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.
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.