Managing a successful service business
By rolling with the market and capitalizing on unforeseen yet profitable variables, Dick Nichols, the owner and operator of Genie Pool & Spa Services in San Jose, Calif., is one of the most successful service technicians in the pool and spa industry today.
In 1977, Nichols made his debut into industry after his father-in-law bought Genie Pool and Spa Services and invited him to join the operation. After working together for two years Nichols took over the business and today his operation employs a crew of 15 dedicated people. He has seven full-time service techs, four repair techs, one part-time employee and three people who operate the office including Nichols and his wife, Aline.
“If I had to give credit to anyone for my success it would have to go to my wife Aline,” Nichols said. “We don’t make any decisions without talking to each other first. In the very early years many people thought my wife’s name was Genie because our business was called Genie Pool & Spa. I roll everything off my wife and she always brings me back down to earth.”
Nichol’s business generates an average of $2 million a year in sales revenues using a fleet of 15-trucks to service more than 225 commercial pools and spas and 160 residential accounts. Most of his commercial accounts are made up of homeowner’s association community pools and condominium complexes, but he also has some hotel and motel accounts on service.
He offers his customers a full menu of service options ranging from remodeling and acid washing to weekly maintenance and service. And although he is licensed to do so, the only service that Genie Pool and Spa does not offer is building pools.
His prices for monthly once-a-week complete service with chemicals included range from $150 to $195 for residential service and $300 to $350 for commercial accounts. According to the June 15, 2013 survey edition of Service Industry News, Northern California service professionals typically charge an average of $95 per month for weekly service, and most maintain routes of 50 pools per week and employ a staff of two.
Nichol’s pays close attention to his costs to create his pricing structure.
“There are certain costs that are fixed,” he said. “Payroll, for example, is one cost that I can control according to how many employees I have, but there is a definite number of employees that I need to get the job done.”
“Insurance is one of our largest fixed costs and doesn’t contribute to our income, and while chemical costs vary depending upon the time of year and the temperature, they are mostly fixed as well. My liquid chlorine costs in the month of July might be close to $20,000 per month, but in January they fall to around $1,500.”
Nichols pays close attention to those changes to prepare his pricing strategies. For any new pool that he adds to his business he charges a minimum of $150 but he takes into consideration the surrounding conditions of the pool to determine not just his price but the number of service calls he makes as well.
Today, Northern Californian technicians are especially challenged by chemical costs because of the 3-year drought in the region. Given that the temperature is warmer in Northern California than in other areas of the country, the pool season is longer and service techs are paying more for chemicals during the non-peak season.
Nichols reports that most technicians in Northern California lose money in the summer months because most do not change their prices according to the season.
“The minimum that I charge for a backyard pool with a working pool cleaner is $150 per month and that $150 a month is the same in July as it is in January even though our chemical costs are a hell of a lot higher in July than they are in January,” Nichols said.
Because his seasonal costs change, while his prices stay the same, Nichols is careful to maintain his customers all year around so that they balance each other out.
“I know some guys will take a look at what their costs are in July and base what they charge for service on those higher than normal costs. They end up trying to charge $185 a month for service to make up for the increase in their chemical costs during the summer months and then wonder why they can’t keep their customers.” Nichols said. “The reality is that there are a lot of guys out there who will do the same pool for $125.”
But undercutting his competition is not Nichol’s style. Most of his closest friends are in the business and many of them are competitors.
“We are all completely aware of the fact that no matter what you do, you can always lose a pool. There are always personality conflicts and you can pick up pools from friends for various reasons, but I do not undercut people.” Nichols said.
His model is to maintain friendly competition. In fact when he visits a potential customer whose pool is on his competitor’s route he is not afraid to tell the homeowner that their pool looks great and that they should stick with their current service tech.
“Just this week a homeowner called me to help decide if they should acid wash or replaster and while I was there, they asked me what I would charge for service. I told them that there are people who charge less than I do and that I am one of the more expensive pool service companies, and as long as they are happy and their pool looks good that they should not look at switching because I am going to be higher,” Nichols said.
According to Nichols, many pool pros believe that undercutting and stealing pools away from competition is a common practice, when in fact it is not. Obviously, the decision of what company to use for pool service is in the hands of the homeowner and service techs sometimes are forgetful of that fact.
In any case, the successful service business will come from the quality of the service, and the quality of the service will come from the employees of the business. This business model has not been overlooked at Genie Pool & Spa.
Nichols attributes a part of his ability to retain his staff to the dismal economy. He has not lost an employee in over three years. But keeping his employees happy is important. He has seven technicians who have been with him for 10 years and three who have been with him for more than 20 years.
He pays his service techs by the number of pools they maintain and also offers multiple commission and bonus opportunities that he ties to performing extra repairs and for not getting complaints.
Using a bonus structure to reward his employees for reducing customer complaints is clearly working, too. He reports that for the most part they don’t get many but when they do, his staff is skilled at diffusing any grievances. One technique that they have found to be particularly effective is to allow time for the customer to cool down and wait a bit before calling them back to address the complaint.
Nichols is highly aware that successfully connecting with his customers greatly affects the growth of his company and ultimately determines his success, which he tracks every 10 days.
Currently, Genie Pool & Spa is experiencing a 40-percent surge in revenues compared to this same time last year, with the increase coming from the remodeling side of the business. Nichols reports that over the past several years, homeowners have not had money to spend on any remodels or upgrades, whether they were needed or not.
Meanwhile, on the commercial side of the industry, any available money was spent on bringing pools into compliance with the Federal VGB pool and spa safety act. Now that the economy is improving, homeowners have some liquidity to spend on what are now needed improvements. And with compliance to VGB complete, additional funds are available in the commercial pool sector as well.
Because so much of Nichols’ business is dedicated to the commercial portion of the industry, he has experienced this sort of increase in growth on multiple occasions.
“When I only had a C61 license, I was pushed to get my C53 license because of a regulation change,” Nichols said. “At that time, the state of California passed a law that made all commercial pools retrofit their lights. Back then lights were not required to have GFCI’s or be encapsulated. But after a couple of people got electrocuted because of installation errors and because they didn’t have surge protectors, they passed a law that all commercial pools had to have the work done and it had to be certified. I had a number of people, including builders, come to me to do the work and bring the pools into compliance. Initially I complained because I did not have my license until I was encouraged to quit complaining and just get my C53.”
In addition to benefiting from regulation changes in the commercial pool industry, Nichols has also prospered from the remodels he offers as part of his service package. He explains that not many service techs offer remodeling services, a great deal of his customers come from the many IPSSA friends and contacts he has made over the years.
Nichols is no stranger to IPSSA either. In addition to being a member for 25 years, he has served the association in a number of capacities. In 1987 he was president of his own Santa Clara Valley chapter and prior to that he was appointed to the position of Regional Director for Region 10 Bay Area South for four years.
He also served on the IPSSA Board of Regional Directors for four years beginning in 2007. During his first year, he served as the chairman of the education committee, and one of the first things he did was to proofread Bob Lowry’s (former co-owner of Service Industry News) water chemistry exam written for prospective IPSSA members.
During his second and third years he served as Chief Financial Officer. And in his 4th year he served as chairman for outreach and government relations. During this period he frequently met with a variety of engineers and key product development people from multiple industry manufacturers as well as with the National Drowning Prevention Alliance. Today Nichols serves on the IPSSA Scholarship Committee.
Nichols believes that in this industry, it is difficult to succeed when so much is predicated on so many unknown variables, determined largely by the market. And while he was fortunate to only lose one pool per week during the 2008 recession, there is really no way to anticipate much in this business. As such, he recommends focusing on one season at a time.