I just answered this question last week in one of the online forums. Actually, two guys asked me about it back to back. The first guy asked what good profit margins are. The next guy asked what profit margins even are and how to calculate them.
And you know what? I get it. It seems like such a basic question if you’ve been in business for a while. But taking me back 15 years ago, I had no clue either. I had no idea what profit margins were or why they mattered.
Now I run Pest Badger, and we do over $10 million a year. And I can tell you that understanding profit margins is absolutely critical to building a valuable, scalable pest control business.
Let me break down everything you need to know about profit margins, what you should aim for, and how to improve them.
What Are Profit Margins and How Do You Calculate Them?
Let’s start with the absolute basics. Profit margins tell you how healthy your business is financially. You could be doing $2 million in revenue, but if your profit margins are only 1%, you don’t have a valuable business.
The easiest way to calculate profit margins is simple. Take all your revenue, subtract all your expenses, and what’s left over is your profit.
That’s it. Revenue minus expenses equals profit.
Now, you might hear the term EBITDA thrown around. That’s just a fancy word for profit. It stands for earnings before interest, taxes, depreciation, and amortization. But at the end of the day, it’s just another way of talking about profit.
So don’t get intimidated by the jargon. It’s simple math.
What Profit Margins Should You Aim For?
Here’s the breakdown I give people when they ask what good profit margins look like in pest control.
If you’re doing 10% to 15% profit margins, you’re in a good spot. You’re running a healthy business.
If you’re doing 15% to 20%, you’re doing really well. You’re above average and building something valuable.
If you’re doing 25% or higher, you’re absolutely crushing it. You’re knocking it out of the park.
I have a buddy I talked to this morning who’s doing big numbers in revenue and he’s at 29% profit. He’s murdering it.
I’ve also seen pest control companies doing 30% to 40% profit margins when they get really big. Because you get economies of scale at that level. You can buy products a lot cheaper. You get group rates on everything. Things get more efficient.
But if you’re doing 10% or more, you’re in a good spot. Personally, I’m always shooting for 15% to 20%. That’s a solid target for a growing company.
Why Early Stage Companies Have Sky High Margins
Now, here’s something important to understand. If you’re a one person operation right now, you’re probably doing 80% profit margins.
And that’s awesome. I’m happy for you. But just know it’s not always going to be that way.
When it’s just you, you don’t have a lot of overhead. You don’t have employees. You don’t have multiple trucks. You don’t have a CSR. You don’t have an office. Your costs are super low.
But as you start to grow and add employees, your profit margins are going to come down. That’s normal. That’s expected.
So don’t brag too hard about your 80% margins when you’re a one person show. Because as soon as you start building a real company, those margins are going to drop to more normal levels.
Growth Versus Profitability: Two Different Business Models
Here’s something we need to unpack. There are two very different types of pest control businesses, and they have very different profit margins.
The Lifestyle Business
The first type is the lifestyle business. This is someone who wants to do $600,000 to $800,000 in revenue, run 40% profit margins, and make $300,000 to $400,000 a year.
They don’t want to be at the office all the time. They have a great service manager or a lead technician running things. Maybe they have three or four techs total. They’re living a great life.
There is absolutely nothing wrong with this model. It’s a fantastic lifestyle. You’re making great money. You have freedom. You’re crushing it.
And honestly, this is where a lot of people who are motivated purely by money end up. They hit that million dollar mark, they’re making $400,000 a year, and they tap out. They’re happy. They don’t want to grow anymore.
Again, nothing wrong with that.
The Legacy Business
The second type is the legacy business. This is someone who wants to build something big. They want to change the industry. They want to create a company they can pass down to their kids. Or they want to build something valuable they can sell for millions of dollars.
These people are willing to sacrifice short term profit for long term growth. They’re reinvesting heavily in marketing, hiring, infrastructure, technology, all of it.
Their profit margins might be lower in the short term because they’re spending aggressively to grow. But they’re building something way more valuable long term.
Both models are valid. It just depends what you want at the end of your career.
Even a One Truck Operation Can Be Profitable
Let me say this too. Even if you just want to be a one technician operation making $80,000 to $90,000 a year with your route, there’s nothing wrong with that either.
That’s very profitable for you personally. You’re making good money. You have a job you control.
Just know that at the end of your career, your business probably won’t be worth much. Because you don’t have systems. You don’t have employees. You don’t have recurring revenue. You are the business.
But if you’re taking that $80,000 to $100,000 a year and investing it wisely, you can still build wealth. It’s just a different path.
How Recurring Revenue Affects Long Term Margins
Recurring revenue is everything when it comes to long term profit margins. Let me explain why.
You’re already paying for the customer acquisition cost. You might as well make that customer worth as much as possible, right?
Let’s say you spend $100 to acquire a customer. If you sell them a one time ant treatment for $250, you only made $150 profit. That’s it. You’re done.
But if you put that same customer on a recurring quarterly plan for $1,000 a year, you just made an additional $800 with the same customer acquisition cost.
Which one makes more sense?
And here’s where it really matters. When you go to sell your business at the end of your career, a company is going to come in and look at your financials. They’re going to look at recurring revenue versus one time revenue.
They’re going to pay you a way higher valuation for recurring revenue than they will for one time jobs.
Now, if you have customers who come back every single year for the same one time service for three, five, seven years, a good buyer might count that as recurring. They’ll look at the lifetime value of your clients and whether they can be upsold into more things.
But at the end of the day, they’re buying cash flow. They’re buying profitability. They’re buying EBITDA. And they’re asking, “What’s our return on investment if we buy this thing? Where do we think we can grow it?”
That’s why recurring revenue is so important. It makes your business way more valuable.
Which Services Have the Highest Profit Margins?
Pest control in general is pretty profitable. But there are certain services that have insanely high profit margins.
Bed Bugs
Bed bugs are extremely high profit. You can charge, let’s say $3,000, and complete the job in a couple hours with one technician. Whether you’re doing heat treatment or liquid treatment with a callback, it’s very profitable.
The catch is you have to be available immediately when you get the call. Customers want it done ASAP. You need the equipment ready. There’s setup time involved. And it’s kind of a gross job that not a lot of people want to do.
But they’re going to pay you well for it.
Termites
Termite work is another one. High profit margins. You can do big jobs that pay really well.
Exclusions
Exclusion work is huge. We’ve done $10,000, $15,000, even $20,000 exclusion jobs that take one day. These are extremely high profit margin jobs.
Insulation and Encapsulations
Insulation and crawl space encapsulation work is also very profitable. These are bigger ticket jobs that customers are willing to pay for because they solve real problems.
Mosquitoes
Mosquito control is super high profit. Especially when you add on systems like InTice Care units that you just refill when you’re there. We’ll talk more about that in a minute.
Lawn Care High Profit Services
On the lawn care side, your high profit margin jobs are things like aeration and overseeding. These are upsells that you do once a year, and they’re very profitable.
Fertilization is obviously high profit too. But aeration is a great recurring upsell every single year.
And here’s the key. Even if you’re selling a one time job like aeration, make sure it’s recurring every year. Don’t just do it once and forget about it. Let the customer know you’ll be coming back next year too.
Same thing with cockroach cleanouts or bed bug treatments. Always think about how you can turn a one time job into recurring revenue. Can you put them on a general pest service after the bed bug treatment? Can you do monthly inspections after a cockroach cleanout?
There’s always a way to add recurring value.
How Bundling and Upselling Improve Margins
Let’s talk about bundling because this is huge for profit margins.
The more you charge for something, the better your margins get. Because your cost of goods sold doesn’t change much based on how much you charge.
Here’s an example. Let’s say you have a service that includes flea and tick control and mosquito control, all wrapped into one quarterly visit.
Your average ticket just went from $150 to $300 for the same technician who’s only going to be there an additional ten to twelve minutes.
Or think about mosquito control with InTice Care units. These are systems you install that you just refill when you’re there. It’s an additional $40 to $60 a month, and it only takes your tech an additional six to twelve minutes per stop.
You’re doubling the revenue for that one stop with minimal additional labor.
Here’s the math. Let’s say your tech does 20 jobs a day at $100 each. That’s a $2,000 day.
Now you add upsells at $40 per job. It takes a little longer, but you’re generating an additional $800 in revenue that day. You went from $2,000 to $2,800 in the same route.
And most of that $800 is profit. You have a little bit of product cost and a little bit of extra labor because the stops take longer. But you’re not spending more on drive time because you’re not adding more stops. You’re just generating more revenue per stop.
That’s how bundling and upselling improve your profit margins dramatically.
What to Do If Your Profit Margins Are Low
If your profit margins are low, you only have two options. Raise prices or reduce costs. That’s it.
Let me break down where to start.
First, Look at Your Pricing
Are your prices accurate? Are you charging enough? Most pest control companies are undercharging. Raise your prices and see what happens. You might lose a few customers, but you’ll make way more profit on the ones who stay.
Second, Check Your Route Density
Are you doing four stops a day because you’re driving all over the place? Are you working eight hours but only generating revenue for two of those hours because you’re spending the rest of the time driving or doing inspections or doing sales calls?
Route density is critical to profit margins. If you’re driving half the day and only servicing customers the other half, you need to tighten up your routes or hire someone to handle the sales and inspections so your techs can focus on revenue generating stops.
Third, Reduce Overhead
Look at your expenses. Are there things you’re paying for that you don’t need? Can you negotiate better rates on products or insurance? Can you reduce waste?
But honestly, I would start with raising prices and improving route density. Those two things will have the biggest impact on your margins.
Profit Versus Revenue: What Actually Matters?
Here’s a question I get all the time. What’s more important, profit or revenue?
Profit. No question.
But in our industry, lawn care and pest control, everyone asks about revenue. “How much revenue are you doing?” “How many techs do you have?”
It’s like everyone’s just trying to outdo each other on revenue. And that’s cool, I guess. But at the end of the day, all that matters is profit.
Would you rather have a $500,000 company doing 50% profit margins or a $1 million company doing 1% profit margins?
The answer is obvious. The $500,000 company is way more valuable because it’s generating $250,000 in profit. The $1 million company is only generating $10,000 in profit.
Revenue is vanity. Profit is sanity.
Know Your Goals and Build Accordingly
At the end of the day, your profit margins depend on your goals.
If you want a lifestyle business, you can optimize for higher margins. You can slow down growth, tighten up your operations, and run a 30% to 40% profit margin business that throws off serious cash.
If you want to build a legacy business, you might run lower margins in the short term because you’re reinvesting heavily in growth. But you’re building something way more valuable long term.
Both paths are valid. It just depends what you want.
Lifestyle businesses usually take longer to grow. But they’re more profitable along the way.
Big companies that are growing super fast are typically not as profitable in the short term. But they’re going to be worth way more when they’re done.
Neither is right or wrong. It’s just about knowing what you want and building accordingly.
If you want to learn more strategies for growing a profitable pest control business, join our free Facebook group, Pest Control Millionaires. We’ve got over 2,000 active members sharing what’s working every day. And if you want the complete playbook for building a million dollar pest control company, grab a copy of our book, Zip Code Kings.
Now go check your profit margins and start optimizing.
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Read the Ultimate Guide: Pest Control KPIs: The Complete Guide to Tracking the Numbers That Actually Grow Your Business – Jonas Olson
