In the Texas suburbs outside of Dallas and Fort Worth, the swimming pool market has finally taken a turn for the better.
Inquiries are up at Claffey Pools in Southlake, from almost 1,500 for all of 2012 to already 1,150 as of early July. So are Claffey’s contracts, with roughly 500 projects (new pools, renovations and backyard enhancements) underway by the same period, which is nearly equal to all of last year.
“We are definitely climbing back up,” says Shelly Claffey, who owns the business with her two brothers. “Last year, we were pretty busy, but I think we had a lot of shoppers. There are more people pulling the trigger this year.”
Across the country, other pool builders are saying the same thing. After a punishingly long recession, the economy is creating, rather than losing, jobs. House prices are rising again, making home improvements much more appealing to homeowners. Both inflation and interest rates have remained relatively low, keeping major and minor purchases affordable.
It all adds up to a more confident consumer who is ready to stop putting big decisions on hold, from buying a new car to renovating their home. “As the housing market gains a little traction, people are saying, ‘OK, let’s build that pool,’” says Chris Christopher, director of consumer economics at IHS Global Insight in Lexington, Mass. “Wage gains [for workers] are anemic, but that growth is still outpacing price gains, which gives consumers some spending power. They may feel it’s time to do a little home improvement.”
That’s welcome news to pool builders, but responding to this release of pent up demand for pools isn’t exactly easy for companies after so many years of contraction. “The year started off with a bang, and no one was really prepared for it,” says Charles Elfert, president of Pleasure Aquatech Pools in Mandeville, La.
Firms want to be able to respond to revived customer activity but don’t want to expand like crazy to take advantage of a burst of orders that turn into nothing more than a blip. “We’d love to have a new office, but we’re staying put for right now,” says Jeff Kearns, owner of Wildwood Aquatech Pools in Fresno, Calif. He remains wary after last year’s rebound proved to be short-lived.
Kearns and his counterparts across the country are finding the middle ground in this recovery — reworking job responsibilities, watching financials carefully, and hiring selectively — to serve new customers and rebuild their businesses without overextending themselves. Here are their stories.
Going upscale: Georgia Classic Pools
As the recession hit, Vance Dover realized that if he wanted Georgia Classic Pools to survive, he would have to move the company into a new, more upscale niche. “The only people out there who could buy a pool were the ones with money,” says Dover, the owner and president of the Canton, Ga.-based pool firm. “Middle class people were worried about their jobs and their house. They weren’t interested in a pool — they were worried about whether they’d lose their job or their house.”
The repositioning worked. “I haven’t had a pool under $100,000 this year, and I’ve even got one that’s $200,000,” says Dover, whose firm expects to build 25 to 30 high-end pools in 2013. That’s half the volume of the past, but the builder’s elaborate backyard environments also go for as much as twice the price of more modest project.
He’s managed the demands of these large, expensive projects by relying on a tiny, but essential, group of five employees who are supported by an extended network of experienced subcontractors. “We’re really not hiring more people,” Dover says. “I’m cautious about hiring because we don’t really know what Obamacare is going to do to us.” While many pool firms are encountering labor shortages in masonry and other trades as they try to scale construction back up, that hasn’t been the case at Georgia Classic. “I pay people quickly. My plumber sends me an invoice, and literally a check goes out within 24 hours,” says Dover, who believes the company’s prompt payment policy also creates motivated subs who want to do top-quality work.
With the market improving, Dover has his eye on gradual growth for his company. But he’s not interested in borrowing to pay for any expansion. “I definitely have people calling me to offer me capital,” he says. “I tell them I don’t want it, because that means I have to pay it back.” While some might find that decision limiting, Dover finds it freeing. “We have found we can run the company better without debt,” he says. “You’re not having to chase down checks to pay bills.”
Watching expenses: Easton Pool and Spa
Like Vance Dover of Georgia Classic Pools, the Hobaica brothers do everything to operate Easton Pool and Spa debt-free. “We bought the business from our dad in 1993 and he always said, ‘If you can’t afford it, don’t buy it,’” says Robert Hobaica, vice president of the Easton, Mass., firm, which expects to build 50 to 60 new pools and renovate as many as 130 in 2013. “We always buy equipment outright and own our real estate. We’ve always believed in keeping our overhead low.”
The conservative approach certainly served them well during the downturn, but it’s working for them now too. With customers keeping them busy with signed contracts for gunite and vinyl-liner pools as well as renovations, the Hobaicas decided it was finally time to replace some aging company equipment at their recovering business. They upgraded the point-of-sales software at their two retail outlets, updated their inventory and purchased a handful of new trucks, all with cash. “We don’t believe in banks,” says Hobaica.
Easton has been slowly hiring as well, bringing the company’s workforce up to 45 people, including this spring’s new hires. “It’s hard to find guys with good experience,” Hobaica says. “Luckily, we’ve been able to keep our key guys.” Those veteran employees have been critically important in training new employees after the lengthy recession decimated the market for skilled laborers in many areas.
Investing in infrastructure: Claffey Pools
At Claffey Pools in Texas, the recovery is well underway. Inquiries and projects are on the rise; so are revenues, which are already more than a million dollars ahead of 2012. “We are way up over last year,” says Shelly Claffey, who handles sales and design for the sibling-owned pool firm.
With business surging, the Texas builder has hired more salespeople, more project managers and more construction employees. “It’s just supply and demand,” says Claffey. “These guys can only handle so much.” With good subs hard to find in their Texas market, she and her brothers opted to bring selected work like glass tile and backyard decks in-house to ensure they got the level of craftsmanship they expected. They even asked their father, from whom they bought the business over a 10-year period, to return part-time and do quality control.
“Years ago, it was just a basic pool,” Claffey says. “Now people want the whole outdoor environment. A piece of art is what we are creating in the backyard now.”
To support the growing complexity and volume of such projects, Claffey Pools is investing not just in people, but in infrastructure as well. In January, the company expects to switch over to new software that will allow employees to check on the status of a project with the click of a mouse. “If you get to this [volume] of pools, you can’t operate without something like that,” says Claffey. “If you don’t change, you don’t grow.”
How does Claffey Pools make sure these significant investments aren’t outstripping its resources? By daily attention to its financials, just as it did in the last decade of boom and bust. “Back in the day, when we started doing not as well, my brother said, ‘We need to make some serious decisions,’” Claffey says. “If we start seeing that we aren’t doing what we are budgeted to do, then a red flag will go up.”
Turning to subcontractors: Wildwood Aquatech Pools
In Central California, the swimming pool market has woken up, but it hasn’t quite shaken its hangover from the recession. “The market had to be so competitive [in terms of pricing] because there were so few pools to go around,” says Jeff Kearns, owner of Wildwood Aquatech Pools in Fresno, Calif., who says demand is recovering, but pricing power has not. “It’s still extremely competitive in terms of pricing. Everyone’s busy, but they haven’t upped prices.”
That squeeze represents a major concern for Kearns, whose margins also are getting pressured by increased labor and material costs. Add his understandable skepticism about whether this economic rally is for real, and you end up with his business decision to avoid adding employees and instead rely on subcontractors for the moment. “There’s not quite enough work yet,” he says. “I don’t want to hire someone just for a short time. Plus, qualified plumbers and electricians are hard to come by.”
As he waits to see if this recovery sticks, Kearns isn’t taking any unnecessary risks. Inventories are tight, by design. Salespeople work on commission only. Cash, rather than credit, is the payment method of choice. New vehicles are under consideration, thanks to improvements in cash flow, but they remain on the wish list for now.
“When we really see things turn around for a longer period, then we’ll start investing in employees, superintendents and office technology,” Kearns says. “We’ve had these little bursts before.”
Staying cautious: Pleasure Aquatech Pools
Between the recession and the massive 2010 oil spill in the Gulf, Pleasure Aquatech Pools of Mandeville, La., has had more than its share of national and close-to-home economic challenges in recent years. But 2012 was full of good surprises. “Last August, there was a big increase in interest,” recalls Charles Elfert, Pleasure Pools’ president. “This year, people started to commit to pools — nice pools.”
It has meant new and expanded responsibilities for everyone at Pleasure Pools, where the employee head count has decreased from a peak of 10 workers to six today. “As your market shrinks, you have to have people who are willing to do more [duties] because there’s less work overall,” Elfert observes. That includes him and his adult daughter, both of whom also do sales and design. “We do whatever needs to be done.”
With 25 new pools constructed in just the first six months of 2013, though, Elfert has begun carefully adding staff. A new employee manages the 5,000-square-foot warehouse, does deliveries and other light repairs. Elfert also has invested in pool service, establishing the business two years ago. Today, he has two contractors servicing what has grown to a 70-pool portfolio and a reliable source of revenue. “There’s a lot to be said for maintaining your own product,” says Elfert. “It gives us a chance to build a long-term relationship with a customer, which we like.”
It also differentiates Pleasure Pools from the startup pool builders whose bargain-basement prices and pickup truck operations are giving headaches to established firms like Elfert’s. “These guys in the pickup trucks who are building pools could be paving driveways tomorrow,” says the Louisiana pool builder, who has much more invested in his business and therefore much more to lose if demand evaporates again.
But Elfert remains philosophical. “Like most things in life, nothing comes without risk,” he says. “The reality is, we‘re both taking a risk. They are betting that things will not get better, and we are betting on the fact that more and more people will want pools.”