Our pool business as a road to retirement

[Arif]

AS some of you know we moved from Panama to San Antonio last year and opened a pool maintenance business. Below is a short outline of where we are in our business. My intent for this thread is to outline the good and bad of owning a small business like Calmloki did on his real estate note thread. I'll post weekly updates as things happen.

Hey Ken!
Well as you know I bought a pool service/maintenance company in San Antonio. We've grown about 34% from November of last year and this month we qualified to work on home warranty calls. The lady that manages the region including Texas said we should be able to get about 500 calls per year. I just hired a new guy last week to handle the increase workload.
One thing I have noticed is that new prospects are more price sensitive than they were last summer. Some just want us to come out and teach them how to take care of their pool rather than sign up for weekly cleanings.
We're still using that finder's fee from the pool store with great success though.

I think in this environment you must think out of the box. What worked last year might not work today so you have to adapt and over come. Just like in the military.

 

[Ed_The_Gypsy]

OK, fess up.

Howcum u left Panama?

 

[REWahoo]

Arif, your finder's fee is a great way to generate new business. For those of you who might not know, Arif gave his business cards to employees at local pool supply stores and offered them $50(?) for each new customer they referred to him. Advertising that he pays for only if he gets a paying customer - hard to beat.

 

[BunsGettingFirm]

Yeah, I'm more curious about the leaving Panama part as well. Care to share?

 

[Arif]

It got way too crowded and expensive in Panama. Just to get our son to pre-k was an hour round trip ordeal in Panama traffic. Those that have been know what I'm talking about.
The cost of living had risen to a level that was comparable to San Antonio so we figured if we were going to pay US prices we might as well live in the US. Several of our friends moved back for the same reason.
As a side note our income was coming from our rentals in the US which we were selling to buy a larger complex but then the credit crunch hit and we weren't able to close. While we were sitting with cash in the bank we had little rental income. So our choice was to head back to the US and buy a business.

OR
I could just say I was running from the Columbian drug cartel.

 

[Ed_The_Gypsy]

Thanks, Arif. Understood.

It has been suggested several times here by people who know what they are talking about that it is just as cheap--or cheaper--to live in the USA as it is to go elsewhere. This is one more point on the curve.

Thanks,

Gypsy

 

[freebird5825]

Welcome back to the good ol' USA.

I picked up on something in your quoted post that I may be able to give you an idea to play around with. You stated "Some just want us to come out and teach them how to take care of their pool rather than sign up for weekly cleanings."
Allow me to propose a compromise between weekly pool cleanings versus none at all, that I myself used to save money for periodic house cleaning.
I used to get my house cleaned 2x per month, 4 hours each session. Rate was $10 per hour, for a total monthly cost of $80.
I FIREd and money became a bit tighter. So I proposed to my existing housecleaner that she come once a month, spend only 4 hours, and I gave her a long overdue raise to $15 per hour. My total monthly cost is now $60.
I do the minor maintainence in between. She was free to pick up another small job, where she can make more than the $20 less she was earning from me.
Does it sound like I came out on the short end? Strictly by the numbers, yes.
But I still have a housecleaner and she was very happy to get the raise without having to ask. She still gets the whole house clean by putting forth some extra hustle, within the agreed upon 4 hours. I eliminated dusting the knick-knacks unless she had time left over. Guess what - she still dusts those knick-knacks.

Think about my approach from the customer's POV. Your customers really like the pool cleaning service, but have to cut back the frequency to lower their overall cost.

 

[Arif]

Welcome back to the good ol' USA.

I picked up on something in your quoted post that I may be able to give you an idea to play around with. You stated "Some just want us to come out and teach them how to take care of their pool rather than sign up for weekly cleanings."
Allow me to propose a compromise between weekly pool cleanings versus none at all, that I myself used to save money for periodic house cleaning.
I used to get my house cleaned 2x per month, 4 hours each session. Rate was $10 per hour, for a total monthly cost of $80.
I FIREd and money became a bit tighter. So I proposed to my existing housecleaner that she come once a month, spend only 4 hours, and I gave her a long overdue raise to $15 per hour. My total monthly cost is now $60.
I do the minor maintainence in between. She was free to pick up another small job, where she can make more than the $20 less she was earning from me.
Does it sound like I came out on the short end? Strictly by the numbers, yes.
But I still have a housecleaner and she was very happy to get the raise without having to ask. She still gets the whole house clean by putting forth some extra hustle, within the agreed upon 4 hours. I eliminated dusting the knick-knacks unless she had time left over. Guess what - she still dusts those knick-knacks.

Think about my approach from the customer's POV. Your customers really like the pool cleaning service, but have to cut back the frequency to lower their overall cost.

Thanks for the suggestion Freebird. We actually have one customer that we do that for with the understanding that she cleans out the baskets and adds the chemicals on the odd weeks we aren't there. She has been so so in keeping up her end of the bargain. Unfortunately a pool can turn green in a week unless chems are added, especially in the spring and summer. In the fall and winter you can get away with this since the pollen isn't falling and it's not as hot.

 

[Rambler]

How much do you charge to maintain the pools? Just wondering. I have a pool in California (I'm in Tokyo most of the year) that does a pretty decent job of taking care of itself (salt water chlorination system and auto pool sweep), but I really would prefer to have it swept really well once a month or so all year round. Never had the chance to find someone to do it, since we are only there for brief stays. I do it myself or have the kids help when we are in town (usually gets swept once at Christmas time, and about 3-4 times in the summer when it is in use).

 

[Arif]

For a chemical only service rates start at $125 and full service including vacuuming starts at $150 per month. Rate vary widely by location due to competition. California Florida and Nevada have lower rates than Texas. I don't know how some of those guys make any money.
Speaking of rates. One thing I've noticed is that the lower your monthly rates the more "issues" you have with the customer wanting to cut back or freebees. On the higher end, the owners are usually workaholics and never bother us. They usually say "just fix it, we don't care what it costs." Now those retirees...oh brother. They watch you out the window with their stop watch or hover over you while you're working.

For those interested in where I bought my route here is the website: Pool Route Sales - Swimming Pool Business for Sale - Sell Pool Business

 

[Rambler]

Thanks Arif, took a look at the site, there were two in my area, one of which had already sold. I'm not particularly looking to get in the business, but I did a rough calc to see how much they were charging per month, and it is under $70. That means about $16-17 per week. You're right, how could they make money at that rate? At once per month, perhaps it is possible, but Does this include the chems? or does the owner provide the chems?

Thanks

R

 

[freebird5825]

Thanks for the suggestion Freebird. We actually have one customer that we do that for with the understanding that she cleans out the baskets and adds the chemicals on the odd weeks we aren't there. She has been so so in keeping up her end of the bargain. Unfortunately a pool can turn green in a week unless chems are added, especially in the spring and summer. In the fall and winter you can get away with this since the pollen isn't falling and it's not as hot.

YW.
Yes, I understand about the "turning green" landmine. I used to assist my neighbors with vaccuuming their inground pool in return for free swimming anytime.
The customer will perceive a cost savings by "helping" with the chems/basket emptying. However, if the customer fails to perform, the pool turns green and now the pool cannot be used. It will take some extra w*rk and lots more chemicals to return it to pristine condition. This will most likely convince them to resume the full service.
The ball remains in your court regardless.

PS I'm a retired engineer BTW. I love to do process analysis, analyzing boundary conditions, testing variables and predicting outcomes. Hope you don't mind.

 

[unclemick]

Thanks, Arif. Understood.

It has been suggested several times here by people who know what they are talking about that it is just as cheap--or cheaper--to live in the USA as it is to go elsewhere. This is one more point on the curve.

Thanks,

Gypsy

Everyone take note - Tonanoxie has been discovered - the Royals are playing some good ball.

heh heh heh - gonna stay on the hill in Missouri. . Lawn care types, garbage pickup and tree trimers/specialists seem to be the tough highly competitive small businesses around here.

 

[Ed_The_Gypsy]

Hey, unc,

How are you dealing with the cost of health care? One serious problem could wipe me out.

 

[Nords]

PS I'm a retired engineer BTW. I love to do process analysis, analyzing boundary conditions, testing variables and predicting outcomes. Hope you don't mind.

It makes for interesting pool parties...

 

[unclemick]

Hey, unc,

How are you dealing with the cost of health care? One serious problem could wipe me out.

Weeellll - one should take what I say with a grain of salt - cause I'm the knothead who went 12 yrs starting 1993 without health insurance rather than pay the 700 plus Cobra would have cost back then in Louisiana (age 49). Post Katrina on meds for 140/90 bp, 1 pack a day smoker paid 158 for 5k deductible (age 61/62) Blue Cross/Blue Shield of KC - later jumped to 10k deductible rather than raise premiums. Now 65/66 pay 178 for a premium type plan to supplement Medicare. And my bp drugs are $8/mo generic. And I finally quit smoking 2 yrs ago.

Hindsight - I only had a minor wrist fracture and my bp meds weren't that bad so I was lucky.

heh heh heh - I hesitate to have health be the tail that wags the dog - but my impression says there is a big variation across the country. Perhaps others can weight in.

I did not realize how much med insurance varied from state to state.

 

[Arif]

Rambler,
Usually the pool guy provides the chemicals here in SA. In other places it might be different but I still think you would have to do way too many pools to make it worthwhile at those prices.

PS I'm a retired engineer BTW. I love to do process analysis, analyzing boundary conditions, testing variables and predicting outcomes. Hope you don't mind.

Don't mind at all. I'm a numbers guy and sometimes I forget about everything else. So another view always helps out.

 

[Arif]

Just a bit of background info on our business:

Last February we bought 34 additional accounts (currently 95 accounts) from a company that wanted to concentrate on repairs only. After the sale, the owner agreed to forward new customers looking for weekly service to us for free. We've received several new customers from him since February.

Last month we signed up with a home warranty company to handle pool repairs in town. The manager for our area said we could expect 500 calls per year. I thought great this would be a goldmine for our company! After a month of working with them we realized there is a LOT of red tape and lower net profits. To be fair some of the red tape is due to state law. The lower profits came in the form of the warranty company only paying for time at the residence. Our normal customers that need repairs are billed at a higher rate to compensate for free estimates, billing, and other support services that need to be done. We had the opportunity to answer 500 calls per year however after looking at the reality of it we decided to pass on the opportunity. We're still busy, but our scheduled work has doubled in terms of profit and our volume has been cut in half.

Lesson learned: There are only so many hours in the workday and as an employer my job is to find the highest bidder for those hours available. By just looking at increased volume misses the point.

Next week I'll cover our goals for this year and employee issues.

 

[Arif]

Well one thing I've learned in business is that you learn something new everyday. The route we bought came with an employee which I thought, "great no training required!" Last month the alternator went out one of our trucks so he left it at his house and he used my other truck to finish his route. Upon leaving he tells me the keys are under the mat. So I go to his house to work on truck and look under his door mat. As I pull up the mat I see a receipt from the wholesale dealer that I get my supplies from. I put it in my pocket assuming it's for me and look under the mat in the truck for the keys and change out the alternator belt. Upon getting home I look at the receipt and notice that it has my employee's name along with "his" company name on it. Long story short he was using my truck and supplies to service his own accounts. I fired him and was venting with one of my other employee and he mentions one of his friends is looking for a job. I hired and trained him and he has been working with us for 3 weeks now with nothing but praise from our customers.
Lesson learned: Trust your gut. Something didn't "feel" right about our problem employee but I trusted the guy who I bought the route from.

Our customer count has dropped to 90 pools mostly due to home sales. The goal for this month is 110 accounts and I think we'll be able to meet that goal. Word of mouth has been our best weapon against the slowing economy. By the end of the year we should conservatively be at 150 accounts and 3.5 employees with a net of about 150k.
One of our customers owns a landscaping business with 75 employees. I'm always picking her brain about growing a business without going crazy and burning out. They've been in business for 10 years and her main advice is don't get too big. The headaches aren't worth it. After dealing with the home warranty business I have to agree. Slow and steady does win the race.

 

[wildcat]

Hi Arif.

Couple questions:

So what have you found to be the most profitable part of the business?

What is your biggest cost? Labor I suppose?

Do you service residential, commercial (along the lines of apt complexes for ex) or both? If not the apt complexes, have you tried to bid on any contracts or have you worked with any property mgt firms to cover this end of operation? Bet you would have a good approach in this area given your RE background.

Have you also tried any free advertising such as Craigslist? Doubt it would be as solid as the lead generation but it could lead to some business.

Have you tried getting in with any realtors? Same lead generation theme.

Any recurring revenue generation? For example, do you complete a repair and mention that you offer pre-paid monthly rates to service the pool or to make sure it is running tip-top shape? Maybe if you could demonstrate the possibility of a pool repair being much more $$ than your monthly rate.

Ever consider cleaning as an additional service? I don't know if that is too competitive of an area but seems like it complimentary service that you could sell.

 

[Arif]

The most profitable part of the business also brings along the biggest headaches. I've found more challenges dealing with customers that just call us up for repairs. Some want to haggle on the price after the repair and others just can't seem to make up their mind on what they want. I also need to do a better job writing out contracts which I usually don't do.
I've decided to concentrate on growing the weekly cleaning service. It's stable and year round versus the repairs which are primarily in the spring and summer. One area which has huge profit margins is drain and cleans. I usually charge $300 to drain a pool which can take 3 hours max. Another is replacing drain covers (new law) which I charge $200 plus the cover for 10 minutes of work. I can get away with the price because I'm SCUBA qualified and the owner doesn't have to drain the pool. When I get some free time I plan to visit the hotels and condos to offer my services.

Out of the 90 pools, we have 4 commercial pools and I just bid on a new one today. I got that referral from a property manager we did some work for. Commercial pools can be demanding giving the volume of people using the pool on a daily basis however we charge accordingly.

I haven't tried craigslist but will look into it. The last time I looked there was a guy offering his pool services for about half what I charge. Not looking to compete with him at those prices.

I need to work on the realtor angle. Probably should have done that in early spring when it was quieter. Now we are as busy as I want to be. I'm not looking to sqeeze the last bit of profit out of the business just a large and consistent income from the weekly cleanings. For the most part employees take care of the weekly cleanings which will leave me with more family time. The repairs are more challenging because I do most of the repairs myself.

 

[Arif]

Good news! We got the contract for the HOA pool! From a numbers standpoint we grew 6% in gross income and average account value from last month. I'm really happy with our growth because we had several accounts that cancelled due to customers selling their homes, job losses or other reasons this month. The source of our growth has changed as well. Last year most of our growth came from online referral services but this year it's been word of mouth. Our goal for June will be a 20% increase in gross income and a 10% increase in average account value. By the end of the year we are shooting for 175 pools that we'll maintain on a weekly basis.

Still haven't been out to visit HOAs and hotels to inform them about the drain cover law changes. However, we have notified the property managers we currently work with and offered our services.

As I've mentioned before this business is not "our baby" and we don't have an emotional attachment to it. It is a vehicle to increase our income that will alow us to retire within 10 years. Our goal is to grow at a reasonable rate that is sustainable and doesn't increase the number of hours worked. When we chose to discontinue the warranty work, this was a direct result of this philosophy. By concentrating on weekly cleanings we can train a new employee within two weeks and he's on his own versus repairs which can take months to train for. I'm still learning on the repair side even after a year of owning the business.

Next week we'll expand our referral program to other pool supply stores in other parts of the city. I ordered 1000 business cards so I'll put them to good use.

 

[CCdaCE]

Thanks for continuing to share your business story/experience!

I see we share similar taste in avatars.

-CC

 

[Arif]

I'm glad someone is enjoying it.
I started this thread because I wanted to share the nuts and bolts of owning a business. I've lost numerous accounts from lack of knowledge in the pool industry but we've learned and continue to grow. Owning a business is really not that risky. If I lose a customer it's not the end of the world however if I lose my job that has much more of an impact.
One thing I realized was this thread allowed me to think through different strategies for my business as well as what is really important in the whole balancing act.

Yeah, I'm a big fan of the Matrix as there are a lot of similarities to real life and how people think.

 

[Buckeye]

Does your company have a website? Do your employees have any stake in the profitability of the company or do they receive only an hourly wage?