The essential guide to pest control business profit margin

Your pest control business profit margin is a key metric for determining overall profitability. Without it, you lack insights that help you determine the best pricing for your services or find areas for improvement.

The three biggest pest control companies in the US hovered around a 15 to 20% profit margin in 2023. While this benchmark is helpful, your pest control business profit margin may differ depending on your location, services offered, and company size. 

This is why it’s helpful to calculate your unique profit margin. We’ll show you how to crunch the numbers and dig into the details behind what influences your profit margin, including necessary costs like equipment, business licenses, and pest control software that help you become a profitable pest control business.

How to calculate your pest control business profit margin

Monitoring your profit margin is key for optimizing business growth and profitability. There are three types of profit margins, and each one provides critical insights into how your pest control business is performing.

You can tally each type of profit margin using the following formulas:

Gross profit margin

Your gross profit margin tells you whether your business is financially healthy and where you can cut costs or employ better sales strategies. 

Start by calculating your gross profit—the total revenue gained minus the cost of providing your services. These costs include labor and materials but don’t include taxes, operating costs, or debt.

Calculate your pest control business gross profit margin with this formula: 

((Total Revenue – Cost of Services) / Total Revenue) x100 = Gross Profit Margin

For example, let’s say your business earns a total revenue of $135,000 and has service costs of $60,000. You’d then calculate your gross profit margin:

(($135,000 – $60,000) / $135,000) x100 = 55.6%

Operating profit margin

Your operating profit margin provides a more granular view of your profit by considering all overhead, operating, administrative, and service costs required to run your business day to day. However, it excludes any debts, taxes, and nonoperational costs.

This metric is a good indicator of how efficiently your pest control company generates profit through your primary offerings. To calculate your operating profit margin, use this equation:

(Operating Income / Revenue) x100 = Operating Profit Margin

Let’s say our example company has an operating income of $28,000. We’ll divide that by our revenue of $135,000 to find our operating profit margin:

($28,000 / $135,000) x100 = 20.7%

Net profit margin

Your net profit margin is one of the most important metrics for tracking your company’s financial health. It can indicate whether you generate enough profit from your sales or if your operating costs are too high.

Net income, or net profit, represents your total revenue after subtracting all expenses. These expenses include your service costs, operational expenses, debts, taxes, and one-time expenses. It also includes any additional income streams as part of your total revenue.

To find your net profit margin, use this equation:

(Net Income / Revenue) x100 = Net Profit Margin

Let’s say our pest control business has a net income of $25,000. We’ll divide that by our revenue of $135,000 to find our net profit margin:

($25,000 / $135,000) x100 = 18.5%

How to do a cost analysis for your pest control company

A cost analysis identifies your fixed and variable costs so you understand the overall cost of doing business. Follow these steps to determine all of your overhead costs and how they affect your profit margins:

1. Track your fixed and variable costs

There are two types of costs associated with running a pest control business:

Fixed costs are any expenses that don’t vary depending on how many service calls you complete. They include business license fees, insurance, software subscriptions, equipment, and vehicle expenses. 

Variable costs are expenses that change based on the number of service calls you make. They include labor, materials, and fuel costs.

2. Calculate labor costs

Labor tends to be one of the largest expenses for pest control companies. You need to account for hourly wages, benefits, taxes, and other employee-related costs. 

Additionally, it’s a good idea to regularly assess whether you have enough staff to handle the amount of service calls needed to stay profitable.

3. Determine marketing and advertising costs

It’s recommended that you allocate 2%–15% of your annual revenue to marketing and advertising. The actual percentage depends on your pest control company’s current stage, with growth and scaling stages requiring more investment than startup and mature stages.

Remember, your marketing and advertising costs aren’t limited to print ads and direct mail. Test different approaches, like pay-per-click (PPC) ads, search engine optimization (SEO), and social media, to determine which methods provide the best ROI.

These three types of expenses can help you determine your pricing and profit margin, begin forecasting cash flow, and determine potential financing needs.

But first, ensure you’re taking all potential expenses into account. And remember, some can slip through the cracks, like that Google Ads campaign you started three months ago. 

6 common pest control costs to consider

Knowing your break-even point—or how much revenue you need to cover all your costs—is key to creating a healthy profit margin. Here are some common pest control expenses and what you might pay for them:

1. Licensing and certifications

Business license costs depend on where your pest control company is located, as well as which license type you need. 

For example, a California pest control business license requires a $120 application fee. You also need to consider the cost of training requirements depending on the type of pest control services you’ll provide, which California breaks into three branches.

If you opt to open a franchise, the cost can vary depending on which existing brand you buy into. Pest control franchise fees range from $15,000 to over $100,000.

2. Supplies and equipment

Starting a pest control business requires specific equipment, such as sprayers, respirators, and foamers. You’ll also need administrative equipment, like a vehicle, laptops, printers, and an office, to keep your operations running. 

FinModelsLab estimates the cost of office equipment and rental fees ranges between $200 to $5,000, while pest control supplies can cost anywhere from $200 to $2,000.

3. Pest control software

Capterra found that the average cost of top-rated pest control software ranges from $45 to $50 a month—or $540 to $600 per year.

Despite the cost, this software quickly proves its worth by improving your overall efficiency. When buying pest control software, look for products that combine invoicing, scheduling, field routing, and customer relationship management (CRM) features. These features help you maintain positive customer relationships, optimize your scheduling and routing, and automate invoicing.

4. Labor costs

Labor costs often make up the largest portion of your expenses, and for good reason. You rely on your technicians and administrative staff to keep your business running smoothly. 

The mean annual salary for various pest control service jobs ranged from $34,760 to $95,380 in May 2023:

• General managers: $95,380
• Business operations specialists: $63,660
• First-line supervisors: $61,180
• Bookkeepers and accountants: $44,830
• Pest control technicians: $44,390
• Customer service representatives: $38,510
• Receptionists: $34,760

Along with salaries, you need to factor in costs of benefits, taxes, training, recruitment, and any other activities related to hiring and retaining your staff.

5. Advertising and marketing

Depending on the growth stage of your company, expect to invest anywhere from 2%–15% of your revenue in advertising and marketing campaigns. Some typical pest control marketing costs include: 

• Paid media advertising, including PPC ads
• Print ads
• Direct mail
• Website and SEO
• Vehicle branding
• Email marketing

Marketing expenses vary depending on several factors, including the channels you focus on. For example, First Page Sage found that customer acquisition costs range from $212 for social media marketing to $1,201 for basic SEO. These varying costs make it critical to test which channels provide your pest control company with the best returns.

6. Insurance

Insuring your pest control business is a must—your state may even require it. Here’s a quick look at a few different types of insurance you’ll need to protect your business and employees against damages and injuries, plus average annual costs, according to Forbes: 

• General liability insurance: This covers third-party bodily injury, property damage, and advertising or personal injury claims that occur on client property. The average annual cost is $504.

• Commercial auto insurance: This insurance covers accidents and damage involving vehicles used for business. The average annual cost is $1,762.

• Commercial property insurance: This protects physical assets—like office buildings, equipment, and supplies—against fire, theft, and storm damage. The median annual cost is $804.

• Workers’ compensation insurance: This insurance policy covers employee injuries and illnesses that occur on the job. The average annual cost of workers’ comp insurance is $542.

• Professional liability insurance: Also known as care, custody, and control liability—or errors and omissions insurance—this protects against claims of negligence or mistakes when you provide pest control services. The average cost for this type of insurance is $735 per year.

How to price your pest control services

Pricing your pest control services to maximize profitability requires you to analyze your competitors, use pricing strategies, and maintain affordability for your target market. 

Here’s a quick look at how to do that. Need more details? Check out our in-depth guide on setting your pest control prices.

Conduct a competitive analysis of your local pest control market

Begin by identifying your local competition. Check out which services they offer, how they price those services, the marketing strategies they use, and what customers have to say about their service.

Remember, it’s important to research competitors in your local market, not just the overall pest control industry. Don’t rely on nationwide pricing data or prices for other locations, as service costs can vary widely by region.

Use pricing strategies

There are a handful of different pricing strategies you can use to provide affordable pest control services while maintaining a profit:

• Tiered pricing model: The most popular pricing model, tiered pricing, features a “good, better, best” set of service tiers. Each service tier is set at a different price point and offers more value than the previous one. This pricing strategy allows you to cater to different customer budgets while providing top-notch service.

• Cost-plus pricing: When using cost-plus pricing, you’ll need to calculate your direct costs and add a profit margin to set a final price. Aim for a 10%–30% profit margin on top of the costs of completing a service.

• Value-based pricing: This pricing strategy focuses on the value your pest control business provides rather than simply offering competitive prices. It requires you to emphasize your company’s unique value proposition to convince customers to pay more potentially.

Discover more ways to maximize the profitability of your business in our guide to optimizing your pest control sales.

Balance affordability with profit

Competitor research and different pricing strategies allow you to set affordable prices that still move your profit margin toward a healthy 10%–20% range. You’ll still want to highlight your business’s unique value to customers:

• Reliability and communication
• Availability for different types of services
• Types of products used, such as sustainable or pet- and child-friendly chemicals

Remember, the key is to find a balance between competitive pricing, profitability, and value for your customers. Review your pricing regularly and adjust if costs and market conditions change.

5 ways to improve your profit margins

Multiple factors can affect your pest control business profit margin. These include your geographic location, business size, the services you offer, how efficient your operations are, and more. 

Managing these factors is key when it comes to maximizing your profitability. Additionally, you can use the following strategies to increase your profit margins further:

1. Upsell and cross-sell

Cross-selling complementary services or upselling customers to a higher-tier service package is one way to increase profits. Some upsell and cross-sell methods include the following: 

• Discounted bundles
• Automated email campaigns
• Sales incentives for technicians to upsell while in the field

When done right, customers perceive upselling and cross-selling as personalized recommendations rather than sales tactics.

2. Update your pricing strategy

Regularly research competitor pricing and keep tabs on local market conditions to see whether you need to raise prices. Additionally, test different pricing strategies to determine if one resonates more with your ideal customers.

3. Train employees

Keep employees engaged with ongoing training. Upskilling or developing employees’ existing skills can strengthen their effectiveness in the field and minimize potential errors or the need to revisit a property.

4. Minimize costs

If your profit margin is slim, minimizing your overhead costs may bring it back to a healthy level. Some ways to do this include negotiating with suppliers, improving operational efficiency, and looking for ways to gain repeat business from existing customers.

Additionally, regularly maintaining your equipment, including vehicles, can provide long-term cost benefits.

5. Diversify your offerings

Diversifying your service offerings can unlock new cash flow opportunities, especially if you’ve already identified demand from potential customers. Complementary services like lawn care and mosquito control—or expanding your services to include multi-unit or commercial buildings—may require smaller up-front costs that pay off in the long run.

Maximize your pest control business profit margin with software made for your unique challenges

Software can improve your pest control business’s profit margin. Designed to improve efficiency, it can help you optimize your marketing and advertising efforts, streamline routes and scheduling, and monitor your inventory.

GorillaDesk offers pest control service software that improves efficiency with several features: 

• Scheduling, both in the field and in the office
• Dispatching and route optimization
• Automated invoicing, reminders, and payments
• Customer appointment confirmations and reminders
• Marketing email templates
• Customer satisfaction and review management

Learn more about how GorillaDesk can help you manage your profit margin without juggling paperwork. Start your free 14-day trial today.