Q&A With Dan Lenz

It appears the economy is very gradually improving. Have you seen signs of this?

Yes, a little bit: 2010 was slightly better than 2009 for us, and we're hoping 2011 will be significantly better than 2010 was. I think we're seeing a lot better consumer confidence than we have in probably 16 to 18 months. Right now we're just coming out of winter in the Chicago area, and we're definitely seeing an increase in interest compared with a year ago as far as calls coming in and people we're talking to.

Given that demand for pools is not nearly as high as it was a few years ago, how have you evolved as a business?

While we have always done outdoor living spaces with outdoor cook centers and fireplaces and such, a year ago we made a big push to concentrate on those types of additions to the backyard, whether or not we are doing any sort of pool construction or renovation for the client.

For example, a year ago we redesigned our inground pool display in front of our retail location. We tore out some concrete that was in between the two display pools, and put in an outdoor fireplace, and outdoor cook center, paver brick retaining and sitting walls and a paver brick patio and a firepit. We changed the display to reflect that we've got the ability to do this, and now with every project we do, we talk about some aspect of it. A lot of our clients have some interest in renovating the space around their pool.

Not long ago we did $150,000 worth of this outdoor living stuff for one client alone. We had renovated his pool five years ago, adding caves and waterfalls, and he then called me last year, wanting to add an outdoor living space. He said the builder he was working with just couldn't hit what he was looking for. He said, and I remember it like it was yesterday, "I know you don't do that stuff, but we loved what you designed with the pool, so can I pay you to design the yard, and then I'll find someone to do it?" I said, "Actually, we do that kind of work, so I can design it and do it." That's a perfect example of why we changed the display in front of our business.

Have these efforts made a difference?

Yes, selling and installing these backyard living pieces probably added to last year's construction revenues by almost 8 percent, and in this economy, adding that 8 percent keeps us from turning backwards. Our growth overall was about 5 to 6 percent.

Do you build more pools with new or existing homes?

Probably 60 to 65 percent of the pools we build are with new homes.

Given that home building has slowed so significantly, have you been doing more renovations to stay in the black?

We've always done renovations, but it was something where people came to us, whereas now we're marketing this more. We saw what was happening in the South and West a number of years back, so as far back as 2006 we started developing all our marketing materials to include mention of remodeling and renovation.

We've got a pretty sizable customer database of around 26,000 customers, and there are a lot of old pools in Chicago. When those people see what can be done now, it starts to spark some interest. We tend to do more of the outdoor living stuff with renovations than with new construction.

Clients' inability to find financing has been a big issue for many pool builders in the last couple years. Has this been an issue for you?

Yes, it certainly has been. For example, about a year ago, we had a client who wanted to have a splash pad as part of his backyard poolscape, but he ended up pulling that out of the design to cut the cost down a little bit because even though he had gotten pre-approved for a line of equity, when he went back to the bank, they told him, "We can't give you that much money anymore." So we did the project without the splash pad, but now he's talking to us about putting it back in.

Now with a lot of our projects, there's no financing involved. The clients write checks. A lot of our renovations, in particular, are that way. It's just people spending their money to make the backyard different.

To help our clients who do need some financing, a couple industry vendors have established financing options to pass along, which is a welcome change.

Are your competitors cutting prices, and is it affecting your business?

In the last eight months or so we've now seen a couple of the more reputable builders around us lowering pricing, where it almost seems they're grasping at straws to stay afloat.

We certainly have a good grasp as to what things cost and we know what our costs are, and we also know what our competitors costs are and when you see some of the numbers on quotes that people are bringing in, you have to sit back and wonder: What are they doing? Because there's no money in it for them at these numbers, unless they're really cutting out some aspect of quality that you can't see. It's just a scary place to be when you've got these long-time, established businesses falling into the same practice as the guy that's working out of his garage.

What are your thoughts on the influence of the Internet on the pool and spa industry?

I think it's positive. It's good for people to have the ability to research and gain knowledge about pools. It certainly means we have to be at the top of our game because people are smarter now. They have better ideas of what they can get products and services for from other places because of the Internet. It makes us better, truly. Our people in the last few years are much more well versed in all aspects of everything they're talking about because of it.

We had to make changes in our retail store many years back because of the Internet developing into a source for purchases. The margins we had back in the '90s are not what they are today, so it forced us to streamline what's going on in our store and offer better service in the store so people come back.

I'm excited about a new Web-based system for lead generation we're setting up with Paramount Pool Systems. They're going to provide a system that integrates with our Web site called Biz Boost. Prospective customers coming to our site can pop their e-mail address into a box, and over the course of 90 days, they're sent three reports that are produced by us with Paramount's help.

The first report is about finding a contractor and what to expect in the pool-building process. The second one comes out a few weeks later, and it's on building a green, eco-friendly pool, and it mentions salt systems and automatic covers since we offer those. The third piece is about putting their minds at ease as to the maintenance and care and cost of running this thing after they put it in. All these e-mails have our name and our logo on them, so they're customized to us.

In between e-mailing those three pieces, Paramount sends out a couple e-mails that look like they're coming from us, and simply ask the recipient: Did you get these e-mail? Did you have time to look through it? If you have any questions, give us a call, and then it's personalized with one of our employee's names with his/her phone number, too.

What is your biggest concern for 2011?

Consumer confidence in general is my biggest concern. If consumer confidence can continue to improve or at least stay strong, then I think everyone in our industry has a great chance of succeeding.