War, Oil Prices, and Your Pool Route

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I welcome to the pool guy podcast show. In this episode, I'm going to talk to you about what happens

when you're in a slow economy and you have a pool service business, and it looks like the current

global situation currently that we're facing is going to of course cause some problems with the

U.S. economy going forward. Are you a pool service pro looking to take your business to the next

level? Join the pool guy coaching program. Get expert advice, business tips, exclusive content,

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And it really could be anything that affects the economy, causing a slowdown. It could be a war

like we're currently facing here. It could be the housing market. All these things affect the

economy. There's been a number of recessions over the years. Probably the worst recession was

during the COVID-19 pandemic, but the government infused economy with a ton of money. Everyone got

these stimulus checks in the mail. It really helped out during that period of time. In 2008,

there was another pretty major recession with all the bad mortgages because the housing market

did pretty much collapse in on itself. The federal government also bailed everyone out by buying

the mortgage back securities. Actually, they turned a really good profit on this when the housing

market went up. They're able to resell those mortgages and of course get them off the books

at a profit. And there's all different things that will affect your service besides the

economy being slow. But a slow economy does affect your pool service in a few different ways.

And it's not going to be anything, I don't think, traumatic. There's always pretty much

the same effects during a downturn in the economy. Customers are going to put off some maybe some

remodeling work or some install of new equipment until things settle down. Their job may be affected,

of course, depending on their industry. But I think on the flip side, the thing that really

affects the pool service industry is inflation. We really saw this happen during the COVID-19

pandemic when, of course, the government was giving everyone stimulus money, which caused people

to go out and buy a lot of stuff that they didn't need and spend that money, which caused, of course,

inflation and disinflation. There was stuff in short supplies where the prices went up,

it has caused inflation all across the board. But the thing that's going to affect us the most,

during this crisis is the price of oil and the fact that everything relies on deliveries and fuel

is one element in that delivery process. You can't really expect prices to stay unchanged

in the pool industry as far as chemical costs go because your supplier or the person that

supplies the chemicals and the equipment and all the parts that your supplier sells is going to

have to charge a higher price for that eventually for to offset the higher fuel costs. One thing you

have to understand in any economy is that the consumer is the one that pays for anything or everything

during an inflationary period of time. Since you are the customer of the wholesaler

buying the chemicals, then your customers are the ones you're selling everything to or maintaining

their pool. Really what's going to happen is that you're going to pay a higher cost for your

chemicals and you get the past that costs on to the customers on your route. There really

is no way around it and it's one of those things where it's kind of a snowballing effect

since you're paying more since your supplier. I should back up since the distributor is buying

products at a higher price because the suppliers are charging more because they're paying more for

fuel which means you're going to go and pay more to the distributor for your chemicals and your

equipment and supplies and your customers are going to have to have a rate increase to cover that

because you can't absorb the extra costs just like your distributor can't absorb the extra cost

they pay from the suppliers and just like the suppliers can't absorb the cost of the higher fuel.

It's a trickle-down effect to where someone has to pay for it and this is why prices go up

everywhere when we're in an inflationary period of time. There's nothing really that you can do

to prevent this. There's no protection you can do. Maybe you can go buy all your chemicals right

now and stock up for the summer because I think if this goes on for an extended period of time

and the price of oil stays elevated the price of fuel goes up everywhere. You're going to see a

pretty dramatic increase in prices this summer now things kind of calm down and you know

write themselves quickly then you don't have to worry about too much it'll be a blip

and prices will go up but then they'll come back down once the fuel prices come down again

who knows what you can't predict who knows what's going to happen or you know how extended

this is going to be but you're going to have to do things to protect yourself now if you were

planning on not raising prices this season maybe you raised your customers prices last season

and you're going to skip this year I would say that you may have to reevaluate that and you really

can't skip raising the prices at this point because there's a lot of uncertainty out there

in the market and I would say that people expected at this point because everything else is going

to go up of course and I would suggest maybe a small increase to cover any kind of increases that

may happen this summer you don't want to do two increases in one year so you have to kind of think

of this strategically and logically but if you wanted to go up 10 or 15 dollars per customer

when you know you have to do it like right now I would say you don't know clearly you have to do

it but I would say that if it's off the table put it back on the table and then at the beginning of

you know summer you may want to increase the prices depending on how extended the increased cost

of fuel is at this point and it's one of those things where maybe the government's going to step in

and help out and you know ease the price of fuel maybe they won't and maybe this won't have

much of an effect because I find that once the cost of gas goes up especially in California it takes

a very very long time for it to go back down it like goes up instantly like you know 10 20 cents

on one day and then over the course of two weeks this is dropping a couple cents every day and I've

been doing this long enough to have gone through many recessions and downturns in the economy and

what what you have to do invariably is understand that you can't absorb the higher costs in your

business and survive no one really does that if you have a business in your absorbing all these

extra costs you're going to go out of business because that extra cost is going to eat into the

profit and this is hard for people to understand when you talk to someone about you know the price

is going up especially in the food service industry restaurants and fast food restaurants the cost

of labor has gone up with the increase of minimum wage in my air in California the food cost goes

if the fuel goes up for extended period of time you know flour goes up in price everything

meat goes up in price and they have to raise the price to their of course their burger and fry

special and pass it on to you and there is a tipping point by the way where people are like well

I'm not going to go out to eat you know today because it's just too expensive to go to Tom's burger

number 10 or whatever and I'm going to just you know make myself a sandwich and that of course

affects the business because now they've lost the customer that day and if that is going across

you know 50 customers that they don't get that day they lose money and eventually you know they're

going to have to do other things kind of employees and you can see how this is a snowball effect now

of things going everything costing more than having the raise their prices and they lose customers

and they have to lay off employees and maybe close a location I mean it could go to that point

that happened definitely happened in 2008 where a lot of businesses were not a business

but for pool service the nice thing about it and I know I just scared of a one right there

the nice thing about pool service is that you are a service industry so the service sector

does have an advantage over retail and food and that is people need your services and they can't

necessarily cancel pool service and do the pool themselves I mentioned the higher price of

chemicals of the customer that wants to try to do with themselves is going to go to the store

and they're going to be in for a sticker shock for the price of chemicals and maintain their pool

also there is time necessary there's an element of time that they have to have to take care of

the pool and there's also a skill level especially in a summertime that they need to maintain their

own pool a lot of people don't have time they don't have the skill if they don't want to go to the

pool store and so those just keep paying for the pool service and not really think too much about

canceling or changing services because the change service as well to someone less expensive

takes time and effort as well and what I'm saying is that the pool service industry is pretty

insulated from any kind of economic recession that happens out there we have kind of this built

in protection by being a service driven industry

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that's not to say you won't be affected and you won't be affected down the line by kind of

the ripple effects let me explain you may lose a percentage of your customers that they're

affected to the point where they can't afford service and you're going to have to get alternatives

like doing it themselves that's very common that does happen I would say that during the worst

ever recession I can think of in 2008, 2009 and 10 there was a drop of about 10 to 20 percent

in service business over the course of those two or three years people canceling it wasn't

immediately it wasn't everyone that same at the same time so it was kind of a gradual drop-off

of customers and it was hard to find new customers of course because people weren't looking for

new service and so that is one of the main effects you're going to have is that getting new customers

growing your pool route is going to be a harder process during a recessionary time holding onto

existing customers won't be a big issue but if you're trying to build up your route or build out

during a recession it's much harder it's just like anything you know the car salesman during

a recession is going to have a hard time selling cars they discount everything because no one's

looking to spend money everyone's kind of circling the wagons at that point and it's the same in

the service industry to some extent where the customers you may lose some customers they can't

necessarily afford service anymore because their job has been affected by the recession that's very

common is something to be expected but the majority of customers won't be affected by the downturn

because most of the people that have pool service is a luxury thing of course to have the service

and they can afford it and their jobs usually aren't affected but there may be a segment that are

affected directly what's going to happen is that you're going to maybe not have the same time table

that you had previously for equipment upgrades and installs or if you do report remodeling or a

builder a lot of times you're going to not get a lot of leads at this point people stop

they're thinking about putting a pool in or remodeling the pool and put it on hold that doesn't

necessarily affect the pool service industry immediately but down the road is going to definitely

affect the industry because if people stop building pools remodeling their pools that means that

the number of service accounts will decline for a period of time and again this happened

very dramatically in 2008 2009 where a lot of builders just went out of business because it

were overextended there was one in my area here I'm not going to name the company but

it had about 20 projects going at the same time to where he just ran out of money people weren't

the next payment he was doing everything on leverage himself and he couldn't pay his subcontractors

and everyone just stopped working and there was about 20 bills that were just in different stages

he stopped and it was not just him it was other pool companies that also were overextended and they

went out of business at that point I'm not saying that will happen now that was one of the worst times

for builders I can think of but there's going to be of course any kind of recession means people

kind of tighten their purse strings and they may not get the pool built this year they may wait

till next year or they may not remodel the pool this year and wait for a year or two which means

that those accounts that would have entered the revenue stream for a pool service have not

entered the entered the market so to speak when they're supposed to enter the market and there's

not to be delay maybe or it may never even get built or done which will affect us in the future

so this is not something that affects us immediately but if you have less remodels and builds

that year or this year you're going to have less potential service accounts in the future

and this will definitely affect us because then you have less accounts and you have more service

providers and it's going to cause a lot more competition now that's the worst case scenario

that's if building slows down dramatically and people pull back dramatically but who knows what's

going to happen you can't really predict that I'm just giving you the worst case scenario you're

definitely going to have less customers wanting to have installs and spending a lot of money on things

and that's a given in the recession that's what causes a recession and that kind of is what

exacerbates the situation people don't spend money when people need to spend money to get the economy

stimulated and that's where the government sent all that money back in COVID to get you to spend

money and get the economy going again that's not going to happen I don't think this time and so

what happens is that people big ticket items aren't purchased you know things that they need to get

done are get get done but things that don't need to be done don't get done during this time so just

be aware of those factors be aware that you're going to have increased costs of supplies because of

the increased fuel cost during this period and instead of causing you to have to raise your rates

under your customer more than likely you're going to have to increase the prices at some point

I think we should let this month play out and see what happens but if it looks like your suppliers

are raising prices you have no choice because as you know once the supplier raises prices they rarely

if ever go back down the other way once the last time in california and your memory that the gas

prices under four dollars and it's one of those things where once the gas prices go up to certain

point they rarely go back down to a low point again so prices always go up and rarely come down

and you have to account for that in your business I wouldn't do sleep over it worry too much about

it but you have to really prepare for a slowdown in the economy if it goes on for extended period

time and you have to be proactive in your business so that you can protect your profit margin

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