An extraordinary man in an ordinary profession
By Carrie Dibrell
What makes a company profitable? In today’s economic climate this is a bit of a luxury question given that nearly 14 million people in the United States are still unemployed. When you add that to the 2013 tax increases, making a profit can be very difficult.
Yet, visit any college campus in the United States today and the number of students majoring in business beats out all other disciplines. Do an online search for the top 10 degrees desired by employers and students, and confirm that accounting and finance are number one on the list.
General information on how to create a successful business and make a profit is everywhere — TV, online, radio and even in the few bookstores that still remain. In fact, among the most profitable college departments today are the business departments that specialize in teaching leadership, management and yes, you guessed it, profit.
This edition of Service Industry News joins the profit conversation as it relates to the service side of the pool & spa industry. Drawing from lessons in micro economics, weekly pool maintenance is not profitable.
According to economic theory, “economic profit” (which means making more money than is spent in supplying a good or service) is not sustainable when an industry is perfectly competitive.
Typically a perfectly competitve industry is characterized by 5 key factors: low (less than $100 thousand) overhead costs, known as fixed costs; many competitors; few regulatory hurdles such as licensing; a non-unique product or service; and very little control, if any, over the price.
At the most basic level and from simply a maintenance perspective, the service side of the pool & spa industry matches closely with each of these factors.
Things are very different however, when the services expand beyond maintenance and include repair and installation. These specialties or service differentiation, raise the bar because knowing how to install a pump or install automation is not something the average pool guy neccessarily knows how to do. If he does offer these services in addition to basic maintenance, the number of companies he competes against will be fewer. And if the number of suppliers he competes against changes, along with several other variables, then it is possible that he has evolved out of perfect competition where profit does not exist.
How then, can a pool & spa service technician leave perfect competition and make sustainable profits that go beyond simply breaking even? In other words what can a service tech do to profit?
To answer this important question, we decided to interview a very successful pool guy to learn what he did to leave the perfectly competitve pool & spa industry where he now enjoys sustainable profits.
In the pages that follow we share with you what he said.
David Hawes of H&H Pools in Dublin, Calif., operates a pool & spa service 30 miles from Oakland, Calif.
His operation employs a crew of 10, along with a fleet of 11-trucks, used to service 650 pools within a 30-mile radius, 5 days a week. Profit margins before taxes for companies of this size (500+ accounts) are usually in the 10–15 percent range. Hawes’ services include: weekly maintenance; repairs on equipment; upgrade features; cleaners; safety equipment; water testing; lights & electrical; pumps & filters; energy audits. The company’s average monthly charge for once per week complete service, including chemicals, ranges from $130 to $150.
By comparison, according to the 2012 June 30 survey edition of Service Industry News, Northern California service professionals charge an average of $85 per month for weekly service. On average, most maintain 50 pools per week and employ a staff of two. These numbers account for regular service and not installation or repair.
Why are you successful?
In the seminars I give at trade shows, I always answer that by saying hard work, dedication and concern for my clients.
But, at the end of any given day, my wife has gotten mad at me for leaving at ten-o’clock at night to fix a client’s heater. To my wife I say, You haven’t experienced planning for a big party and then not having your heater work, and how frustrating that can be.
But it’s a lot of hard work. It takes a lot to run a business.
I also try very hard to stay educated and on the cutting edge. In thinking about the successes I have enjoyed it hasn’t been all about increasing sales, but improving my knowledge. Executing in many areas is important and has allowed me to learn more by making more mistakes.
Also when I am learning, I am networking. I put myself out there. I was not a wallflower, and over the years I relied heavily on networking and the social aspect of business. It really helps to know the right people when you’re in trouble.
Now even though I feel like an old guy and I don’t clean pools anymore, I could do a route tomorrow because it’s not beneath me. At the core I am a pool guy, but I have to organize my time to direct the ship.
If you were to make some suggestions to new pool guys, what would you say?
I have mentored quite a few and essentially I tell them not to try and grow faster than they can handle.
More should consider staying a one-man operation and educating themselves in financials and accounting. It seems obvious but understanding business is often forgotten.
It is very important to watch the money, and stay on top of the cash flow and be conservative.
This also means that planning for all things financial should happen right away and often. Planning for taxes and retirement should occur all of the time.
I saw the end of my career at the beginning of it. Many guys just see the checks coming in and forget to plan. They overspend on things they shouldn’t and under spend on things they should.
A key to a great business is one that has financial security and allows an owner to take time off. In this business you can be as big as you want, but it takes hard work and dedication. In my heyday I had 900 pools on route. But young service guys today just want to big right now. Don’t go big too fast.
What has been the hardest part of growing your business?
Juggling all the balls in the air; I’m a dad, husband, owner, human resource manager, marketing manager and book keeper. But the most important and most challenging aspect of the business are the employees.
Some people just shouldn’t be bosses. Being a boss is not like the military. Bosses should not be asking their employees to jump hoping for the ‘how high’ answer.
Being a boss is about establishing relationships with people. A lot goes into it too. People have different personalities, different baggage, different needs and wants. It’s hard to keep people happy and motivated and know how much to pay them and how to retain them.
How big is your business and how long did it take you to get where you are today?
20 years. I really started as a 12-year old kid. My company was called Dave’s Chemical Service. I would ride my bicycle to people’s pools and add chemicals. I had an early vision of what I wanted. The vision changes everyday and so contingency plans are very important.
I am probably in the top 5-to-10 percent in terms of size. At one time I had 900 pools and two companies. I sold my Newark, Calif. operation over ten-years ago to my employees.
Is your competition friend or foe?
Friend. Networking is key and you cannot be an island to be successful in this business.
Guys need to network with manufacturers, suppliers and other pool guys; it is very important because at some point you will need them. How willing will these people be to help you if they don’t even know who you are?
As far as other service technicians, I’ve turned away many potential clients. I might go to a pool and check it out, but if I see that the pool looks good and the equipment looks well maintained and even better, if I see a service card in the box, then I will tell the client to work it out with their current service company.
I looked at one lady’s pool and after I saw that her service company was doing a good job, I told her that I wouldn’t be able to take her on as a customer. She followed me all the way out to my truck asking for a price. I wouldn’t give her one. It’s an integrity thing.
If the customer can’t get along with their current service company, then they probably can’t get along with me.
How did you obtain your customers?
By hard work and then word of mouth. It’s a cliché but it’s true. Do a good job. People’s expectations are so low today that all it usually takes is to commit to doing what you said you would do. It seems to amaze people. Another integrity thing. Gradually 50 clients will turn into 100.
I have 650 people working for me by word of mouth. Forget about marketing programs and advertising. Well no — don’t forget about it — but to start, it is all about providing a good service.
The magic pill is to do things the way they should be done: responsibly and ethically. I start my day at 6:45 in the morning with paperwork. I’m in the field in the afternoon, and when I get back to the office I do the paperwork from those visits. I usually work around 80-hours a week: that’s about 13-hours a day.
How do you retain your customers?
When I was first establishing my commercial property management accounts, I had about 100 at one time.
I would take just 10 minutes out of my day to stop in and say “hi.” You know meet and greet. I would carry around a nice change of clothes in my truck, stop off at a bathroom somewhere and change so that I looked nice. Then I would go into their offices and just chat, mostly asking if there was anything that we needed to be doing different or better?
You have to give it a personal touch and put your face in front.
My oldest service guy, who has worked for me for 15-years, has had zero complaints from his clients. He tells us at our company meetings that he’ll often just stop off at a client’s house and say “hi” and ask if there is anything he can do to improve his service? His customers love him. He is doing his job and building good relationships.
He obtained several of his customers just because they saw his truck at their neighbors house every week, on the same day and at the same time.
I have heard lots of guys say that they don’t ever want to see the client. They just want to get in and get out and hope they won’t see the customer. They see the client coming and they see a complaint coming. You just have to turn it around: when I see a client, I see an opportunity to do a better job.
It’s about the LTR’s — long term relationships. I have had some clients for 25 years. My very first clients are still on service and I’ve been to some of their weddings and birthdays. I’ve even been around long enough to see some of their dogs die.
With my clients it’s all about the little things. Sometimes I’ll still stop in to see a client just to say “hi.” Then they tell their friends that the owner of their pool service company still stops in to see them from time to time.
This kind of thing is going to become even more important as customers turn more and more to the internet to find service guys. Very few of my clients would consider “shopping me” online just because of the relationship we have established.
What techniques of others have held your attention?
At 30 I would have cared about how to get profitable clients, but now at 54, I listen to where they are vacationing and what kind of retirement plans they have made for themselves.
I also pay attention to what processes they have in place that allow them to step away. I care about what kind of exit strategy they have and whether or not they have considered the end of the game.
For myself, I have put my employees in a place where they are the people our clients want to talk to. In some cases I am the guy that goes to take a look at a customer’s pool and they don’t even know that I am the owner. When I mentor a new pool guy I focus on how important it is to plan for retirement.
Have the 2013 taxes had an impact on your business?
Yes a very strong impact. We have been gearing up for the different scenarios for the past 6 months. This is not the kind of thing that you can start to think about on April 15th.
It’s important to keep looking at financials even without the fiscal cliff. It’s strange because we perform a service and want to be paid to do it but some of us don’t want to consult with a CPA for their services that are very important.
Reviewing revenue streams and constantly monitoring material costs and what needs to change is a daily process. Since September of 2012, we have been reviewing our material prices, vehicle costs, employee needs, prices and all sorts of financial variables. We have not looked at decreasing any particular expense with the new taxes, but we are constantly looking at all expenses for ways to make reductions. Budgeting for the year involves looking for early buy incentives, constant route monitoring for the least amount of overlap, and revenue growth through additional services. I think the new fiscal picture for 2013 is going to force all of us to take a more serious look at our financial picture, but again, this is not just because of the fiscal cliff.
Are there any regulatory actions that you think are unnecessary?
I think that there is some merit in all of the regulation that this industry has passed. For me, the frustration with regulation is not the regulation, but the lack of enforcement and the big cloud of ambiguity.
Take the California’s Contractors License for example: In California this regulation is very cut and dry. I have had my license for 25 years, but I’ve had to compete against people who don’t have theirs. Who is enforcing the regulation and how is it being enforced? And then, is it enforced consistently? That’s what is frustrating.
And basically there are no excuses for not having the license in the first place. It’s about respect. If you don’t have one, get one!
This gets even more frustrating when you get called out to fix something that doesn’t work because it was installed wrong by someone without a license. Enforcement is a big fat question mark.
And it’s not just about enforcement either because the regulations are also ambiguous. Something as simple as rules about drain covers; some cities enforce, some don’t; some inspectors enforce, some don’t. And then on top of it, there are the differences between state and federal rules.
What business model do you follow?
Return your phone calls! Establish what you are responsible for and just do what you say you’re going to do. That’s it. That really is the magic answer. We are not 100 percent all of the time, but today people are so surprised by good service, that when you answer an email on the same day you get it, people are going to love it!