Our pool business as a road to retirement

[Arif]

The website is on the todo list. DW was suppose to be working on it but got sidelined when we started doing the warranty work. It will be nothing fancy just some pictures of "before and after" shots, customer pools, contact info and our services.

Our employees are hourly workers however they think like owners. I've been thinking about when we sell the business whether to take a few accounts and give them to one of the employees. That's a few years off and a lot could change but I think that would be a great bonus for him.

 

[utrecht]

Im surprised at the fact that people are willing to pay good money to have someone maintain their pool (I shouldnt I guess be...people are dumb and lazy for the most part).

I have 2 drain covers and changed them myself by just holding my breath, diving down, unscrewing the olds ones and screwing in the new ones. As you said, it took 10 minutes.

I brush the pool twice a week or so in the swimming season and and never in the fall / winter. I do have a Polaris sweeper thingy and no trees in the backyard.

I have an automatic clorinator attatched to the pool equipment and I supplement it with a gallon of plain old generic liquid bleach about once every 4 days in the summer (needs no bleach at all in the winter) and my pool has been sparkling crystal clear since day 1. Im on my 7th year of owning the pool now. Ive never had a speck of algae, let alone an entire green pool.

The money wasted on unecessary chemicals (pH up..pH down..yellow out...ect) amazes me. Good for you that its all working out for you though.

 

[Arif]

Well, I guess pool care is like everything else we pay for in life. While not rocket science, most of my customers either can't maintain their pools because of a physical limitation or they are so busy career wise they'd rather spend time with their family rather than cleaning their pool.
For those in the latter category they probably rationalize it like this: at work they make $100/hr so working on their pool they lose $100/hr. Some might say they don't make that much but most of my clients are self employed or professionals. I have some customers who I have never met before. They signed up through the internet lead service and send their check each month.
We don't target the diy types as we couldn't make any money off of them. However, there are plenty of people that are so focused on their work (or afraid of losing it) that they spend an insane amount of hours working and spend what little free time they have with their family.
It pays to know who your customers are and not every customer is a good customer.

 

[Arif]

Well, it's been almost two weeks since I last posted here and we've been as busy as we want to be. We've been in business exactly one year and so far it's been a great year.
We bid on a new commercial pool two weeks ago and found out we won the contract today. So far this month we've grown 15% in gross revenue (month over month)thanks largely to this new contract. While I was talking to the maintenance guy he mentioned that we were the only pool company that he found with worker's comp. and general liability. I did another bid for a commercial pool and the guy there told me the same thing. Most pool companies hire indepedent contractors to avoid the requirement for worker's comp and employment taxes. I think we'll keep our employees and it turns out to be a competitive advantage.
To meet our goal of 155 accounts (currently we have 97 accounts)by the end of summer we've increased our marketing budget by 45% and will be reiterating our compensation program at the local pool stores since they have new employees that aren't aware of it. Speaking of marketing, we signed up for the yellow pages last February and I think we've gotten two calls. Unless we start getting more calls from them we won't be renewing next year.
As far as retiring early, our goal is to continue growing the business for another 8 years and then cash out. The good thing about owning a business is your networth goes up as the business grows. So we'll also continue to save a large portion (atleast 50%) of our income and purchase foreclosures which is what we were doing before the pool business. For me there is not a better way to make money than real estate and owner your own business.

 

[Arif]

Forgot to post this lesson learned:
I got a call from a guy who I was planning on buying his pool route. He tells me that he is no longer taking new customers so he will them my number. I've never met him in person but was glad he was willing to forward any leads my way.
So often we hear about competition in business and never sharing with your competition. This is the second time I've had offers like this and the business owner has never asked for a referral fee. Just goes to show you that your competition is not always your enemy.
Also got a 50% raise from one of our customers. Guess we're doing something right.

 

[CCdaCE]

Nice!

-CC

 

[Arif]

June was our best month ever! Our revenue grew 22% over May numbers as we picked up a total of 2 large apartment complex contracts. Unless I hire another tech we are maxed out on our ability to service commercial pools since they have to be done in the morning before the bathers get there.

One thing that I have not been able to successfully deal with are complaints. Just today I got a call from one of our new customers complaining that our tech hasn't shown up in two weeks. We leave door hangs but they say they haven't received them. I highly doubt my tech is skipping their pool because with 100+ degree weather the pool would have turned green by now. We get atleast one or two customers that claim this each month. It normally ends with the customer seeking another pool company. If anyone has advise on how to handle this better let me know. I am open to suggestions.

BTW-I've had customers that I service personally tell me that no one came to clean their pool. We finally figured out their dogs were literally eating the door hangs we were leaving for them!

 

[CCdaCE]

Is it always the same tech.?

Sometimes it's best to let those problem customers be someone else's problem, if you are at full capacity.

Maybe if the customer doesn't see them, they assume they never cleaned the pool.

-CC

 

[Arif]

It is the same tech but he has 45-50 accounts he services each week. No other complaints from long time customers.

Yeah, that's what we've been doing but I wanted to see if there was a better way of dealing with it.

I've even had a customer tell me his 80 year old mother is at home and she didn't see him come by. I'm thinking to myself: is she posted at the pool 24/7? She doesn't take naps during the day?

 

[Nords]

One thing that I have not been able to successfully deal with are complaints. Just today I got a call from one of our new customers complaining that our tech hasn't shown up in two weeks. We leave door hangs but they say they haven't received them. I highly doubt my tech is skipping their pool because with 100+ degree weather the pool would have turned green by now. We get atleast one or two customers that claim this each month. It normally ends with the customer seeking another pool company. If anyone has advise on how to handle this better let me know. I am open to suggestions.

How's your churn rate? Are these customers the 10% that you want to "fire" anyway?

Maybe they're complaining as a pretext to firing you, no matter what you do. So when you lose them would you be replacing them with happy (or at least non-complaining) customers?

This would be a great excuse to build a database of problem customers to be shared among pool-service companies. But that's probably all sorts of illegal/unethical.

 

[Arif]

I haven't tracked our churn rate but from my month to month comparison I'd say we lose on average 1-3 customers per month out of 100. We gain on average 7-10 new accounts per month so it's not a huge problem however I see it as money walking out the door. WE've been fortunate enough to actually increase our average account bill so while we lose 1-3 accounts per month the replacement accounts are paying more money on average. So I guess it might be a neccessary evil in that our margins improve with little to no additional effort. Current customers aren't willing to pay more for the same service so I guess this is a by product of that.

I used to keep a small database of the accounts we've lost and used it to both improve our customer service and avoid problem customers. The pool business is really small here so we share information on problem customers that don't pay or complain a lot.

 

[Nords]

I haven't tracked our churn rate but from my month to month comparison I'd say we lose on average 1-3 customers per month out of 100. We gain on average 7-10 new accounts per month so it's not a huge problem however I see it as money walking out the door.

I think AOL and Facebook would be jealous of that turnover ratio.

If you have to spend more time & effort on retaining your current customers than you would on getting new ones, then your only concern would be running out of new customers...

 

[utrecht]

Maybe instead of putting out a door hanger each visit, you could give the customers some sort of punch card that attatches to the pool equipment with a zip tie. Then your tech punches the card each time hes there. The card cant "fall off" and the punch proves that he was there.

 

[Nords]

Maybe instead of putting out a door hanger each visit, you could give the customers some sort of punch card that attatches to the pool equipment with a zip tie. Then your tech punches the card each time hes there. The card cant "fall off" and the punch proves that he was there.

This door hanger/card punch issue reminds me of a nuclear story.

Years ago there was a research/training facility operating a Navy nuclear reactor, so the Naval Reactors inspectors would occasionally check safety & cleanliness. Comments made by the inspectors would be recorded and the company would have to write a letter to NR telling them what they were doing to fix the problem(s).

On one visit an inspector noted that the floor was dirty. Next letter to NR said that the company had cleaned the floor and added a floor-cleaning log to make sure that the floor was kept clean. Next visit the inspector noted that the log had hourly slots but that it had been more than an hour since the last log entry. Next letter said that the log was modified to emphasize hourly checks. Next visit the inspector noted that the hourly checks were occurring exactly every 60 minutes, which seemed unusually precise (e.g., falsified). The log policy was changed to require random visits every hour at intervals not to exceed 60 minutes. Next visit the inspector noted that log entries were still being missed. The log policy was changed to include supervisor initials next to each log entry. Next visit the inspector noted that some supervisor initials were missing.

It's easy to form the impression that the inspectors were a bunch of martinetic jerks, and unfortunately that reputation is not undeserved. However in this case the inspectors were only checking whether the company was doing what it said it was going to do-- they were only inspecting compliance, not the rules themselves. The more rules the company made for themselves, the more things the inspectors could check for compliance... and the more things they could find "wrong".

Which shows how far off track the company had gone from the original question: Was the floor clean?!?

As you've pointed out, Arif, if the pool is clean then it's pointless to argue whether or not the pool guy was there…

 

[Arif]

This door hanger/card punch issue reminds me of a nuclear story.

Years ago there was a research/training facility operating a Navy nuclear reactor, so the Naval Reactors inspectors would occasionally check safety & cleanliness. Comments made by the inspectors would be recorded and the company would have to write a letter to NR telling them what they were doing to fix the problem(s).

On one visit an inspector noted that the floor was dirty. Next letter to NR said that the company had cleaned the floor and added a floor-cleaning log to make sure that the floor was kept clean. Next visit the inspector noted that the log had hourly slots but that it had been more than an hour since the last log entry. Next letter said that the log was modified to emphasize hourly checks. Next visit the inspector noted that the hourly checks were occurring exactly every 60 minutes, which seemed unusually precise (e.g., falsified). The log policy was changed to require random visits every hour at intervals not to exceed 60 minutes. Next visit the inspector noted that log entries were still being missed. The log policy was changed to include supervisor initials next to each log entry. Next visit the inspector noted that some supervisor initials were missing.

It's easy to form the impression that the inspectors were a bunch of martinetic jerks, and unfortunately that reputation is not undeserved. However in this case the inspectors were only checking whether the company was doing what it said it was going to do-- they were only inspecting compliance, not the rules themselves. The more rules the company made for themselves, the more things the inspectors could check for compliance... and the more things they could find "wrong".

Which shows how far off track the company had gone from the original question: Was the floor clean?!?

As you've pointed out, Arif, if the pool is clean then it's pointless to argue whether or not the pool guy was there…

It is a slippery slope once you go down that road. We went from small slips that we would put on the door jam but those would fall off so we went with the door hangs. That's about as far as I'm willing to go. It's called diminishing returns and if it works for 95% of our customers then that's good enough for me. I guess the answer is finding customers that are like us.

 

[Arif]

Ok. I've been kicking this idea around but not sure if it is ethical and I'm looking for input. Our long term goal is to have about 200 accounts. Once we reach that number I plan to package up the [-]difficult[/-] excess accounts and sell them off each year. This method has two benefits:
1. Generate additional cash from the sale of accounts
2. Reduce the number of high maintenance accounts

Also note that businesses who buy accounts have a 90 day guarantee so if the customer cancels they will get a refund on that account.

 

[REWahoo]

I sounds not only ethical, but downright smart.

Question is, who are you going to find who will pay you to take your problem clients off your hands? And if you do find someone and they buy once, will they buy again next year or will you have to find another [-]sucker[/-] buyer?

 

[Arif]

I sounds not only ethical, but downright smart.

Question is, who are you going to find who will pay you to take your problem clients off your hands? And if you do find someone and they buy once, will they buy again next year or will you have to find another [-]sucker[/-] buyer?

Since REWahoo said it must be ok!

Actually people from all over the country buy accounts just like I did last year. Most buyers are people that aren't currently in the business so there should always be a steady flow of buyers. Plus by then I could higher a customer service rep that handles all the problem customers until we sell them. That's the plan anyway.

 

[Nords]

I sounds not only ethical, but downright smart.
Question is, who are you going to find who will pay you to take your problem clients off your hands? And if you do find someone and they buy once, will they buy again next year or will you have to find another [-]sucker[/-] buyer?

Let's read that question again, this time substituting the phrase [-]toxic waste[/-] "subprime mortgages" for "problem clients"...

 

[Arif]

Nords,
I wouldn't call them toxic waste or subprime mortgages. These customers are high maintenance customers that take up a lot of time but pay on time. When I was buying my route my main concern was, "are the customers paying you on time." The buyer also has a 90 day guarantee which I used a few times when buying my routes.

 

[Nords]

These customers are high maintenance customers that take up a lot of time but pay on time.

No, I agree with you, as long as there are buyers for this kind of seller then with full disclosure you should be fine.

I'm a bit bemused/surprised that the buyer would think that they'd prefer to have a customer you're tired of dealing with, and that the buyer thinks they can do a better job than you've done, but then that's not your concern!

 

[Arif]

Ok. Well, the last couple of weeks have been quiet. We're now looking for another employee so I can get my hours back down due because of the new commercial accounts. I posted an ad on craigslist and recieved about 20 emails and resumes in the first few days. One thing I've learned from past interviews is that people who aren't used to working outside in 100 degree heat don't last long. If an applicant doesn't have pool experience but worked in construction or landscaping they generally do well. Those who worked in an office for the last 5-10 years usually won't make the cut.

I've been debating if I want to use the pizza shop model or the pest control model. The pizza shop model utilizes the employees truck and pay him mileage depending on current gas prices. The pest control model is buying a truck and have the employee use it for his route. Obviuosly there are pros and cons with each model. I've decided for now on the model with the lower upfront costs, pizza model. I don't plan on keeping the business for more than 5 years (even though I only planned on staying in the Army for 3 years and ending up serving 11) so I figure why spend money on assets that require maintenance, insurance, and gas. The employee also benefits in that the rate I pay is about twice what they pay in gas so the excess covers the maintenance of their vehicle. Sometimes this does cause a problem as I get applicants that are qualified but have a car instead of a truck. I don't allow employees to carry chemicals in their car due to the fumes and danger of transporting it in a closed vehicle.

Our general liability insurance is due to expire next month. The membership in the pool association includes general liability of $3 million (at half the price) versus the current $1 million coverage I have. So I'll be canning the current GL insurance at the end of the month. Now if I can just find cheap worker' comp. insurance.

 

[Snidely Whiplash]

Arif,

Are you still around? Been a while since you have posted here and I have been curious as to how things are going for you and your business.

 

[Arif]

Can't believe it's been almost six months since I posted last. Thanks for those that inquired about how we were doing.

Well, shortly after I posted on here my business dropped about 20% during what usually is the busiest time for the pool industry. Our customers were feeling the effects of the recession and could no longer afford our services. It felt like all my customers worked for the same company and were being laid off. At that time I cut out all nonessential activities and focused on increasing business.

As I looked at my list of customers I saw a trend that I hadn't noticed before. The makeup of our customers was changing. We were losing residential customers and gaining HOAs (home owner association) pools. I decided to focus on that area of the business that was still growing. I started talking with property managers who worked for HOAs. The strategy worked and within 4 months we were back on track and February will be an all time high from a net income standpoint. We even won a government contract to maintain an Olympic size pool at a local college. There is also another opportunity to bid on a contract for all the community pools in town worth over $100,000. That contract comes up for bid every four years and we'll be keeping an eye on that when it's time for renewal.
I'll be interviewing another technician to handle the increased workload. We even started another business a couple of weeks ago. This new business has the potential to be very big and I'll discuss it later as we gain traction.

 

[harley]

Excellent news, Arif! Way to go with focusing on the positive instead of wallowing in the negative. To me that's the sign of a good business person. Good luck going forward.

By the way, you think you could get me a pool pass if I come visiting?