As a business person, I’m always looking for different ways of providing our customers value that others don’t offer. Eventually that meant getting out of the new residential construction business.
When I started my business in 1991, I opened up a small retail store with two trucks. My goal was to bring in service work by making people feel comfortable that they had a physical place to go, not just a phone that could be disconnected.
In the beginning it was take-what-you-could-get. We did weekly service, repair work — anything and everything. Then we slowly evolved into our current business model.
We built a pool the first year. Our main business was always service, but we got to a point where we would build about 30 new residential pools per year, alongside our repair work and renovations.
But because of the progress of our business and economic conditions, we have almost completely dropped new residential construction.
Part of this is because of our commercial pool management work. We got into it 12 to 15 years ago. We started out just opening, closing, cleaning and monitoring them. A lot of people kept asking me, “Do you do lifeguards?” I knew getting lifeguards would be a whole other ballgame, but eventually we went into that. Now we manage a lot of commercial pools and supply the lifeguards. We also have a supervisor who visits the pool.
In my opinion, you can’t do commercial pool management and residential construction both at the same time effectively. So we decided to focus on commercial management, residential service and renovations. That’s worked out very well for us.
We’ll actually build one or two new pools a year, but only under certain conditions. I won’t do them in our busiest months, May or June, because it coincides with everything else we do. They are strictly referral, and I will only bid on a new pool if I think we have a good chance of getting it — if we built their relative’s or friend’s pool and they’re highly recommending us. Otherwise I’ll just tell them we’re not interested.
The pool management work has also served us well because of the consistency. I have contracts, so I know I have, say, 50 pools that we’re going to manage. I may lose one, but then I’ll gain two or three. But I can count on that, so I can staff accordingly. I know I can hire my lifeguards over the winter so they’re set up for the spring. I know that revenue’s coming in. It’s similar to residential service in that way.
It also helps set us apart. I’m always looking to offer things that not everybody has. Pool management is very difficult and you have to be either in it or not in it. You cannot fail to have a lifeguard at a pool. Commercial pools are seven days a week. The pools are busiest on Saturdays and Sundays, and the health departments are out on those days, so there’s no resting. So it’s not for everybody. And it’s not easy to get into. You have to have a lot of experience, so Johnny’s Pool Service can’t just decide they want to do commercial pools.
When the economy started to go down, new residential construction became ultra competitive, because now you had the same number of pool companies competing for one-third or one-fourth of the pools. So all the big builders in our area dropped their price to be competitive, to keep their trucks running and their guys working.
We had enough work in service and renovations where it didn’t pay for us to build a pool to keep guys busy. We didn’t really get that affected by the recession. The pool management side didn’t miss a beat, except in renovations. The last few years have been very good for us.
The other thing about selling new residential pools is that it takes a lot of time. You have to do a presentation, talk about their kids and get them to feel comfortable with you. Then you still have to hold their hand after the pool’s built and explain how it works. In my opinion, our time could be used more effectively in the other areas of our business.
On a renovation, the customer already has the pool and knows how to maintain it. So there’s a lot less time after the sale that you have to spend making them feel comfortable.
I’ve also found renovations to be more profitable.
For one thing, our closing ratio is much higher on renovation than it is on a new pool. The market is still competitive, but less so. And often, we’re hired for a renovation by one of our service clients, so they already know and trust us. So, where it’s common practice to get three estimates to build a new pool, about half won’t do that for a renovation if they know and trust their service company to do the work. The other half will get the estimates, but you already have a relationship.
In new residential construction, even if I come highly recommended, a customer is still going to get three estimates. And I don’t want to be the company that’s providing a second estimate just to make the homeowner feel better, so they know the company that they’ve all but chosen isn’t taking advantage of them. It can be a waste of time.
I’ve also found the profit margins to be much better in renovation. With a new pool, you have a 20-by-40-foot installation that’s X amount of dollars and comes with these 15 items. It’s easier for a customer to compare apples to apples. On a renovation, there’s room for more labor-intensive work, which is more profitable. And there’s a good opportunity for us to upsell.
This model has really worked for us.
I feel most companies try to say, “What are my competitors doing? That’s what I should be doing.” I think that’s a mistake. I don’t want to do what my competitor’s doing. I want to do something different. I want to offer things that my competitors aren’t. I don’t want to play in the same sandbox, I want to differentiate myself, not just by saying, “I build a better pool.”