When cutting costs, many businesses focus only on what’s inside their own four walls. But there are a variety of other, often neglected ways to save money.
Here, three Pool & Spa News Top Builders discuss how to work with vendors and subcontractors on lowering their prices or raising their level of service.
1. Ask for half-off. When the financial crisis hit last fall, Swan Pools’ Cecil Fraser went down the list of his outside office vendors.
“I’ve called each one of them and said, ‘Cut [my bill] in half and tell me what you’re going to take away in terms of service,” says the president of the Lake Forest, Calif.-based firm. “We’ve gotten significant reductions in just about everything.”
In some cases, he is told he’ll have to downgrade his service to get the price cut. “But we’re down in volume, so I’m going to do that,” he says.
When it came to service contracts for his office equipment, Fraser was willing to discontinue the maintenance agreement entirely if he couldn’t get the price he wanted. “I told them, ‘We need to maybe just cancel the service and run the risk of our stuff failing. Then I’ll have to pay you your full fare to fix [any problems],’” he says. “They said, ‘Well, why don’t we just redo the service agreement?’”
2. Renegotiate with landlords. While leases are binding agreements, they generally become less so when the property owner is worried about losing tenants. In most cases, finding a new renter won’t be easy in a market pummeled by shuttered businesses.
Joseph Solana Jr., CEO of Carlton Pools in Warminster, Pa., successfully renegotiated his rent. “We said, ‘Look, if we’re not profitable, you can’t be either. Therefore you need to adjust these leases,’” Solana explains. “Even if the leases aren’t a year old, they’re receptive to that.”
And the call probably won’t be a surprise. One of Solana’s landlords said that eight out of 10 tenants already had contacted him to renegotiate.
Solana was able to cut his rent, in the short term, by 20 percent. However, after a specified period he returns to the old amount, plus half of the savings — 10 percent — gets added on, almost as if he were paying back a loan. “Hopefully we’ll be in a better position when the time comes,” Solana says.
If opting for this plan, try to get the landlord to agree to the reduction for as long as possible. “Pick whatever [time period] you think you can get away with,” Solana says.
3. Ask suppliers for extra perks. Many industry members have no problem renegotiating deals with vendors from a different field. But when working with a fellow pool and spa professional, it can become more personal.
That’s why Mark Ragel takes a different approach. “Builders and suppliers are partnering to better weather the storm,” says the president of Tucson, Ariz.-based Patio Pools. “I can’t rake them over the coals, they’re pinched at both ends.”
Instead of negotiating for drastically lowered prices, his company tries to add services to the contract. Longer warranties and direct delivery are helpful perks; and tapping vendors for additional participation with charity projects can raise his company’s visibility.
The same approach may be taken with materials suppliers. “Our supply house will do twice-a-day deliveries because during the season our stores may need that,” Ragel says. “Some suppliers are creative and some aren’t.”
4. Work with subcontractors for greater efficiency. Rather than focusing only on price, try working with subcontractors to increase efficiency.
To that end, Fraser started having his excavators dig the deck along with the pool. “The deck guy is always complaining that he gets on a job and has to move 10 or 15 yards of dirt before he can set up his forms,” Fraser says. “So I have the excavator do that instead. He charges me more [than before], but he’s got a labor rate, where the deck contractor has a craftsman rate.”
You can also arrange to have gas and plumbing trenches dug ahead of time. This saves the subs time — and you money.
5. Prepare your own insurance bids. Ragel wants as much control over his insurance pricing as possible. That’s why his company prepares its own proposal document to supply to the insurance company, rather than relying on an agent or broker to do it.
“[Agents will] always have their interpretation of how to fill out the application,” Ragel says. “But this way, you provide specifications that narrow the playing field. We’re bidding exactly what we want.”
Having a proposal in hand also allows him to use more than one agent in the shopping process, thereby getting a broader view of what’s available.
The document itself should describe in detail what kinds of coverages and deductibles are needed, as well as provide pertinent information about your company, such as how many employees and vehicles you have. “You list all that, along with your safety programs, photos of your facilities, a little history about your company and why you’re a low risk,” Ragel says. “You’re selling yourself to the insurance companies.”