Racing to the bottom

I couldn’t agree more!  I can’t say this is true for all areas but in my area, the biggest issue is the lack of understanding from those out here as business owners.  We need more folks willing to educate or consult for some of these others who are either just starting out or have been stuck in the same spot for years.  The sad truth most in our area cannot tell you some of the basics that are needed to make the needed decisions as a business owner.  You need to be able to determine what it costs you per month to run your company, you need to know what your average cost to service a pool is, and you need to know how to create and use a P&L to determine if or how profitable you are as a company.  These will be the same ones running around doing pools for $115-$120 a month and then go under in the first year leaving customers high and dry.  

We are the ones who control this market and as a group, we need to start controlling it.  If we were all on the same page or close you have to ask yourself what could you be making.  We do work hard, we do take on a lot of liabilities out here every day, and we do spend a lot of time and money doing the job better than our competition.  Why wouldn’t we charge more for that?  If you believe you are not worth more then why would your customer believe differently?  This is not just a job it's a long-term investment to provide for your family the rest of your life so treat it as such.  No one should be going into business to just get by.  Anyone not wanting to pay your rate is just not your customer it is that simple.  Our area is full of the $120 guys who say they can’t get more or they’ll lose accounts if they rate hike.  They are losing money now and do not even realize it.  I try to help educate everyone out here I meet in passing so that we can all be successful.  Some are thankful and stay in touch while others give me the deer in a headlights look and have no idea what I’m saying.  

The bottom line I suppose in all this is to let everyone know a race to the bottom is also a race to being out of business sooner than later.     

Well said and I concur with the OP and the comment above. I’ll admit that I was guilty of this at first too. I had very competitive rates when I first started out because I was eager to grow my route. Luckily, I have business experience and quickly changed that approach shortly after starting by raising my rates more in line to what they should be and even sometimes well over what they should be for accounts that maybe I didn’t really want or didn’t feel like doing and guess what, most would still sign up. What I have experienced is that customers are just happy that you answered the phone because most if not all the companies they called, did not. That said, they are likely to pay any reasonable amount you provide. As mentioned above, we have control of the market rates. There is plenty of pools out there for all of us. 

I also agree, but I realized that nobody  mentions what they feel is a fair price or how they come to this conclusion . I think it's useless to complain about the low ballers and not state where your prices are, or where you feel the right price is.  As we all know , no pool is alike, enclosed or open , 10k gallons , 70k gallons . Do we price per gallon, how many tress are surrounding the pool, is there a spa , are they snow birds , chlorine, salt, bromine, organic . Do they have pop ups, auto cleaners, are they going to be a pain in the back side. So many variables . There is one thing that can be concluded and is for certain , we all want to make the most money per pool, per stop. If we can find a way to collaborate as pool maintenance companies and set a price locally , now that would move the needle . until then most small companies will fear the rejection, or cancelation until they stop caring , which is while they are on their way out. I love our industry , and yes im a small company 300 accounts , I try to use a set price per pool but at the same time I try to read the potential client . I know what the big companies charge as well as the owner operator . I find my pricing in the middle at the moment . example my prices rang from 125-560 . yes 560 2 stops per week ( monster pool) . I START AT 125 for an enclosed 15k gallons or less salt pool. I go up from there. the price range for the competition 95( owner operator)to -160 ( big companies ) . this upcoming year I will be raising prices 10-15 per pool .

I think the fair price for the easiest pools should fall around 140-150 and up from there . We can't keep adding pools to our techs and expect quality work without fair comp. 

So lets figure out a way to join all the pool maintenance companies across the nation on one free platform so we can set the market price and not allow the homeowners to put us into a race to the bottom. 

So I would ask you, do you feel your service is subpar to the “bigger companies”?  You being an owner-operator should have no real bearing on pricing, your service should determine that.  Big companies don’t have some special power to charge more just by being a brand name or national chain.  Are you okay making less than your competition?  I sure wouldn’t be, “if they can get it then why can’t we” has always been our mentality. If your service is on par with the company getting $160 then your price should be $160 that’s the market for that type of service regardless of name.  Why would you be lower?    

No customer can ever put you into a race to the bottom, that is a personal decision based on the fear you cannot grow at the larger price for your service.  Those that aren’t okay with your price are also not your target customer.  If you're signing every account you bid then there is an issue, it means you are too cheap.  I made this leap over a year ago but I am a numbers guy and the numbers didn’t make sense.  I still added 140 accounts last year and 75 already this year.  Our starting rate is $169 and that leaves us about a 20% margin which isn’t great but its acceptable.  

Let's say we are both at 300 accounts (I have 340 actual accounts) to make this easy your current starting is $125 and mine is $169.  That means this is how we compare in billing:

300 x 125 = $37,500 monthly and $450,000 yearly 

300 x 169 = $$50,700 monthly and $608,400 yearly 

Hope all of this doesn’t come off wrong, but this is exactly what I was referring to in this thread.  I hope this helps in some way.  

This is such a great article. I run into so many other companies that undercut everyone in order to pull more customers. Two things happen here: the business owner makes zero profit and works themselves to death in the process, and the customer does not get what they deserve from a pool professional. 

There are customers out there that will price shop, and honestly they will get what they pay for. In turn, the customers that want quality, honest, reliable service will pay a better price. The key is, in my experience, being able to forge a good relationship with the customer and ensuring a trust bond is built with them. 

When we raised prices this year, we did not lose one customer. No one even questioned it, which is exactly what we work so hard for. Forging trust through hard work, trustworthiness, and educating the customer on their pool is what we have founded our business on.

Bottom line is, don’t undervalue your business and yourself, in turn you undervalue the entire profession. Like expressed previously in this thread, if a customer won't pay the price your business deserves and provides, then they aren't for you. 

The great thing about this industry is in most places there is a very lower barrier to entry. But that same low barrier to entry is the problem for the “race to the bottom”. There are so many variables in maintaining a pool properly which invites many of the bottom feeders to cut corners which allows them to lower the price and race to the bottom. 

One of the main issues with this is the lack of education the home owner has. They think as long as the pool is clear and blue the company must be doing a good job. I can’t count how many pools I’ve tested on estimates that fit the clients perceived “well cared for” only to find the salt system is cranked all the way up with zero stabilizer and pH through the roof, or a zero alkalinity and piss yellow pH with a stabilizer over 100. Both appear to be well taken care of to the untrained eye but I wouldn’t want any of my clients swimming in either of those pools. 

So we come in at a much higher rate, but we do things the way they should. Actually balance the pool, maintain the equipment, etc etc. 

All the things you mentioned OP; honesty, integrity, dependability are all things to be very transparent about. Clients love that stuff and only shows the value you bring to the table, so the extra money to them is well spent. 

Hi Mike,

I completely agree with you. Competing on price alone is a dangerous race to the bottom that harms the industry in the long run. At ACORB Pools, we focus on building trust with our customers through honesty, integrity, and communication. Educating clients and providing dependable service sets us apart, and it’s these small but impactful actions that create loyalty. Like you said, we’re all in the service business, and the more we make it easy for customers to trust us, the stronger our businesses will be.

Best,  
Gonzalo, ACORB POOLS

We made a hasty decision and purchased an established route without going thru a broker. Not a recommended option, however we are now about to start the 5th month. I'd say, the biggest issue is that every account is WAY underpriced, as in 55 a month for spa account and average 120 for combo, including basic chemicals. Customers are used to 80-dollar filter cleans.

We are a TINY new business, but we are worker bees and providing above and beyond customer service is absolutely our priority number 1. I know that every one of our accounts, gets top-notch service. We are really trying our best, not afraid to use way more than the allotted time if its needed.  We have heavily invested and purchased the best equipment, like spin touch, riptide, carbon fiber poles (although 1 was just stolen, im pissed) Aiming for Orenda LSI balanced pools. (this is easier said than done, and expensive) 

Honestly, I don't know how to raise prices, when or how much? I have listened to countless podcasts and read everything I run into, but feel at the end of the day, anxiety and worry about rate increase. I think these accounts got established thru Angies list, the snake we bought route thru, way underbid just to make a route to sell. We weren't shown the actual pools before we paid. Most of the accounts arent even paying ontime, its like pulling teeth. we offer autopay, accept credit card, Zelle u name it, n still it takes several reminders and bad excuses before they finally pay, extremely frustrating. 

I KNOW I KNOW, we are taken advantage of, and going about this all wrong, but don't have anyone to guide us or get suggestions from. We have tried up front billing, but that's almost impossible. We don't have the luxury to “skim the fat” since we just have 25 accounts.

Btw located in Corona, California

Any advice is greatly appreciated.

Camilla

This is a live and learn situation and a hard one but you’ll know better moving forward.  We have all been there so don’t be to hard on yourself.  Their are multiple issues at hand and you have to navigate the best you can to rectify this.  

First what is the monthly cost per pool for your company.  If you do not know how to figure this you have to take EVERY expense and I do mean EVERY expense add them up and divide by number of accounts you have.  I’d imagine your not making much if any profit and cash flow does not dictate profit btw.

Second, what do your rates need to be in order to sustain the desired profit margin?  I’d be checking the competition and if your doing everything they do charge the same.  If your doing more (have to be honest with yourself on this one) then you charge more.  Never waiver on your rates they make or break your sustainability. 

Lastly you have billing and pricing issues with this acquired route.  Here is my suggestion for fixing both.  First create a quarterly news letter which you can use to sell a few things but the real goal is to provide the customer with information and show the value in your service to them.  As a part of that institute a late payment policy that includes a late fee and suspension of service should they be late on payments.  Explain the cashflow is important to continued operations.  I’d also state in there that repeat offenders will have to have a payment method on file or service will be discontinued.  If they aren’t paying you are already loosing.  Be firm on this and it’ll get better and let the bad ones go since they are doing nothing for you now.  

The pricing issue can be fixed with a rate hike notice.  You’ll want this notice to be very professional and I’d recommend explaining why in detail with.  I’d also list pricing of some competitor's and how they compare to your level of service to get the message across in the best way possible.  You can loose a few accounts and still come out more profitable on the other side of a rate hike.  Most times you do and kick yourself for not doing it sooner. 

In one of the skimmer webinars there was a calculator for this type of thing you can plug in your numbers and your increase and it will tell you how many you can loose and maintain current profit levels.  It also allows you to input how many you think you will loose (up to 30% of the total accounts not likely though) and it will show you how much more profit you would make.  I’m sure its still out there and can be found. 

Best of luck and don’t be afraid to increase those rates!!  

thank you so much for your in depth response, I REALLY appreciate it and all the time that you put into it. I will take all your suggestions to heart and work on our numbers. 

Thankfully we are now out of the heat season, so less chemicals are needed…. We are actually considering suggesting boric acid to our customers, after studying up on it, it seems to be a good option, at customers expense. Whats your opinion?

Previous owner actually switched several of our customers away from salt to chlorine, which seems crazy to me. Is that a normal thing to do? Should we recommend to those customer to switch back?

Thank you so much again

camilla

Your welcome, don’t let winter months profits deter you from a rate increase.  My guess is your just getting by if your even showing a profit on these accounts.  Just did our cost per pool for October and then looked at accounts we need to take a closer look at based on that number.  I’m a firm believer numbers take feelings out of the equation and allows for a more educated decision.  If your cost per avg service is not in line with what your charging on avg then you have no choice but to make a change or you will not last long term in this industry.  I think you will find your holding onto accounts that your losing money on and are headaches.  

We don’t use boric acid but if you decide to do it then create a news letter and add that as an option with benefits and features along with a price.  Another thing to add to each news letter is replacing filters.  We charge about $150 for your avg filter and make anywhere from $50-$70 profit and its easy to do.  There are plenty of ways to market things to current customers and increase profits just sit down with your team and explore some options then put it into motion. 

Changing salt over to chlorine is an absolute no no for us.  My guess is there is something wrong with the system and they either didn’t know how to fix them or never even told the customer.  I would be telling customers right away when you find issues that need to be fixed.  If a customer chooses not to fix the salt system that is fine but the price per month increases $20min for going to a chlorine pool for us.  We bid them differently due to cost of servicing each type, once it becomes more expensive to service the customer has to take that hit not the company servicing.   

Hey Camilla,

First of all, I gotta say, I’m really sorry to hear about your situation. That sounds super frustrating. I can imagine you feel quite trapped at times too - especially with people not paying on time. I have some thoughts about raising your rates, but I think your slightly bigger problem is getting the payments under control. For me, I have what I call a “shit list” where my worst clients are ranked. It helps me focus on who I want to fire as a client (if needed) and others I’m fine putting up with for now. My goal is always shrinking my shit list - getting them back on the nice list or off all together. If the majority of your route really is bad with paying, I would do what you can to get new clientele ASAP and do damage control along the way. For me, I started with a “grace period” of 2-3 months because I was scared. Now that window is MUCH shorter. If they didn’t pay after three months of service, there was no more service until that was paid. Then I made it clear for the final time that future late payments would result in immediate cancellation of service. I would also explain how that wasn’t a feasible way for me to operate my business. IE: If you get a haircut, you pay right then and there. There’s no ands, ifs, or buts about it. 

Since acquiring my pool route (now 75 accounts), I have raised my rates 2-3 different times. It’s for sure scary the first time, but it does definitely get easier once you go through it. Some things to keep in mind when considering raising your rates:

1. What is the going rate in your area for pool/spa service? There’s usually a range. Personally, I have found a lot of success with being mid-range when pricing new clients, but usually do pretty well pushing the limit once I’ve proven my worth with existing relationships. In my area, it’s been about $140-180. I’m usually around $160-170 for new clients.
2. Time of year. Currently, I think the best time to raise rates is in the Spring. My reasoning for this is people tend to think they can get by without pool service over the winter. This could give them more time to find another service and/or save a few bucks. I think the least competition you’ll face is mid summer. Seems to me most pool companies have a hard time picking up the phone. Even if your client is getting cold feet, they’re going to have a hard time replacing you. Plus they’re usually concerned about their pool going green overnight with any lapse in service. All that said, I think you can raise your rates most months of the year in SoCal without facing many issues.
3. You don’t have to do it all at once. If you’re really unsure about how everyone is going to react to a price increase, consider picking out a “test group” to try out the new pricing on. Maybe pick ones from different areas on your route to get a better feel for different neighborhoods.
4. Consider breaking down the pricing and your service offering. You absolutely need to be doing this for yourself to know your operating costs, but I have found this helpful to communicate to clients at times. How much would it cost for a client to purchase their own chemicals from Leslie’s or Home Depot (don’t share your wholesale price)? How much would it cost them to hire a neighbor kid to come by EVERY SINGLE WEEK? Would that kid be reliable, etc? Personally, I don’t think you could get any kid to clean your pool for less than $20 a week. With the hypothetical neighbor kid option, they’d be paying $80-100 a month for labor. Plus they’d probably spend AT LEAST $40 in chems every week. Total there would be about $120-140. For you, you’re a professional. You know what’s up and what to do. You show up as an INSURED professional in YOUR TRUCK (also INSURED) and have EXACTLY WHAT you need WHEN you need it. To top it off, you send a service report via Skimmer when you’re all done. The client never has to think about their pool except jumping in. You compared to a neighbor kid sounds like a great deal.
5. I like to map out my pricing to see how much more I could make monthly if I implemented new pricing. Let’s say you raised your rates $20 a month (or $5 a week). For you with 25 pools, you’d be making at least $500 extra a month. If you had 3 people cancel service, how much would you lose? Maybe $360? At that, you’re still making an extra $140 a month, doing less labor, using less chems, driving less, and more than likely you probably got some people off your shit list! Now you got more time to do better service for your existing client base and focus more time on improving your systems and finding new clients that actually value you.
6. If you truly are providing a quality service, keep in mind that there are many companies that don’t - especially in our areas in SoCal. Whenever someone threatens to cancel service, I stand my ground and keep it friendly and professional. People will often shop around, but then realize they probably got a great thing going with you. If you’re being competitive with your pricing, it’s usually enough to combat the fear of jumping to someone new to save a few bucks a month.
7. Lastly, I think if someone doesn’t value you enough to pay an extra $5 a week (AT LEAST), do you really want to do business with them? 

In closing, I think you have everything to gain from raising your rates. Plus, I think overall it improves our industry and the market as a whole. It helps make it better for fellow service companies to provide a higher quality service. Plus the people we serve get better service. I think so many people are just used to the status quo. They just need to be guided to the possibility of what could be.

Anyways, I hope this helps. Would love to connect with you guys. I have a route in Orange County, and my brother has a separate route in Riverside and specializes in equipment installs.

Sincerely,

Ryan

Brothers Pool Care LLC

With your company focus there is no doubt you will be successful. 

Mike,

Agree 100 percent with your post.  A big problem is that too many of us see other pool professionals as only one thing, and that is a competitor.  While we are competitors with each other, we do not need to be adversaries.   

Sharing my knowledge and experience with a “competitor” goes against every instinct I have.  But I do it and have a network of about 10 other pool professionals in my area.  We talk on the phone a lot about pricing, best chemicals, how to handle unruly customers, etc.  We even refer jobs all the time because while I’m good at fixing heaters, I’m not good at installing liners.  So I refer the liner guy and he sends me a heater job.  Networking and helping each other is how we all prosper.  Trying to grab market share with low prices is a ticket to nowhere.  And if I can implore anyone who thinks that's a good idea to try and remember one thing, it’s this.  If you are not pricing jobs adequately to make a profit, you are not really in business, you are slowly going out of business.