Defining the 4 types of pest control business revenue

Your total business revenue is not simply one-time revenue plus recurring service revenues. At least two other types of revenue do not fit neatly into those categories. Let’s review the basics.

• One-time service. True one-time services are customers whom you most likely will not see again. These services typically are performed once and do not lead to repeat business. Examples include emergency pest control services or one-off treatments for specific infestations. While these services can provide immediate revenue, they do not contribute to long-term financial stability. This revenue almost always must be “bought” again every year.
• Re-occurring services. These are seasonal services performed for customers loyal to you the few times they see you, even if they skip a season here and there. They might not be on a formal contract, but they return regularly and have you on speed dial should an emergency occur. This type of revenue is more predictable than one-time services but typically lacks the consistency of contractual recurring revenue.
• Recurring services. This is the key value driver that every pest control company owner knows the best. Whether it be general pest, termite, mosquito or other services, these are customers on annual auto-renew contracts. Note that a contract is not required for revenue to be recurring; a general understanding that the service repeats will suffice — as long as the passage of time triggers another service.
• Add-on services. As described, this is any “one-time” service performed for a customer with whom you have a recurring customer relationship. While these services are typically one-offs in nature, they increase revenue from current customers. Another plus is that the sales and marketing costs and effort are typically lower because the customers already know about your company.

Customer retention plays a role

The final piece in the revenue value puzzle is retention. Recurring and re-occurring customers are retained at different rates for various reasons. However, a low customer retention rate has many of the same profit-and-loss (P&L) impacts as a low recurring rate as a share of total revenue.

How it all fits

Companies with a high proportion of recurring revenue and customer retention almost always benefit from reduced marketing and sales expenses, more consistent revenue and higher overall profitability. Simply put, you do not have to buy back and onboard your customers every year.

This is easily demonstrated via marketing and sales spend. A recurring customer from last year who is retained is zero marketing and sales dollars — and hopefully, minimal administrative time and labor, too. If they were either a one-time customer or not retained, you’d have to buy back that customer with marketing and sales spending. Would you prefer your annual marketing budget go toward refilling the glass or to actual growth?

Understanding how your revenue mix fits within the recurring revenue spectrum is critical for understanding and using your financial statements. The effects of revenue mix can be seen throughout the P&L, from the obvious revenue to the cost of goods sold and operating expense line items detailed above.