There’s a terrific board game called Ticket to Ride whereby players essentially act as train tycoons in a race to build tracks across the nation. The longer your track, the more points you score. The fun part is trying to predict the configuration of your competitors’ routes so you can intercept them by running your tracks through their territories.
Some pool service companies are playing a very similar game, only the stakes are dangerously real.
Not unlike the steam-engine industrialists who seek board-game dominance, there is a breed of pool service professional whose sole motivation is to build up large, valuable routes that they can sell off for a tidy profit.
It’s called route building, and its a practice that appears to be on the rise as the economy improves and more homeowners seek regular service. But not everyone thinks route builders are playing fair.
Here, PSN explores this growing practice, and its mostly unwelcome impact on the industry.
The route of the problem
To hear some pool pros tell it, route builders are the current scourge of the service trade.
In their zeal to attract new customers, route builders, some contend, are aggressively marketing low prices. A common tactic is to offer the third, sixth, nineth and twelth month free, which might average out to monthly service for as low as $50 a month. Your average pool pro isn’t able to make ends meet working so cheap.
This is conditioning homeowners to expect service at such low rates that it’s pricing pros out of entire markets.
So just like in Ticket to Ride, one person comes out ahead while the rest are left picking up the pieces.
“There are some neighborhoods that I won’t even go into just because of the pricing pressure,” says Ken Scott, owner of AquaBliss, serving Florida’s Broward and Palm Beach counties.
He’s seen the advertisements for pool service for as low as $50 a month in markets where the going rate is closer to $90. Homeowners are even handing him flyers, asking if he can meet or beat the price.
“There’s just the common mindset down here that’s, ‘Hey, I can get my pool cleaned for $70 a month,’” Scott says.
Building routes responsibly
Many in the industry share those frustrations.
The problem has become so prevalent in South Florida that some of Scott’s peers have been crunching the numbers to determine how these companies can make money at such low rates. The prevailing theory is that they probably aren’t. Some suspect that route building is practiced by more sizable firms that can afford to take a loss upfront in order to dominate large, valuable territories to put up for sale. In other words, they’re making money from the sale of the route, not the service accounts.
It can be a lucrative gambit.
Bill Williams has dabbled in route building with enough success that he’s considered making it a fulltime vocation. But at this stage in his career, unloading his service business isn’t the right choice.
“I’m at the age that I need to build something I can keep,” says Williams, manager of Pool Maxx serving suburban Houston.
But for others, it could make perfect sense, he adds: “There’s definitely a business model that’s workable, if that’s what you want to do.”
Williams first got into route building by picking up the odd account here and there. Want ads pinned to the bulletin board at the local supply house, for example, would generate a few leads. In many cases, these were pools that may have been off the beaten path of the sellers’ routes. Williams could get these for a steal. He also treated pool store owners to lunch in exchange for customer referrals. If he gathered enough accounts within a given location, he could sell them as a bundle.
The trick, he says, is to offload the routes before investing too much money into them by hiring an employee and buying another truck, for instance.
Williams understands why the practice may irk his peers, but he’s always considered himself a responsible route builder. Williams has sold five routes. His largest had 50 pools; otherwise these were smaller transactions with about 25 accounts. When building up a route, he prices his services at the lower end of the market, he says, but never below it.
And he’s always gone above and beyond to get buyers up to speed on the pool business. He offers two weeks of training, after which he’ll gladly talk newcomers through any problems they encounter in the field.
In all but one case, they’ve gone on to become successful pool pros.
“I’m a mentor,” Williams says. “I hold their hand.”
But Williams acknowledges that not all route builders are as nurturing.
A common accusation among pool pros is that irresponsible route builders lure the inexperienced with the promise of an instant customer base and hand off the accounts with little to no training. They tell of newcomers who are suckered into buying routes where homeowners are accustomed to paying well below market value. Not only do route purchasers discover too late that they can’t make a living at those rates, but the problem is compounded by costly mistakes that inevitably come from their lack of experience.
“It absolutely ruins them,” says Jansen Falvai, sales manager at Pool Route Pros in Orange County, Calif. “It’s horrible for the guys who are newer to the industry because they don’t know what to look for.”
Route brokering firms such as Falvai’s, which arrange transactions between buyer and seller, are distinct from route builders and can offer an interesting perspective on the practice.
SEE MORE: The Middlemen
Falvai is among other brokers who say they’re occasionally approached by embittered buyers who are eager to get these money-losing ventures off their hands. Unfortunately, Falvai has to turn many of them away. It’s a common broker practice to only sell accounts that have been serviced by the seller for at least a year. This is because brokers often request a year’s worth of monthly billing statements to appraise the route.
“We want to make sure the route is established,” Falvai says.
Those with buyer’s remorse have only two options: Up their rates and risk losing accounts or keep plugging away until they can sell their route.
“We want to help get them out of the crappy situation they’re in,” Falvai says, “but we wouldn’t feel comfortable selling a route like that.”
That’s why brokers advise buyers to do their homework before signing the dotted line.
After all, if a deal is too good to be true …