Pool service routes and consolidation strategy

July 13, 2020

by a searcher from Kansas State University in Houston Heights, Houston, TX 77008, USA

Has anyone looked into pool service routes as a way to build a service business with recurring revenue?

Seems like the industry has some good things going for it, recurring revenue, essential business, simple operations, low startup cost, highly fragmented. The only cons I can see from here are low overall industry growth, managing of lower wage employees, low barriers to entry.

Businesses look like they trade for 3x earnings, with a 20-25% net on revenue, and routes trade for 12 mo revenue providing a direct route to growth or raising capital if you have a good marketing machine.

Is there something I'm missing? I did a search and didn't find a single post here about this industry.

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Reply by a searcher
from University of Virginia in St. Louis, MO, USA

I will tell you what I know from working with pest control (a similar business that had overflow into pool) software for a few years. Routing and scheduling is everything in terms of efficiency. A giant share of your cost is driving around randomly with non-optimized routes. Insurance and accidents can be back-breakers too. There is an economy of scale for those willing to organize it but it takes significant time and effort to amass enough customers to efficiently route. Not much you can do with routing if you only have 50 customers.

Customers view the service as a commodity and will switch on minor price differences so you need to be close to the low price provider. Many will seriously consider DIY pool maintenance at a certain price.

The Achilles heel is the labor pool. I have a friend who runs a long-time pool business and what I've learned from him is that you cannot get legal, reliable labor for $25k per year. Remember that they are driving commercial vehicles for which you will be liable. Too many accidents and the insurance company will drop you. Try finding a $25k pool cleaner who isn't on drugs.

Can you scale the business and get it efficient enough to pay more while still being profitable? That's the question.

Independent owner - operators tend to be people who don't want to work for the man, and are happy with a certain level of income. Because they own the business they take pride in it and tend to operate responsibly. Because they are independent they are less attractive to the ambulance chasers when they eventually do have an accident.

I would be happy to talk if you want to.

Reply by a searcher
from The University of Michigan in 1075 Gills Dr, Orlando, FL 32824, USA

^redacted‌ I looked into this as well for the same reasons you stated. My strategy was going to be to do an initial acquisition of a larger company where the owner was not cleaning the pools and then begin rolling up the smaller companies where the owner was the only employee given the low multiples they sell for. I found that those owner managed routes typically made $70-$80k in profit and replacing the owner with an employee would cost ~$25k/year. The problem I had was that I couldn't find many targets for the initial acquisition that were larger, almost all the companies I found here in Central Florida were the type where the owner was the single employee. Also, I disagree with the comment about lack of organic growth. Central Florida, and I imagine Houston is similar, is growing rapidly so there are a lot of new homes being built.

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