of people were stressed out. We were exceptionally busy on the residential side. Everyone was home, tick and mosquito. I call them my pandemic favorites. Tick and mosquito services were through the roof. Rodent work was incredibly busy.

What great timing Anticimex has this SMART program where you can reduce service visits inside the home during COVID. It was phenomenal. Right up my alley, I was like, “We could sell this all day.” People don't want you in the house anyway. The rodents are going to trigger this software. It's going to ring on our phone. We call you to tell you there's a rodent in your house. How impressive is that? Everything I've always heard about from clients, the feedback I get is, “I don't want to manage you, you need to manage me.” This SMART system is phenomenal. I'm calling you now to tell you, “There's a rodent near your house. We’re coming out to take a look.” 

Paul Giannamore: Before you go on from SMART, this is an important one because it speaks to Jim's search for technology. Jim, do you remember before Anticimex entered the United States or around that time, they made an investment in WiseCon? We had a discussion and you said, “I need to get this technology. Can you track these Danish guys down and see if I can do this here in New York? This would be fantastic in New York City.” 

I can't remember if Anticimex made the investment or not, but I tracked the Danish guys down. We had a chat with them, “We're partnering with Anticimex,” so on and so forth. You were looking for this “SMART technology” for several years now. I remember even being at PestWorld with you. We had some meetings with some other manufacturers that do those SMART traps. This is something that you've focused on for a long time. When Jarl’s interview comes out, you're going to hear him talk about it for probably half the episode. What are you guys doing in New York with SMART? Do you see it as a promise there? Will the hype that you had in your head years ago turn into a reality? 

Jim McHale: Absolutely. We've blown out our budget in it for SMART sales. In New York City, we have a couple of reps who have embraced it. The value is incredible. The client feedback has always been, “I don't want to manage you. You need you to manage my account.” I don't want to talk about pest control. It should be taken care of behind the scenes.

We have a lot of property managers and corporate buildings that we now have this product installed. It's phenomenal because we get notified and we let the customer know. There's a reporting feature. Everyone's all about measure, monitoring, and management. That’s Anticimex's way. Everybody wants that. I love the barcode scanning. When that first came out, we did a couple of pharmaceuticals and they used to embrace the technology that we had with the barcode scanning. 

Sentricon came out with the barcode scanning. On the commercial space, that's a key-value point and that’s what they use to justify their budget. Typically, we're low on the P&L. We're not a huge expense. The fact that we have this data that other companies and other service providers can’t deliver, that's a value prop for us. That's good stuff.

Paul Giannamore: I remember when you and I were in Stockholm a few years ago, Jarl was there and they gave the big presentation on SMART. I was about ready to fall asleep and you were like a kid in the candy store. You were super excited. You're like, “Take me outside. Show me how this stuff works.”

Jim McHale: The presenter was part of the Wallenberg family or something.

Paul Giannamore: Was he the great-grandson of the founder or something? Is that right, Jim?

Jim McHale: Yeah, that’s right, and he still works for the company. 

Paul Giannamore: Because you're largely a residential business up in New York, are you optimistic about this SMART residential technology as something you could use there in the New York metro? Is that more for homes that would be in markets like Seattle that have a lot of rodent pressure more so than what you would have in your service area?

Jim McHale: I am on board and ready to go. We had a little snag in the technology component of the residential SMART. They're launching it on October 19th, 2020. We could sell these hotcakes. Our clients would love this, especially because during COVID, we want to limit visits inside the home. This enables us to be proactive. We're managing the situation. It gives us an opportunity.

Now we’re not trapped checkers anymore. Now we focus on the avenues of entry and the points of the pathways that rodents enter. We cross-market our exclusionary work. It opens up a whole new revenue stream from that perspective. We don't have to worry about checking the traps anymore. We know when the rodents are active and then we can focus on how they're getting in and focus on a more chronic solution. 

Paul Giannamore: When we were in Stockholm, Jarl was talking about one of the reasons why he was excited about SMART and owning the technology because he wanted to build like an Apple. Apple has the software and the hardware, whereas Anticimex and the portfolio companies have the technology. Also, they have a service organization.

I know SMART technology is new. I know they've just rolled it out in the United States. How is that changing your organization from a historical JP McHale, now part of Anticimex, with this SMART technology? Are your people embracing this? Are they excited about it? Does it change their day-to-day job, so to speak?

Jim McHale: It's all about resources. Now we have additional resources. SMART is included in every rodent opportunity that's presented to us. It's another tool in the arsenal. It's not standalone. In some cases, it can be. It's differentiated us. On a lot of levels, Anticimex has provided different resources for us to compete and execute on a higher level. It changed things for the better. My commercial reps have embraced SMART technology. In Westchester, I know as a company in the United States, we have 10,000 installations. That's a great number for relatively a new product line. You could see how the industry is starved for this kind of high-level technology. 

Patrick Baldwin: Jim, you made this line a couple of times about managing the customer versus the customer feeling like they're managing your employees. In twofold here with your concierge, Inner Circle, you said they have an assigned dedicated CSR. Second, that technician. How do you handle that turnover if they're used to dealing with a CSR to lose that CSR? They're used to dealing with a technician. If you have a new technician taking over the account, how do you still manage the customer?

Jim McHale: Having the same technician at the site on a regular basis is essential. People don't want to take the time to show the new guy around. We have service supervisors who are geographically situated so when new technicians come in and a technician has left, that supervisor from a high level knows the account and there are notes in there. They will take the new technician around and introduce him to the account.

Change is inevitable. Technicians come and go. Like Bill Belichick, you have to have a system and a process. He wins every year, whether it’s Julian Edelman there, Danny Amendola, Hogan, whoever he has in the slot, they're going to execute because he has this plan and they work within the system. That's where you have to build your model so that you can plug in technicians to a model with the scope of work and a process.

With the Inner Circle, we've had some turnover there. I've had some that are better than others. What I did do, and this leads me into some of the changes that we've made since Anticimex came on board, is I brought on a vice president of client experience. At my leadership table, I have someone who represents the client, and then under that VP client of experience, I have the customer success manager. The customer success manager is the person that's ultimately in charge of the installed customer base. His name is Shaun Coen. He's the one who pulls out the 500 top clients in the residential base and watches them.

As this grows, he will add team members under him but right now, he's in charge of it. That's some of the changes I've made to ensure that if Shaun Cohen leaves, we have the VP client experience that directs this from a high level. He will be able to make that transition go smoother because we have learned the hard way that when the Inner Circle CSR leaves, the clients do feel it. They call and there are questions. We send out a letter and we have a little gift, a pen, something inexpensive, “Thank you for your business. You're in our Inner Circle. So and so has left. This person is now on the scene. Same phone number, call them.” We're doing a lot more electronic. 

Shaun has a background. He's used to writing playwrights and he writes for magazines. He's an excellent communicator. That's one of the things we need to get better at as an industry through electronic and texting. We have a mobile app, which makes it easy to do business with us. It's about the customer experience. Innovate around the edges. Easy to buy, easy to arrange an appointment, easy to pay. That's what Shaun's role is. That answers your question.

Paul Giannamore: It opened up a lot of questions is what it did. Jim, you broached the topic. I was going to ask you about some of the changes since you've partnered with Anticimex. Before you did this transaction in 2019, JP McHale was one of the fastest-growing pest control businesses along the eastern seaboard. If I look back, it was rare that your business would grow less than double digits on top and bottom line. You were extremely profitable. 

Jim McHale: AX got a deal. 

Paul Giannamore: We can begin the renegotiations immediately.

Jim McHale: I have to give a shout-out to the boys at Western Pest on the East Coast, Tony Ramirez, Tony Fortunato, and Tom Pederson. When I was a young guy, I didn't have a lot of direction about the industry. I used to go down there and sit down at the office down there in West Orange, New Jersey. They would let me sit there, learn, and let me ask questions. Bob Samenth couldn't have been kinder. I learned a lot of my acumen on how to build a successful business. They were where I wanted to go. I could take what I liked from them and then put in my ideas.

I helped them, too. I remember, I was probably one of the first guys to sell residential pests over the phone and they would tell me, “That's a bad move. You need to send a representative out. You need to morally obligate the client to crawl around on the attic, and then you're going to come out of there with two sales. You're going to get a pest control sale and a termite sale. If you're selling on the phone, it's just transactional-based and you're not going to show value.”

At the end of the day, they agreed that you could sell it over the phone. People were too busy. They don't want to wait for two appointments. We would sell it over the phone, send the person out, have the rep show up as well, and we still got the additional sales. While we were doing to clean out, we were doing the inspection, and then we would do a bolt-on sale after the person was exceptionally happy with the service. It worked out.

Paul Giannamore: I remember talking about this and I remember vaguely you talking about, “If I have to get a bunch of sales guys to go out into the field, I got travel time, I get additional compensation, so on and so forth. Even if I'm not as effective over the phone, it's costing me a ton less. If I'm pumping out a bunch of advertising, I’ve got a big call center.” That was always one of your focuses. JP McHale has that big call center downstairs. 

Jim McHale: How you handle that first phone call is going to determine the success of any relationship you have with the client.

Paul Giannamore: You are the call center master. You've had those monitors you had up and you could see what calls, who's coming in right above you. 

Jim McHale: You'll probably see them shining off my forehead.

Patrick Baldwin: I'm amazed, you are naming so many people. I can't even keep up. I've heard Mike, I've heard Shaun, the people at Western. I couldn't even make the rest of the list. You've surrounded yourself with great people. It sounds like almost you're indebted virtually. It helped you along the way. It’s humbling to hear you say that.

Jim McHale: Guys like Anthony Fortunato, Anthony Ramirez, and Tom Pederson. One thing about this industry I learned early on, I'll never forget my first pest control conference down in Dallas, Texas. I remember Norm Cooper was the president. He showed with that white cowboy hat on. Everyone is willing to help. Everyone's always exceptionally helpful. If I had a question about how to pay technicians or how to pay commission, I'm grateful. This industry has been great to me. Straightforward, down-to-earth people. I've learned a tremendous amount. 

Even Bob Soriano put a Western commercial on the map. I learned a lot from him over the years. I had no mentors. That interaction with Austin Frishman changed my life and put me in the right direction. If I was listening to my father and all those guys up in Albany, “We got to get out of the business, take away all the good chemicals,” he was the only guy thinking straight up there. 

Patrick Baldwin: I hear your name referenced a lot. Paul asked me a question on one of the podcasts about what's consistent with these guys that have done well in their business. Humility was the answer and I see it today. You're energetic. We had David Billingsly as a guest on an interview here. You're both are high energy. Anticimex has found some great presidents and great management here. Speaking of D Bigs or Dollar Bill, what is that competition now? It sounds like a competitive organization. How do you stack up against Mr. D Bigs?

Jim McHale: Dave's a great operator and he has his arms around. He knows his numbers.

Paul Giannamore: But Jim's going to bury him. I'm waiting for this.

Jim McHale: I try to compete. Our EBITDA is strong and our growth is exceptionally strong. We do some things better than him, he does some things better than us. He's got a tremendous amount of acquisitions under his belt. I've got none. I'm back on zero right now. He's got some things going on that I don't. He's active, agreeable, and easy to work with.

They’ve got a lot of good business acumen and we can share best practices with each other. It's more of a collaborative effort. Paul over at Viking couldn't be nicer. We share resumes. If I don't need somebody, I'll send it down to him. He'll send me opportunities. It's given me this network that I had to go down to Western when I was 22 years old sitting down on Eagle Rock Road in West Orange, New Jersey and Tony Ramirez’s branch down there. I’m watching, listening, asking questions, hearing the phone ring, hearing the scripting, and running into all these guys like Tony Yochum and Bob Soriano, and now I have this network of people I can call anytime.

In addition to that, AX has now this support group in Berkeley Heights New Jersey. David Locke and Brian Alexson had a big job with Terminix. He was right in the Inner Circle with Albert Cantu and Norm Goldenberg. He was right up there with them and he's a wealth of knowledge. It's good to be able to share these best practices with these guys. One of the things we're doing here was we're building out a lot of infrastructures that I never had before. It’s hurting my EBITDA a little bit but we're taking a step back so we can explode once we start doing an acquisition and integrating additional revenue.

Patrick Baldwin: David has a few more years with Anticimex than you. JPM went to AX. American went in 2016 with AX.

Jim McHale: That was their second acquisition after Bug Doctor. I know his dad.

Patrick Baldwin: You know a lot of people. You said while you're running JPM, pre-AX, you did not do any acquisitions there. I wonder what does that look like now? AX is looking for you to bring some bolt-ons or some tuck-ins in the JPM. What do you know now going into this as far as integration, what you've done it differently? Have you've added some acquisitions before?

Jim McHale: I did a couple of small acquisitions. I had technicians that went out in their own business and then failed. We would take the client clients on and pay them as an urn out, but we wouldn't retain them. Those worked out. When you start integrating and taking on the intellectual property and the talent that they have, that becomes problematic. Some people are strong-willed. They're set in their ways. They're used to doing certain things. They want to maintain their identity. You can't just jam this down their throat when they come over.

Looking back in hindsight, earlier in the process, one thing we could have done better is to examine these integrated companies, look at our existing infrastructure on the indirect side, uncover the overlap and streamline quicker. We took a wait-and-see approach, let them acclimate to the brand, and then slowly did it. 

If we’re probably more a little expeditiously moved that process along, things would have fallen into place a little faster. Things are going well. My example before, if we had that Bill Belichick patriot’s model immediately put in there and then use these people where they were most likely to succeed, things would have been more seamless. For my next integration, we're going to be all over that. We have some big wins on the table, so we better be on our game because it's going to be a lot to integrate. One of them is not on PestPac, so that's going to be an additional integration challenge.

Patrick Baldwin: Do you need Paul's help with any of these?

Jim McHale: Paul's involved in at least two of them.

Paul Giannamore: In a past episode, we talked about decoupling service from billing, the monthly credit card billing. On one of our episodes, Patrick and I were talking and I said, “That's a model I like but Jim McHale would vehemently disagree with me.” Because you've always run the model where you were selling triannual residential pest control services historically.

Jim McHale: I got that from Western. That's one of the things they told me to do early on.

Paul Giannamore: You would love to pre-bill. You would do a triennial service and you would build a customer in advance for a year. You’d love that for a couple of reasons. Number one, it gave you a cash upfront that you could reinvest. Number two, you would always say, “I'm locking up this customer. They've already paid me. They're not going to go anywhere with some network door knock or knocks on their door. I've got this relationship and now it's submitted financially.” Is that a model you continue to do now, and will you continue to do that? 

Jim McHale: We've had these discussions with AX. A lot of the platforms do auto-bill on a credit card every month. For me and my client, $500 to $700 sale on a credit card once a year. I like that. You collect the money. It keeps the LDS door knockers away and keeps Lenny Gray and McKay Bodily away from me. My son used to work for them. They prepay you and that shows you the strength of your brand. It's not a lot of money for most of our clientele and now it's yours to lose.

Deliver the service and you got a customer that's going to renew for life. There are certain thoughts throughout the industry, “We want to charge the credit card every month, small amounts, and that'll increase retention.” I wholeheartedly believe that's not the case in our specific platform up here. I don't want somebody looking at the charge every month especially in November, December, January, February. “Why am I paying pest control in January, February, March?”

I went through these issues. That's why I converted to monthly service because I had “monthly customers”. However, they would be available April through October and then all of sudden, they start dodging me in November, December, January, and February. They weren't home, couldn't do the service, didn't want to be charged. Then I would go spray the outside, and then it'd be this contentious relationship with the client, “Why are you charging me? I wasn't home. You didn't get inside. You could have called me.”

I don't want to fight with my customers. “Prepay me, I'm coming three times. Call me any time you want. You're paying for annual protection and we're here for you.” Some of the fortuitous things when the door-to-door industry started to blossom around here, we were well insulated from that because now the person canceling would have to call me up and request a refund. We sniff it right out.

Also, it eliminates bodies in the accounting department where people's credit cards would expire. It eliminated a lot of problems and made it cleaner. It's about the customer. “We will charge you one time. We will come three times targeting different pests of the season. Call me any time you want. Our response time is fantastic.” It's worked well for 30 years. I don't think billing it out on a monthly basis is going to be effective or it's going to increase our renewals any better.

Patrick Baldwin: When did you charge those credit cards? Was every residential customer charged on January 1st or did it fall on their anniversary?

Jim McHale: On the general pest control services, we would charge them on their anniversary date. Here's another guy, Irwin Naval. He's a wonderful guy. I'll never forget, I was on the floor of the PestWorld convention and we were talking. I was talking about termite renewals and how I wanted to increase my termite renewals. He said to me, “You want to make money? What happens is you're selling termite work in April, May, and June and then the renewal comes up in April, May, and June. You're out servicing clients handling phone calls and you don't have time to follow up on your termite renewals. Make all your termite renewals come due on January 1st or October 31st.” That's what we ended up doing.

“Then you have the time now because call volumes are lower to follow up, and then synergize by Sentricon coming in because now you have something to remove, a tangible item to remove the system.” We tell them, “If you don't renew, we're going to come out and take the system out.” Even though it hasn't been serviced in a year, people feel that are like, “I'm losing protection.” That increased renewals. I was told by the tower rep we're the number one in termite retention on the East Coast and that's because of those two things. Irwin Naval told me, “I just made you about $300,000.” He was right. He probably doesn't even remember that conversation. 

Paul Giannamore: If he hears it, he's going to send you a bill.

Jim McHale: He might do that. He's in Florida. I talk to Dorothy once in a while. She runs his business. 

Patrick Baldwin: He's a good dude. I did not give David Billingsly this question in advance. In AX culture, we heard girls say, “Quality, profit, growth. You've got to get your quality in line, and then your profit and then your growth.” You're already thinking about where I'm going with this. To be fair, I'm going to give you the same unannounced question here. What profit and growth seem measurable and quantifiable when it comes to quality? What does that look for JP McHale?

Jim McHale: I talked about these NPS scores from the client’s perspective. Quality has been a big deal for us and that's why we have this customer success manager in place. Within 30 days after every client signs up, they get a welcome to JP McHale call where we confirm the billing address, confirm all the service addresses, make sure any ancillary accounts are linked to this account. Make sure in PestPac, we all know what the relationship is, the entire scope of the relationship, what this person owns, what businesses they run. We get the account up and running. 

The onboarding process is important. We have a commercial business manager. His name is Robert Lynch. He’s fanatic and attentive to detail. He makes sure that these accounts get up and onboarded properly. It's a reoccurring after that. Then 120 days prior to renewal, they get an NPS call, either through text, email, or pick up the phone dial.

If you guys are familiar with the NPS, it's like, “On a scale of 1 to 10, how likely are you to use our services?” Anything less than an eight gets a follow-up question, “How would we be able to get an eight from you?” Then they open up and tell you, “He dragged the host to the plant.” “He ran over my mailbox,” whatever.” I love this business. You can’t make some of this stuff up.

On the commercial side, we do have our top 200 accounts. We have what we term goodwill calls. I have a VP of operations, Robert Seeger. He perfected this with his company down in New York City, where based on spend, they get service visits from service supervisors, quality assurance inspections. That's important. I've always tried to get that off the ground here at JP McHale prior to AX, but you have to be careful because you have to have your operations manager on board for that.

I had a gentleman that was doing these quality goodwill calls and he almost became viewed by the branch managers as the rat. He's ratting us out. He's saying bad things. It's up to the operations manager to protect this person. This goodwill person is there to support you, help you provide another set of eyes, and be the support role for the branch managers. If the operations manager does not protect this particular person, it can go bad. If this guy becomes a police officer and the technician starts to look at this person differently, like, “There's the rat,” it can be damaging.

You have to have an operations manager that understands the model completely. I have one now, Rob is smart. He ran his own business for ten years and sold a year before me to Anticimex. He's a successful guy in himself. Now, that program is up and running and it’s super smooth. In past years, I've had weaker operations, people who didn't understand the dynamic between these goodwill inspectors, the branch managers, and the technicians. It turned out to be a bad thing rather than what it was designed to be a good thing.

Patrick Baldwin: You passed the test. Your old was listening to that. He would say, “Jim, I'm on the way if you didn't answer correctly.”

Paul Giannamore: Speaking of Jarl though, Jim, when I had dinner, he had a lot of nice things to say about a lot of his platform presidents all around the world. We talked a lot about you because I’d work imminently with you and him on this transaction. He's thrilled with what you and your entire team there in New York is doing as a matter of fact. 

Jim McHale: We have a strong team.

Paul Giannamore: You've built a great team. Not only have you differentiated your services in the eye of the customer, but you've also differentiated your business from a cultural perspective. You've built a unique culture in JP McHale.

Jim McHale: It’s all about culture.

Paul Giannamore: I know some things that you do. I want to hear them in your own words. To influence that culture, one of the things that popped out to my mind is you go down and hang out in the call center. You go down into the room where those guys eat, you sit down there, you hang out, you laugh with them, and you talk to them. You're a guy who's on seven days a week, you're up in the morning, you're in your office, you're talking to everyone. What are some other things that maybe I don't see or didn't realize over the years that you do personally to build that culture there at JP McHale?

Jim McHale: I listen to calls. When the person hangs up, I'll make it like a little bit of a show. I'll tell them how this call could have been handled differently. I'm only talking to that one person but you're almost holding a seminar there. It's like EF Hutton. When you speak, they're all listening. You use these impromptu meetings to have a discussion. Even when I'm down with the technicians, we’ll talk about certain things. I'll say, “This is my perspective,” in a funny way. We'll joke around a little bit, but everybody gets the message. You want to get people singing off the same sheet of music aligned with their thoughts.

We have a very diverse group of people here from all different cultures and backgrounds. We’re constantly reinforcing the fact that we all need to look through the lens of what's best for the client. At the end of the day, if we can all agree on what's best for the client and empower them to deliver this value to the client, we're going to be successful. No matter where you're from, what language you speak, what your culture is, if we could all agree on a set of rules of what's best for the client, that's where we're at.

Sitting in the tech room, talking to these guys, letting them know I have a personal relationship with them. I do a lot of skip meetings which again when I've had weaker operations, it didn't go over well. If you're an effective, smart manager, you shouldn't be upset if Jimmy McHale wants to go out and talk to your technician so your service supervisor finds out what's going on.

I'll never forget I was having a problem with an operations person and I didn't know it at the time. I would meet one-on-one with them and then we would agree on a decision and we would walk out the door. Meetings are a great medium for information gather, nudging people in the right direction, and making quick decisions. That's an Andrew Grove policy. He used to love meetings and calendar invites. They use them as a medium to get things done. We would do that.

I'll never forget, I was in a tech room one day and a tech came over and said, “Mr. McHale, can I talk to you about something?” He told me the problem and I said, “You have to go talk to the operations manager and he'll straighten out.” He says, “He doesn't like to talk to us. He says he doesn't communicate with us on a regular basis, then we have to talk to the service supervisors.” I'm like, “This isn't cool.” Here I am talking to the technicians and showing all my managers that I'm willing to do this.

I brought the manager in and I told him what the situation was. I didn't tell him which tech told me. I ran into the technician in the driveway a couple of weeks later and I said, “Did the operations manager take care of the problem?” He goes, “No, Mr. Jim. He brought us into a room and goes, ‘Who's talking to Jim?’ If I find out who's talking to Jim, you're fired.” That's the day I knew I had to get rid of that operations guy. Sometimes you don't have the buy-in. You think you have, but you don't have to. Act quickly and remove that guy.

Patrick Baldwin: Your reference to skip a meeting. I'm not familiar with that term. What is that?

Jim McHale: That's when I have either an impromptu meeting or a formal meeting. You have process-oriented meetings and you have mission-oriented meetings. When there's a problem, you have to solve the problem. If you have a mission-oriented meeting, you pull everybody together, you collect the information, you nudge people in the right direction, and you make some quick decisions on how you're going to handle this. You have your process-oriented, meetings like my leadership meeting. Every Tuesday at 11:00 AM, we get the leadership team around the table, “Top of mind. Let me hear your thoughts.” We gather information and it gives them access to me. We can collaborate on what's best for the company. 

A skip meeting would be if I met with a technician or I meet with the CSR or I meet with service supervisors, or even a branch manager who doesn't report directly to me. I don't want to find out that maybe someone on my team is not disseminating the information as effectively or is not buying into what we've agreed upon in a meeting wholeheartedly.

Patrick Baldwin: You're getting filtered info. You're only hearing what they want you to hear. You're literally skipping.

Jim McHale: I want to hear it from the person who's talking to the client. One of the things in this industry that I've always found odd and I've had this with some people I've brought in from the larger companies is people think they make decisions from the position of power. You have to make decisions from a position of knowledge. If you're not talking to the technicians and you're not talking to the sales reps, they have the knowledge. They may not be able to make the best decision for you but they're going to tell you what's going on out there.

If you're sitting in your ivory throne and you are presiding rather than being actively involved, you have no idea what's going on out there. You're going to make a bad decision and you're not going to get buy-in from your client-facing teams. It's important that you stay in tune and in step with your client-facing team. They’re the most important people in the organization.

Patrick Baldwin: That's the whole episode right there, listen to skip meetings. I do know that you had a long engagement with Paul, a record of eleven years is what I've heard. What I know is when you originally engaged Paul, if I understand right, you and your brothers, you had to establish the C corp. That was one of the first things that you made.

Paul Giannamore: Jim doesn’t even remember that. 

Jim McHale: I remember that. I remember when we formed it. Early on, I had another smart mentor. He came in and he straightened us out from a legal perspective. He structured the company with the brothers, the buy and sell agreement. He noodled through what we needed to do to structure this thing properly.

One of the things he did do was make it a C corp. At some point in my business life, I said to myself, “I have three brothers. My one brother has two children. The other one had three children. I have three children.” I was in this business with my brothers. I was the older brother. The best looking and smartest, too, by the way. They were good as far as deferring to me and we ran the business, but I was having a hard time seeing how these cousins would work together in the future where they didn't grow up with one another. They live far away. It would be tough to bring them all together and noodle this out.

I knew probably at the end of the day this entity would have to end with us, the three McHale brothers. I found Paul through some medium and engaged him. I'd already been doing this a little bit with Western and then I also had some connections at Terminix where I would show them my numbers and try to get an understanding of what they like and what they valued in a business. I had no idea. I’m like, “What do I have to do to make this a more valuable type of thing?” They would give me and would share information with me.

Steve Good up at Terminix was great and a few of the other guys up there. They would describe to me but then I got Paul involved. Paul, as we all know, is a smart guy. He understands the business model. He understands what the acquirers are looking for. I engaged him to look at things. We talked about, “What do I need to do to improve the portfolio?” "You need to have more commercial business. They want this kind of a business mix.”

It's funny with the COVID pandemic, everybody's looking for a residential business. Business mix is important. Commercial was a big component, portfolio revenue, and where your costs need to be. It had to be at 20% EBITDA and 80% of your business needs to be a portfolio. We went through those exercises and flirted with some of the big guys, all three of them at one point in the eleven years. At one point, we were close with ServiceMaster and that's when it came up we were a C corp. As good as the offer may have been, the tax ramifications weren’t good. We had to switch to an S corp and there was a seven-year lookback, wasn’t it Paul?

Paul Giannamore: It's five now, but it was ten at the time.

Jim McHale: We made a decision, “Let's flip this to an S.” We had that work done and we were going to wait for ten years, and then Paul called me at one point and did say that they reduced the lookback period. We had now covered that lookback period. He thought the time was right, given my business mix or profitability. I had me and my two brothers. We’re making a tremendous amount of money. We’re pulling out of the business. 

We’re at the point where we needed to either start making some acquisitions ourselves, which culture-wise, I don't know if we would have had the infrastructure to do that, or we would have had to add infrastructure. We talked about some of the changes I made by bringing in a director of HR, the VP of client experience, a sales and operations person. We would have to add all those people on. With me and my brothers taking out all the money, it was tough to afford those types of infrastructure moves. In discussions with Paul, we all agreed that this is probably the best time to move the company. That's how we proceeded down the road for the last time. I'm sure Paul was happy about that.

Paul Giannamore: I want to bring something up. In the pest control industry, like any industry, there are a lot of family businesses. When I think about the guys that I've worked with even up and down the East Coast, we've got McHale brothers, Jim with Doug and Rich, Stevenson brothers. You've got a lot of these family businesses, father-sons, and brothers. It gets complicated.

One of my observations in family businesses is that a lot of times, families confuse the last name. You got ownership based on your surname. You’re McHale so you got ownership in the business. Fathers often don't like to pick a favorite. If you might have a son or a daughter that's going to run with it, they always want to be equal with the kids.

I end up dealing with a lot of family businesses where there are four children and each of them on 25%, and then you've got one that sticks around and runs it, and then you got three off in other corners of the world. You end up with all sorts of complications. What I've seen over the years is these transaction multiples have increased. These businesses have gotten more valuable. It's hard.

In your case, Jim, you talked about you and your brothers have all these kids. By the time you got fifteen grandkids of your father, now it's a complicated mess. Who's running it? Who owns it? All that sort of jazz. It's complicated. Jim, I can say this as an outsider, maybe you won't say it, I think highly of your brothers, Doug and Rich. You're the CEO of that business. Essentially, it was your father's name on the wall but you're named after your father so if I thought about it, it's Jim McHale’s business.

Jim McHale: I accepted that responsibility.

Paul Giannamore: You put your heart and soul into it. We talked to Brandon and Brian down at Inspect-All Services. Sometimes for the good of the family, it's better to exit these businesses so brothers can be brothers and fathers and sons can be fathers and sons because I've seen a lot. The good news for Jim and his family and some of these other folks is the family stayed together and did well, but I have seen a lot of cases where father and son don't talk to each other anymore. In this industry, there's a lot of that and it breaks my heart when I see it. It all comes down to family business dynamics.

Jim McHale: Martin Luther King’s one of my favorite quotes and I used to quote this to myself and my brothers all the time, “Everybody's watching us. There’s a lot of jealousy out there in this world. If we start fighting, things are going to go bad and there's going to be a lot of happy people out there because they'd love to see you fail.” Martin Luther King always said, “We need to live like brothers or perish like fools.” We need to live together as brothers. That's a huge mantra of mine. 

My brothers were great in the fact that they always were deferential. We had our discussions. Things got tense at times but at the end of the day, we agreed upon a common goal. We ultimately did what Martin Luther King asked everybody to do, “Live like brothers because if you don't live like brothers, you're going to perish like fools.” There were a lot of people out there that would love to see us fail.

My dad came over here from Ireland. He had little from a resource perspective, other than a hard work ethic. He worked at Sing Sing Correctional Facility, started this business up, brought us in, and we built a business that all family members can live happily ever after, so to speak. Family dynamics get crazy at the end.

We were making a lot of money. The business probably wasn't set up for the third generation. In any business, 1st to 2nd generation is 50% success rates, and then 2nd to 3rd, those numbers drop significantly. For our specific situation for what was happening at the time, my son was getting out of college and we were having discussions amongst the brothers, “Are the children going to go into business? Are we going to move on?”

We got to a multiple where everybody could cash out, live comfortably, and then if you want to set your son or daughter up in the business yourself, you could do that. That's the path we've chosen. Everyone is happy with that choice. Overall, it's been successful. I've enjoyed my time. I've learned an incredible amount working for Jarl. He's a special guy like Paul. He's connected throughout the world with different cultures.

He's talking to the guy from Malaysia, the guy from Norway, the guy from Sweden. He's Swedish but in America, he can relate to anyone. He's smart. You know his a track record from previous business ventures. This decentralized business model, I'm a fan of and that's one of the reasons why I liked when we merged. It was probably the right move. We could have got higher multiples if we waited through this pandemic, but who could have seen this pandemic coming? At the end of the day, it's all good.

Paul Giannamore: Are you having fun, Jim?

Jim McHale: Yup, I like the people I'm working with. Mikael Vinje, the North American president, is a wonderful and smart guy. He's got a tremendous amount of business acumen. He's great. When I call him on the phone and ask him questions, he's a busy guy but he does take the time to give you a thoughtful answer and it's a pertinent answer. It's maybe a wrinkle I hadn't thought of before. There's a lot of synergy between us and I'm happy.

Paul Giannamore: I've publicly stated this least a dozen times on this show that I can't even think of anyone in this industry that I've learned more about pest control, about being a great manager, and about building a great business than Jim McHale sitting right here. I say that sincerely with you on here, Jim. He's full of a tremendous amount of knowledge and experience.

Jim, you are a hardworking guy and you take this seriously. We were going through this whole transaction. We dealt with private equity firms and met with a variety of different strategic acquirers all over the world. Everyone that met with you wanted to be on Team Jim McHale. One of the big concerns that everyone had about Jim McHale is, “If Jim makes a lot of money and sells his business, he's still a young guy but he'll take off. He'll do something else.” I said, “No, Jim doesn't do this for the money. Jim does this for the sport.”

Jim McHale: I don't know anything else. I’ve never done anything else. I've always been a serious kid. I put a lot of pressure on myself probably more than I should. I was always funny. I was worried about my middle guy. He's like that, too but he's coming into his own. He's a 6’0”, 250-pound tight end for Georgetown football. I’m credibly proud of him. I've always wanted to take this business to another level.

In the beginning, when I was out there spraying the bugs and working nights, days, six days a week. I couldn't wait to get to the point where I could work on my business versus in my business, but it did a lot more for me socially. Weeding women was tough when you know you had your big bug on the back of your shirt and you pull it up in the pest control truck to pick them up for a date. I was able to get one, Jennifer. She jumped in that bug truck. She’s stuck around for some strange reason. It's a great story. We started from nothing and helped us a lot of girls out there looking like, “Maybe I should have hooked up with that guy.”

Paul Giannamore: Jen's fantastic. She's a fantastic woman. 

Jim McHale: She's a good person. She's an attorney and a judge. Unfortunately, I don't get a fair trial every night. There's no justice.

Paul Giannamore: It's rare nowadays to keep a marriage together and also be a great father. You've been a wonderful father to your boys. Let's see if you remember this. How old is your little one now? Is it Liam or was that your middle one?

Jim McHale: No. Liam was my little guy. He is at Georgetown. My little guy is 18 years old. He's at Providence College in Rhode Island.

Paul Giannamore: Let's see if you can remember this. It was approximately eight years ago or so, so he would have been ten years old. We had a meeting and we were meeting some folks from out of town. We went to BLT below the Ritz and your wife was working late some night or whatever. You had your little guy and you're like, “We're going to go to this meeting.” You rented him a room at the Ritz Carlton that night and you ordered a bunch of pizzas to his room. You're like, “Here little guy. Just stay here, eat pizzas. Watch whatever you want. Don't go to the porn channel. I'm going to be downstairs with Paul.” Do you remember that?”  

Jim McHale: We had to get the security guy up there because he couldn't get the Xbox game working on the TV. It was a major emergency. They had all this security at the Ritz Carlton who was running around trying to get this kid's Xbox going.

Paul Giannamore: Jim had executives from international companies from all over the world descending on Ritz Carlton. His ten-year-old could not get the Xbox work.

Jim McHale: That was a major problem but we got that solved. He had some cookies and he had a ball. I remember that. My other son, James, my oldest guy, was a football player for Holy Cross. He was quarterback up there. Paul introduced me to McKay Bodily from Rove Pest and Lenny Gray. My son ended up going door-to-door sales up in Massachusetts. He worked there for about a month and he was the number one salesman. I had a friendly wager with McKay. I said, “My son's not an LDS kid.”

Paul Giannamore: He is now. He didn’t know about that. He’s converted.

Jim McHale: McKay was like, “I could take your son. He's a 6’3” quarterback in Holy Cross. He will perform just as good as my LDS kids.” Long and behold, my son was the number one sales rep for Rove Pest Control up in Massachusetts.

Paul Giannamore: Until the coach pulled them off the doors.

Jim McHale: The coach told him that he didn't want them working during camp because he was dragging a little bit. He said, “Either you need to stop working. If you need money or something, call your father.” 

Paul Giannamore: Jim, let's talk about that. I don't remember how many years ago this was, but you and I are always talking about door-to-door. You got these pains of the assets in your neighborhood knocking on the doors and you're like, “Should we consider this?” I said, “I'll introduce you to some folks to talk to you.” McKay came out and spend some time with you in the staff. How did your son get involved in that? Did you want him to learn it, come back to your firm? How did that happen?

Jim McHale: McKay came and we put on a presentation, the two-day seminar on exactly how you get this door-to-door program going. He came and armed with LDS churches in the area and how we recruit. He gave us the roadmap on how to do this. My son was working here as an intern. He participated in the seminar.

We went out to dinner with McKay and we were talking about, “I don't know if I could get this off the ground.” I remember speaking to Dennis at ABC and he tried it with some Texas A&M students. He told me it failed miserably. He and I agreed that it was probably because of the experience that the LDS kids had selling their religion to different countries in different languages and how you learned how to handle yourself a little better there.

McKay was like, “No, you send your son up to me up in Boston. I will show you that he can do this and he doesn't have to be an LDS kid.” Lo and behold, he did it. He was number one and he got a gift certificate. He worked for a gentleman up there by the name of Juan who's a fantastic guy. He still keeps in touch with James.

I wanted to introduce James to the business. He's working in a hedge fund business now. It’s important that all the kids go out and experience working for someone else in a different industry. If they like pest control, it's because they like it. It's not just an easier pathway. That's an important component of growing up as a person.

I'm glad James got that experience. He still talks about it now. It's funny when he does an interview for other jobs, that always comes up. The people are like, “You went door-to-door and sold pest control?” It's an attractive quality on his resume. If anybody out there has done door-to-door, don't leave it off your resume. It's a great talking point in an interview.

Paul Giannamore: Why did you decide never to pull the trigger on doing door-to-door at JPM?

Jim McHale: We didn't have the infrastructure. It's detailed. They use this pest route software where they drop pins. We didn't have that technology handy. We were on a PestPac which didn't have that feature. At the end of the day, we thought the retention of these particular clients wasn't going to be good, given our market share. The feedback we got from our clients saying, “These people were coming up on little scooters knocking on the door,” a lot of our clients were uncomfortable with the interaction. Now that I'm out in Long Island, we have a $2 million company. There are some discussions on outsourcing some of this and maybe trying to capture some market share in that particular territory. Those discussions are ongoing, but I think I would outsource it rather than try to build it up in-house.

Paul Giannamore: You're not going to bring James back?

Jim McHale: He's happy right now. He's working his hedge fund stuff and he’s pleased. We will have that discussion one day maybe.

Paul Giannamore: He left door-to-door at the top of his game, right?

Jim McHale: He did. He went out a champion. He crossed over. 

Paul Giannamore: He's a great kid. We're getting so old to him because I remember him being a little guy. How old is he now? 

Jim McHale: He’s 24. He’ll be 25 in December 2020.

Paul Giannamore: I remember him before he could drive.

Jim McHale: This COVID brings out such innovative stuff, so he's working remotely. He and his friends rented a place in Scottsdale, Arizona, and they're going to go out there, work remotely, and hang out for a couple of months. Good for them. He's taken advantage of a good situation, the ability to travel a little bit and still work remotely. That's wonderful. His company said they're probably not going to go back to work physically in person till February 2021. Crazy times. That's not good for commercial real estate in New York City.

Patrick Baldwin: Paul, you've pulled out these notebooks of clients. I'm sure you have a lot of one-liners from Jim. Do you have anything you can share out of those books for us?

Paul Giannamore: Here's the complication. There's a tremendous amount from Jim McHale but I'm trying to think what can be said in public.

Jim McHale: We have dark humor. If you understand us, you laugh but some people would take offense and some people would not think it's funny. Some people are offended by our sarcasm. 

Paul Giannamore: Everyone is, Jim.

Jim McHale: Anybody's normal anyway.

Paul Giannamore: Here's what we're going to do, Patrick. Jarl said he wants to do a live interview with Jim in New York when he comes out to New York and I promised I'm going to come up. When this all happens, and with COVID visas, who knows? It's supposed to be November but maybe it won't be. I need to get up to New York. Jarl comes over. We'll bring you up. We're going to have some drinks. We'll do the interview live after dinner and we'll have Jarl there. We're going to do that. You can take a tour and see how our pest control company runs.

Patrick Baldwin: Earlier, you are building up this someone that has been great in the industry and I've learned so much from it. I kept pointing at myself and then you're like, “Jim, you are the man.”

Jim McHale: I could tell just by speaking to you, you're a good operator and you're probably successful.

Patrick Baldwin: If you saw Paul's journal on me, it's an empty book.

Paul Giannamore: Jim, thanks so much. This has been a long time in the making getting you on here. We had to build up to this. I keep saying we're not ready for Jim McHale and we scratched the surface with him. We got to do it again and we got to do it over drinks, but we've got to inoculate the audience slowly with Jim McHale. 

Jim McHale: Small doses. I come out a little strong but at the end of the day, I'm harmless. 

Paul Giannamore: Big teddy bear, Jim. 

Jim McHale: I hope I've been able to deliver some value for you guys. My experience with Paul Giannamore over the years has been fantastic. He's a tremendous advocate for the industry. There's nobody who could better represent me and my family during our exit strategy. We thought it through and we made adjustments along the way, C to S, increasing portfolio mixes, making sure the EBITDA in the portfolio and mix was fine.

You need somebody to steer you through these times, especially if you have multiple family members. This business is loaded with family businesses so you guys are right on point. This podcast, by the way, is extremely valuable. I appreciate it as an operator to be able to hear perspectives from Mike Givlin, Mohit, and some of the private equity guys, even though the private equity guys probably were never an option for us. 

Anticimex was the perfect mix because it was private equity, but they own pest control companies. You're able to align yourself with the best of both worlds, the strategic and the private equity. You're able to take your risk off the table and reinvest. I'm finding this now if we were just with a standalone private equity firm trying to do these acquisitions, it's hard. Without the support from AX, it would have been a difficult road and we probably would end up leaving money on the table. At the end of the day, Paul steered us in the right direction and it was great.

Patrick Baldwin: Jim, I appreciate what you said about The Buzz but during this interview, I've learned so much. I appreciate. You've given back by making time for us. I'm grateful.

Jim McHale: I love talking about pest control. I love talking shop. I love talking to people in the industry. People in this industry have been kind to me and they've helped me along the way. I'm happy to always give back and help because you got to pay it forward. It's all about karma.

Paul Giannamore: Jim, it was great catching up with you. 

Jim McHale: Always good talking to you, guys, and Patrick, so much to make your acquaintance. I'm glad that I know you now. I can't wait to get together, have a couple of cocktails, and share some more stories in the pest control industry. It's a wonderful industry with a bunch of dynamic people and some entrepreneurial and spirited, innovative growth. It's always good to meet other colleagues in the industry, especially from Waco, Texas. My wife's a big fan of Joanna Gaines down there. 

Patrick Baldwin: You're welcome. It's great to meet you. Looking forward to meeting you in person as well.

Jim McHale: Thanks, guys.

---

Patrick Baldwin: We interviewed Jim and in two days, I've implemented all of Jim's ideas since we interviewed him and now I’m liking one thing. 

Paul Giannamore: What are you liking? 

Patrick Baldwin: Therapist. There's so much in here. I know we have readers to these episodes at two times speed. They're getting this thing. They're taking notes as fast as they can. I know they had to slow him down for our Swedish friends. 

Paul Giannamore: It was some good stuff. We barely scratched the surface with Jim. There's so much going on there. Not only had I worked with him for a long time prior to going to market so I had a good handle on his business. When you're going through the sell-side process and then finally you get into diligence, there are all-day-long sessions of him explaining all the innovative different things that they do which were eye-opening. I can sit there and listen to Jim for hours. I'm happy we had him on.

Patrick Baldwin: Of all the things you've said about Jim, you didn't tell me he's a reader. I've been texting with him, chatting about books since we recorded. 

Paul Giannamore: I assume that he could read. 

Patrick Baldwin: He’s up north. I don't know what to assume. My Yankee friends are up there. He's referencing Bill Belichick. I'm like, “Where's your sweater vest?”

Paul Giannamore: Jim is an educated guy and continues to educate himself. One biggest flaw that Jim has is he went to the crap college within Cornell University, not the good one. That's where I've got a leg up on the guy.  

Patrick Baldwin: Other than other divisions within Cornell?

Paul Giannamore: Yeah. There's a bunch of different colleges inside, College of Liberal Arts, College of Engineering, College of Industrial Labor Relations, and College of Agriculture. He went to the Wrestling College, otherwise known as the School of Ag or Agriculture. I got to break his balls sometimes, Patrick.

Patrick Baldwin: These guys have sold their businesses and done well. It's amazing to think in this industry that something is simple as pest control, these guys are humble, this humility. He's animated. There are so many adjectives to use to describe your buddy, Jimmy, but humble was one. I wasn't expecting it. I've known of Jim and now I feel like I'm starting to know him. That was amazing.

Paul Giannamore: Jim is a super loud animated New Yorker. No doubt about it. You meet him in person and he's the life of the party, but he's thoughtful. He spends a lot of time learning from other people. He is humble though he doesn't appear so at first glance. One of the things I've always appreciated about Jim is he's focused constantly on not only improving his business but improving himself as a person and as a businessman. We've spent well over a decade debating various books and articles. The guy reads and he thinks, and I've learned a lot from him.

Patrick Baldwin: Although you've made fun of the college in Cornell he went to, you're still giving them credit for that.

Paul Giannamore: You know my opinion on formal education, it's a total waste of time. If I could do it over again, I would have skipped out completely. Him going to Cornell was the least beneficial thing that he could have done. Most of his learning was in the trenches. 

Patrick Baldwin: School of hard knocks. Here's the other thing, I didn't see Jim pull out a notecard but he learned not to reinvent the wheel. He's learning from other people that have gone before him and a lot of those names he mentioned in the industry, I felt like, “Would you tell this guy he's coming on to accept an award on the Buzz.” He's like, “So and so and Western.” I’m like, “Who was this guy?”

Paul Giannamore: You heard the story. He took this business over from his father. He had two younger brothers that followed him years later, but he needs to get out there and learn how to do stuff. He's right about this industry. People said all the time that the pest control industry is an industry that shares. Folks are willing to help people out. People were willing to help me out and that's why I do as much as I can to give back to this industry. 

That's common around the world in industries where people don't compete with each other. Jim McHale is not competing with you down there in Central Texas. It's a lot easier to have those conversations. Back in the early years, he's up in Southern New York, he drove across the river had down in New Jersey. He wasn't competing with the Western guys necessarily. Maybe if he were in their backyard, they would have been a little bit less likely to sit down with him. Because pest control operates in tight finite geographic territories, it’s easy to share with somebody from the state away.

Patrick Baldwin: I never realized Dr. Austin Frishman’s business acumen is one of these names that he mentioned. Doc, sorry, I appreciate your bolo tie now more than I did before because chlordane is getting taken away. Doc, I think of a technical guy. I'm not sweating this California rodenticide bill that got passed but what I could see as a weakness, how could it be turned into an opportunity, Jim's referencing Doc Austin Frishman on this. He’s like, “This is an opportunity. 

We're going to talk more. We've got John Myers, CEO of Rentokil North America coming on. We've had these interviews with a few of the Anticimex guys about SMART technologies. It's interesting. There are opportunities in California for doing things differently. I called Bell Labs’ board-certified entomologist who covers territory here but he's also overseeing the West Coast. We had a good conversation about digital rodent devices and also alternatives to the second generation. There are answers out there, so don’t sweat it. I’ve been sweating it.

Paul Giannamore: On the digital side, one guy who I like is Ethan Vickery down at VM. He's a Texan. He's based out of Dallas. Do you know the products I'm talking about? I'm not a technical guy but they were making some traps. Interestingly enough, Jim has been into this whole digital electronic monitoring, data gathering pest control for a long time.

What we talked about in the interview, it's true. I remember it was before Anticimex made an investment in WiseCon several years ago, there's a handful of these companies that were pioneers. One is out in Korea. WiseCon is in Denmark. Then of course you have the big manufacturers. I remember Jim was having me track these guys down. He would call me up, “While these guys are foreign. I can't talk to them. You got to give them a call.”

I would call them and chat with them because he was trying to get Anticimex’s SMART stuff way before Anticimex was in the United States. I remember a couple of years ago, we had dinner with John Wilson, president of Rollins at a PestWorld and we invited Ethan to come and hang out with us. Super sharp guy. If you don't know Ethan Vickery down at VM products, the other business that he's running is called PestOptix and he's got a partner in Israel, his name is Ronen. I don't know much about the technology but I know Ronen is super sharp and I've seen what he's done with his business in Israel. He's doing probably $10 million US. He has digitized that thing.

Patrick Baldwin: Now, I've got two options. I can go to Israel interview Ronen or if you want, Ethan's in Dallas, that's 1.5 hours north of me. I could go interview. I could do my own roadshows, Paul. 

Paul Giannamore: You could do that. 

Patrick Baldwin: It’s Stockholm or London.

Paul Giannamore: I've seen Ethan in a lot of places in the world. Waco is probably one place you're not going to get him to go. I encourage readers out there, if you want to start to understand the digital traps and how all that's working, Ethan and Ronen are too guys to get in contact with.

Patrick Baldwin: I referenced Bell Labs, Scott Smith lives up in Dallas Fort Worth, Ethan's up in Dallas Fort Worth. If our readers want, I'll head up to Dallas and do a couple of interviews on this digital. I don't want to call it SMART technology because Anticimex says the curb on that name, but the digital rodent.

Paul Giannamore: What do you want to do? Do you want to get on the road now and do interviews? 

Patrick Baldwin: You’re the mini-me now. You're 24 pounds lighter than me. I still have so much more to talk about Jim. We're going to bring him back. I've been at BNI, Business Network International, and I've enjoyed BNI to each their own. Every chapter takes its own life. Jim's interview before there was BNI and it happened to be in good old Sing Sing Prison, I couldn't believe that. That was amazing. 

Paul Giannamore: What can’t you believe about that? 

Patrick Baldwin: The guards are networking. You're the beer tap guy, you're the carpet cleaner, maybe you're the painter, you're the electrician. We're going past referrals back and forth. That's insane. That's cool. Not a formal relationship, not coming to sit down and pay your dues and whatnot. I know BNI is not the only one. Vistage probably does something similar. In addition to that, prison guards knew how to interface with customers like, “What are you going to throw at a prison guard you haven’t seen before.” They've come at him with shivs. What's Mrs. Jones going to do?

Paul Giannamore: I heard that story quite a few times over the years with Jim. One thing I didn't realize is that the beer tap cleaning company still existed. I didn't realize it was still operative some 40 years later, which I found to be interesting.

Patrick Giannamore: It sounds like an interview when we go to New York. 

Paul Giannamore: No doubt. Jim's dad cleaned the beer taps out from both ends.

Patrick Baldwin: You've continued to preach, if you will, to me from your experience differentiated capabilities.

Paul Giannamore: Jim did build a lot of unique and differentiated capabilities. One was the effort that he put into the call center. He spent a lot of time with that. We talked about it in the interview where you call JP McHale and guess who answers the phone? Jim McHale. Jim used to answer the phone himself in person and now we make sure all of his customers hear his voice. His name's on that door. 

Patrick Baldwin: I test things. I'm a fact-checker by heart. I did not know that going into the interview. I was like, “I want to hear Jim's voice,” as weird as that sounds. 

Paul Giannamore: Maybe you should play a little clip of it.

Jim McHale: “This is Jim McHale and thanks to you for contacting JP McHale Pest Management. If you know your party's extension, you may dial it at any time. If you're a current valued customer and need to schedule service, please press one. If you're a first-time caller…”

Patrick Baldwin: I've not thought about a call center. I think about several people in the office answering the phones and some order form of fashion. Is there a certain size company which that becomes visible or maybe in your clients you don't see call centers become viable at a certain point?

Paul Giannamore: What I start to see with regard to call centers as these firms grow, you've got a small business like your business in Waco, is doing less than $5 million per year. You've got a group of people in the office answering phones but at some point, I tend to start to see an inflection point in the $3 million to $5 million range. That's where you start to think about call center capabilities.

As you and I are chatting, I’m doing a little research. Jim operates in 2 of the top 20 wealthiest counties in the United States. He's got a former US president as a customer. He's got a sitting governor as a customer. Martha Stewart uses their firm and tons of different celebrities. He’s used in a wealthy area of the country. You heard him talk, he's got people spending $3,000, $4,000, $5,000 to $20,000.

Patrick Baldwin: $27,000.

Paul Giannamore: I remember him having a $30,000 recurring residential, $500 a year.  He got a wealthy customer base. His concierge service, I always thought was extremely innovative but when somebody's spending $10,000 or $20,000 a year on residential pest control, they want $ 20,000-year service.

Patrick Baldwin: That's amazing. I did not know that about the concierge service and never thought about it before.

Paul Giannamore: It’s cool because it was one of the things that he said a long time ago. You bundle up enough services and you're spending enough money with the company, it would be like, “I get Patrick's cell phone number. That's my guy.” I remember when I first met him, he's like, “Paul, you're spending this kind of money with us. 2:00 AM, you got a pest problem. This is the Bat phone. This is the one you call and you're going to get ahold of somebody, and we're going to take care of you 24/7, 365, it doesn't matter. We are on the ball.” You're spending a lot of money on pest control. That's what you need to do. 

His average annual account value is probably 30% higher on average than the national average. He's selling high-end services. He's more expensive than most of his competitors there. JP McHale is largely a residential services business. I'm the $26 million in revenue. I have this in front of me and this was 2019 that we did the deal. On the commercial side several years ago, he was barely doing any commercial at all. Now he's grown that but on the commercial side, it's probably $4 million out of the $26 million. It was largely residential services.

Patrick Baldwin: This white-glove service whether you make the top 500 or not. I want to bring him back to see what that system is. Is it monthly rotation? If I'm at the bottom of 500, I'm going to add a mosquito service so I keep my dedicated CSR, onboarding customers, there's a system in and his system is going into skip meetings. This Goodwill Ambassador, another level of QA , that person is set up for internal failure unless they have some extra buy-in.

Paul Giannamore: Jim's an interesting character because what he says in the interview is 100% in real life, as far as him spending time with people. Every time I was in that office, he was down in the break room. I remember we sat down and had a chat in the call center. I sit on the chairs, people trying to answer the phone, he's loud as hell. We're sitting down there talking and he's talking to people.

He did spend a lot of time with everyone at every level of that organization. He was constantly out and about. What is interesting is when he did say skip meeting, I'd never heard that term in my life and I saw the look on your face. After he mentioned it, you're skipping rank essentially to have meetings with other folks.

Patrick Baldwin: I'm going to throw another one at you, Net Promoter Score. We've heard that Jared up in Pointe Pest put that in and now we're hearing the quality of Anticimex could be defined by Net Promoter Score, quick answer, throwing these guys under the bus if they don't answer correctly. Is this common? 

Paul Giannamore: Net Promoter Score is common. The internal Net Promoter Score with regard to team members is also becoming more common. We’re seeing a lot of deviations from Net Promoter Score. As Jim explained in the interview, it’s a simple one-question survey with a gradient of 1 through 10. We're seeing now more detailed surveys. Companies are getting more sophisticated using random sampling.

On the one hand, you do on that promoter test. You go out and do a service. They get the survey, Net Promoter Score, what is it, but then as you start to get more sophisticated, you randomly sample your customer base with more of a detailed survey. The bigger companies will randomly do an internal eNPS, Employee Net Promoter Score.

They'll do that but they'll also randomly sample the employee base. If you've got 200 employees, you might randomly sample twenty of them and go into a detailed survey. We're seeing a lot more of that. I know that there are a lot of commercially available products for those types of things. In the next episode, let's chat about the things that you've stumbled across. I can certainly chat about things that I've stumbled across to help folks out there to do that kind of stuff.

Patrick Baldwin: You’ve said it before, you’re in Silicon Valley, the guys that missed it after the bust have a lot more regret than the guys that sold too early. I picked up a little of that from Jim, like, “What if we helped through 2020 not knowing all of this is coming?” It sounds like multiples have increased. Is Jim throwing it out there? Have you seen valuations go up, as far as strategic valuations? Have they been still increasing?

Paul Giannamore: No. It's been consistent. The M&A market seized up this 2020. Where we are is from a valuation perspective as effectively as it was when Jim did his deal last 2019.

Patrick Baldwin: Tell Jim, “It's okay, Jim. You did fine. You got the highest multiple as you wanted.”

Paul Giannamore: Jim's transaction was a scorcher and he always wanted to be the trendsetter. A decade ago, he's like, “Paul when I saw this business, I wanted to solve the highest transaction multiple ever.” He at the time was close to that. What he was referencing is that businesses continue to grow. He is a larger residential business that has done well even in the New York metro. He is doing the disinfect services stuff and the SMART stuff. The business will continue to grow. It's always a moving target. I deal with that every day.

A typical conversation with a client is, “Paul, this acquires, better get this deal done because I'm continuing to grow.” That's not necessarily relevant because it acquires buying the future. Everyone always thinks the transactions are based on multiples like, “If I'm doing $1 million today and my multiple is one, my business is worth $1 million.” “If I'm $1.1 million on a twelve-month basis, two months from now, I'm worth $1.1 million.” That's not how that works. It is a forward-looking process.

Patrick Baldwin: I'm starting to understand that. You've told me this for years, “We're going to learn you good Patrick.” You're speaking my language. The light bulb just clicked with me. You are or were in Jim's inner circle. He played you like one of his top 500. This whole white glove. Did Jim call you at 5:00 AM to be like, “Paul,” in process? Didn't you say Jim would just call you at all hours of the night? 

Paul Giannamore: Yeah, whenever Jim wanted to pick up the phone and call it, he’ll do it. I had a concierge service going on. I've tried hard to limit access to my mobile number, but clients get it and Jim would love to call any on hours. Jarl was talking about doing this joint interview with us and Jim. If we get up there, a couple of things you have to put in your notes for the Jim discussion is the Stockholm Odyssey with Jim and Jen. Jen is Jim’s wife and she's fantastic. We spend a lot of time in Stockholm. Jim made a couple of trips over there with me and Jen came over on a trip. We'll save that for the next interview.

Patrick Baldwin: I made a note, you saw it. Jim, thank you for making time for us. Congratulations on your continued success. That competitive spirit wanted to come in and it kicked butt every day. Hats off.

Paul Giannamore: Patrick, I'm pleased that we got him on for round one and I know he'll be on for round two. He's one of my favorite guys not only in the industry. Jim's the type of guy that if I ever found myself in trouble and needed last-minute help, he will be on my shortlist of people to call because he's that type of guy.

Patrick Baldwin: Paul, where am I on the list? 

Paul Giannamore: I don't know. 

Patrick Baldwin: If there's a PCT 100, am I on that? Paul, thanks again for getting Jim McHale on here. Great meeting him and I'm glad he made time for us.

Paul Giannamore: Great session.

---

Patrick Baldwin: Now that Paul is gone, I can read this review and it won't go to his head. This is Jim's brother, Doug. Doug wrote after the transaction working with Paul. “As one of the largest pest management firms in the country, we have been contacted by every advisor as you can imagine. For over a decade now, Paul has been abiding by our firm and his abilities and professionalism are second to none. There was no way that we would have ever considered anyone else and everyone else has called us a million times.”

“Paul is the most professional advisor I've ever worked with in my entire life. I can honestly say that without his ability to navigate sensitive shareholder and acquire dynamics, this deal would have never gotten done. If the M&A market ever goes down the tubes, Paul should consider being a psychologist or therapist. When deciding to sell our family pest control business after 35 years, we knew it would be a complicated and emotional process. Paul Giannamore of Potomac provided the comfort and experience that only a true professional could.”

“Paul was present every step of the way, maximizing the value of JP McHale and addressing the insane amount of little details in the process. His knowledge of the industry is second to none but more importantly, he's a true M&A banker, not a former pest control business owner who now dabbles in the extremely complicated and high stakes arena of mergers and acquisitions. I get Paul the highest recommendation possible. You should get to know him today if you don't already. Doug McHale.” You all have a great week. We'll see you.Jim McHale

Anticimex

Jarl - past episode

New York State Pest Management Association

Dr. Jeff Scott

Sentricon

ScottsMiracle-Gro

PestWorld

Execution

Competing Against Luck

High Output Management

SMART

Western Pest

David Billingsly - past episode

Terminix

American

Bug Doctor

PestPac

Lenny Gray

McKay Bodily

Irwin Naval

ServiceMaster

Brandon and Brian - past episode

Inspect-All Services

John Myers - future episode

Rentokil North America

Bell Labs

VM

Rollins

PestOptix

Business Network International

Vistage

Pointe Pest

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