A big question loomed at this season’s industry trade shows: What should we expect in 2023?
While every year ends with projections and prognostications, this one seems especially puzzling, as economic forecasts seem to collide with work realities for many in the industry. Increasing interest rates and inflation become a reality, while some experts see a recession in the not-so-far future. And as some pool/spa companies are experiencing a softening of leads, others are maintaining a brisk pace.
Cautious optimism seems to be the theme going into this year. It may be a good time to focus on the cautious. Here, industry veterans share some tips to prepare your company for the uncertainty.
* Get the most from the work you already have.
It’s an unusual time. While many in the pool/spa industry are concerned about the year ahead, they still are experiencing robust business, particularly in service.
All Seasons Pools, Spas & Outdoor Living in Orland Park, Ill. is seizing on this opportunity to garner more of a commitment from its service customers.
First, the company began requiring these clients to sign annual agreements as a condition for All Seasons to perform its service and maintenance. And, where many of its customers used to buy their own chemicals, which the service techs would then apply, clients now must purchase the chemicals from All Seasons. Not only does this open another revenue stream, but it makes the work easier for the service technicians and, therefore, more efficient for the company.
“If [the techs are] familiar with the product, they don’t have to spend time trying to figure out what they’re working with in the shed,” says co-owner Dan Lenz. “For instance, the algaecide that we use primarily is a certain dosage that the techs know right off the top of their heads. They … pour it right out of the bottle, into the pool, and they’re on their way. Whereas if you have somebody who has a gallon of who-knows-what, you’re trying to read the label or Googling the product to see what is the dosage of this product.”
* Charge what you actually need.
When replacing products for clients, charge them current prices, even if the unit was purchased some time ago for less.
“We haven’t been shy about raising prices,” says Mark Reed, president of Memphis Pool, in Memphis, Tenn. “When we get a price increase, we raise the price. You do it now because, even if you have product on the shelf that you bought six months ago, the cost to replace it is going to be the new price. So you have to adjust.”
When increasing the customer’s price, consider going the route of margin percent rather than margin dollars. Say a piece of equipment used to cost you $1,000, and you sold it for $1,500 — a 50% markup. If that unit increases to $1,200, mark it up by the same percentage to $1,800. Don’t simply add the same $500 markup to the updated cost, which would amount to $1,700.
“Because of that, our profit margin dollars are up from a year ago, even though the quantity of [equipment] we sold is down,” Lenz says. “We sold less but made more.”
When he receives calls from homeowners who fall out of the company’s general service area, insisting that they want All Seasons to maintain their pools, Lenz will determine what it would really take to make it worthwhile to send a technician so far away. Sometimes it’s significantly more than other customers are paying. But if they’re game, then the company will take on their pools.
* Move toward diversification.
With demand being so hectic, some companies have pared down to their core products and services to keep up. Some builders, for instance, took a break from renovations in order to focus on the demand for new pools.
Now’s the time to consider going back to services the company once offered, or perhaps even adding new services. Builders who strayed from renovations can consider offering that service again in order to cast a wider net and perhaps compensate for any reductions in leads and backlog.
All Seasons is taking on more renovations again. But it’s also preparing to add a new service. The company is putting 10 to 12 of its staffers through the Pool & Hot Tub Alliance’s certified pool inspector training. Some of these trainees hold positions you’d expect — service technicians who are very familiar with the mechanics of a pool. But Lenz and his team didn’t limit it to these employees.
“I also have sales staff who are going through it, and my service office manager is going through it,” Lenz says. “My intent to be able to fulfill everybody who calls looking for an inspection and fit whatever their timeline is, even if it’s today.”
* Rethink your sales approach.
To work with the most realistic prices, builders might want to try something that they probably wouldn’t under any other conditions, suggests Paul Porter, CEO of Premier Franchise Management, based in Granite City, Calif.
Usually, contractors advise their clients and peers to nail down a complete design, with all features and materials specified, as early as possible to avoid the confusion and disruption of last-minute changes.
But with the possibility that prices can increase at any time, Porter suggests leaving room for additions to be made after construction begins. This way, if a customer adds something later down the line, then the pricing will be closer to real-time, leaving less of a chance of losing profit from an underbid.
“If you can, don’t sell the kitchen sink,” Porter says. “We still do upselling [in the initial sales consultation], but we want to leave some dry powder. Some consumers won’t go for that — they want the whole package, and they want it done. I’m just saying that right now, with pricing pivoting, sell them a pool they can afford, and if they want to add things, let them add it at a price there’s margin in.”
