Cost Conundrums

For pool service professionals, raising prices can be a tricky topic. How much to raise prices and how to inform customers of the changes are decisions that should be approached with care. Beau DeRohan, the owner of Great White Pool and Spa in Boise, Idaho, knows it’s a daunting but necessary task. “Our rates are adjusted according to what the market’s doing and what we have to do to turn a profit,” he says. “Staying in business is the No. 1 important thing.”

Rick Woemell, the president of Bi-State Pool and Spa in O’Fallon, Missouri, says there is no perfect formula for how to raise rates, and that younger businesses in particular may suffer more pushback when doing so. “Businesses go through different cycles,” he says. “If you’re a brand new company and trying to build up your customer base, initially it may be more important in your business cycle to have more customers than profits.”

Pool service professionals consider several things when deciding whether to raise rates. DeRohan says he often takes his cues from what his competition is charging. “I obviously don’t want to be the cheapest guy on the block,” he says. “I also don’t want to be the most expensive. During my first two years, I’d take anything I could possibly get because we were establishing a clientele. Now I have a quality over quantity type of mindset.”

Another factor to consider is yearly costs. Scott Hudson, the owner of Callen Pool Supply in Rancho Cordova, California, says it’s not always easy to figure out whether you’re breaking even or turning a profit. “In the summertime, you might be making only 20% profit,” he explains, “but you might make 75% in the wintertime. If you don’t [track costs], that drops your percentage year-round down, which might not be enough to keep things going.”

DeRohan doesn’t raise rates every year, but when he does it’s usually in winter: “I say, ‘Where do we need to be to continue to be profitable?’ ” Woemell takes a similar approach: He and his team sit down and find out where they are, going over the hits and the misses “and trying and make those misses into hits,” he says.

If the competition is charging considerably more and/or profit margins are declining, it might be time to increase service rates via a text message, email or letter to customers. DeRohan says he lays out for customers exactly why he is raising rates: For instance, if he hikes hourly rates by $5 due to higher gas prices, he explains that to his customers.

Woemell also believes in sharing the specific factors that lead to price increases. Lately, he has found himself raising prices in an effort to continue to pay his employees fairly; he says customers respect that.

However, it’s understandable that pool service professionals may be worried about losing customers after rate increases. For DeRohan, that’s just the nature of the business. “Every year, we see people come and go,” he says. “For me, it’s about building those relationships and quality over quantity. If you’re not banging out job after job and you’re providing a quality service, usually those people care more about the job you’re doing than a $5 or $10 difference.”

Woemell says customer drop-off just isn’t an issue in his market. “The economy’s good right now,” he says. “We’re actually having to limit the number of customers we can properly service.” DeRohan says the key is thinking long term. “Live inside of your means,” he says. “You don’t want to look at this job, especially if you own your own business as ‘Every year I’m going to raise my rates five bucks and make more and more money’ because, eventually, you’ll reach a point where you price yourself right out of the market.”