Heading into the fourth quarter has everyone
guessing at what 2024 will
bring. Economic uncertainty
is the safest prediction, and as we have
witnessed in the prior post-COVID
years, it has become somewhat of a
theme. This puts many pool service
professionals in a position where they
must prepare for the unknown. That is
not the easiest thing to do.
Damn it, man, I’m a pool guy, not
an economist! I and many others
anticipated 2023 to be troubled, and the
pool industry to be plagued with rising
prices. So, I was half right. The nation’s
economy did not dive into the toilet.
Still, the cost of chlorine, other necessary
chemicals, and equipment continued
to increase at what I consider to be an
obscene rate.
Add to this, the problem of the
current early buy. Historically, a large
purchase in the fourth quarter for many
companies that can warehouse products
— taking advantage of the often heavily
discounted early-buy rates — has been
the norm.
Now, this has turned into a gamble,
with the fear of purchasing too much
and then facing a normalization of
demand, causing you to be upside down
on your inventory during the season. The
opposite is as much a concern for those
who balk at the early-buy commitment,
and then are forced to pay higher prices
than were available only months before.
Beyond that, we had the incandescent
light bulb snafu of 2023 that left many
with stockpiles of unsellable product (I
don’t want to know what you did with it).
The way this rolled out was stealthy, with
the Department of Energy banning the
manufacture of most incandescent light
bulbs taking effect in July of 2022.
The information was there for us
in the field, but with everyone working
full out and the recent DOE VSP law
that went into place at that same time,
it was easy to overlook this change in
lightbulbs. It is thought by many that
the manufacturers did not do a very
good job of making their customers
aware of the looming demise of
Edison’s incandescent electric light (the
Department of Energy gives credit for
the invention to Humphry Davy of Great Britain in 1835).
Sadly, the deadline for selling those
now-illegal bulbs was July of 2023, and
it’s September, so…maybe you’re just
using them up at home. I am unaware of
anything looming for 2024, but honestly,
I was blindsided by the lightbulb thing
along with everyone else.
Regardless, there are things we can
do to prepare for the upcoming year that
will be beneficial no matter the state of
the 2024 economy.
Preparation
Always take care of the money first.
Review the financials for the past three
quarters. Identify opportunities to reduce
expenses and increase prices. It would
help to analyze these numbers and break
them down by customer profitability.
You’ll need to factor in all sales to each
pool owner. Include everything from
recurring monthly service fees, add ons
in service, and any other relevant
purchases.
When calculating customer expenses,
you must include all business costs
with that homeowner. This includes
payroll, liability insurance, professional
insurance (if carried), the cost of
product, dollars invested in employee
training, marketing, vehicle maintenance,
fuel, and any other business expense
you recognize. Some of these things are
black-and-white fees; for others, you will
need to really think about the amount
of time spent at a specific pool to
determine its cost to you as a business.
Another cost that is accrued but not
as easy to quantify is the PIA (Pain in the
Ass) tax. Dealing with a chooch regularly
is an emotionally draining experience;
they should pay for this. Or at least
be a line item on your accounting
sheet. Whether that customer is just
a dependably unpleasant encounter
or someone you have to chase after in
order to get your money, these things
take a toll.
For such customers to be profitable,
the amount they pay must exceed the
total cost in dollars and aggravation they
cause. And the margin has to be big
enough that the account is worth having
(if it’s a push, let that one go).
The PIA tax is subjective. There is no
formula I can give you to tell you how to
calculate it. I think of it as follows:
Customer profit = (customer revenue) –
(customer expense) – (PIA tax)
Customer profitability = (customer
profit) ÷ (customer revenue)
This assigns each customer a
profitability value. If a customer has
significantly lower profitability, then the
choice is simple. Either raise their rates
or get rid of them. There are times when
firing a customer is a sound business
decision.
Now Is the Time
Double check your doormat. Does it
still say welcome? Customer service is
essential for all businesses. It is even
more critical for a seasonal, service based
company dependent upon repeat
business. Many other service companies
are in your area, and your customers
chose you. That should make you feel
honored. Do your employees own that
when they’re in your clients’ backyards?
It doesn’t mean we should dismiss abuse from those with a stick up their
waste line, but we must appreciate those
who appreciate us and give us their
business. I know you have customers
that call to complain. How many do you
have that call with accolades? Do people
recommend you to friends and family?
How often does your company name
come up on that word-of-mouth page on
social media for your town?
With an economy that could go
either way, now is the time to dissect
and measure your marketing return on
investment (ROI) over the past nine
months. This will help you to build your
program for the upcoming year. The U.S.
Small Business Administration suggests
7 to 8% of your gross revenue should
go toward your marketing. You can call
bullshit on that number and ignore it if
you like, but you’ll wish you hadn’t if the
economy tumbles.
In an industry where most service
companies think, “My word of mouth
for my company is so good, I don’t
have to advertise,” you can establish
yourself as the expert in your community
while they ignore the opportunity. To do
that, you must develop a persona for
the recession pool owner that sees the
value of swimming pool service despite
the economic downturn. This target
audience will have specific preferences
and needs that differ from those of the
past 15 years. You must identify those
needs, create a fictional representation
of your ideal client, and be prepared to
market to that person.
Marketing is one of the first areas
businesses typically cut back on
during a recession. That is a huge
mistake for most, but it allows you to
capitalize on their blunder. You should
continue to market your business
during this economic cluster duck and
consider investing more. This will aid
in positioning you as the area expert
and also give the appearance that your
company is the only game in town.
In short, now is the time to make
investments. We prepare for challenging
economic times by increasing efficiency.
To do that, you need to see how long
you can get by with subpar equipment
that should already have been replaced.
No, you need to replace it now, that was
a joke! Ensure your team has the best
tools for the job. Trust me, this will also
help in increasing employee retention.
Lastly, keep up with your trade
publications, like this one, AQUA, and
they’ll keep you up with changes in the
industry. Trade show season is almost
upon us, providing another excellent
opportunity to stay on top of industry
goings-on and network with other
professionals in the pool business.
I know I will be at the AQUA Live:
Leadership Retreat in Fort Lauderdale,
Fla., in December, and I hope to see you
there.
One more thing: Remember, what
we do is hard. Do not forget to stop
occasionally and look back at everything
you have accomplished. Take that in for
just a minute. If you look back and are
not in awe of how many people you have
made happy in this business, look back
a little harder. Then, no matter how good
2023 was for you, let’s put plans in place
for an even better 2024.
This article first appeared in the September 2023 issue of AQUA Magazine — the top resource for retailers, builders and service pros in the pool and spa industry. Subscriptions to the print magazine are free to all industry professionals. Click here to subscribe.