Pool Construction Growing in South Florida
Pool builders design and construct in-ground pools for residential and commercial customers. The year-round warm weather in South Florida along with a large amount of households with high disposable income make South Florida a preferred location for pool builders. The total amount of permits for new pools in Florida has more than doubled since 2011. Although the number of new pools in Florida has declined since 2022 (primarily due to rising interest rates), new pool permits in Palm Beach County reached a record high in 2024 and was up six percent year over year. Some pool builders also provide regular pool maintenance services for its customers, but most pool builders strictly specialize in new pool construction. Pool builders must be properly licensed and insured, and often join organizations such as the Better Business Bureau.
Valuing Pool Construction Companies
The average multiple paid for pool construction companies is 2.8 x its annual profits or owner benefit. This means that a pool construction company that generates $500K in annual profits (or owner benefit) sells for about $1.4M. The valuation range for pool construction companies varies considerably depending on its growth rate of new business, value of its included equipment or vehicles, and overall goodwill or reputation in its community as a trusted and reliable pool builder. In today’s market, positive google reviews with a strong social media presence and rankings from satisfied customers significantly enhances the goodwill. A successful sale of a pool construction company should always be handled confidentially in order to protect the seller’s business from being disrupted in any way until the closing.
Growth Rate Affects Valuation
A well established pool builder with a long and consistent growth trajectory will sell at a premium valuation multiple compared to a less established pool builder with a stagnant or declining record of growth. Typically, pool builders should gather their last three year records of financials (such as tax returns or profit and loss statements) in order to show potential buyers their growth profile. Buyers desire to purchase pool builders with a strong growth rate in its revenue or total gross sales, as well as a strong growth rate in its bottom line profits or owner benefit. A pool builder with a strong rate of revenue growth but stagnant or declining profits may signify that the company has declining operating margins or operating efficiency. A well run pool builder keeps a close eye on its operating expenses (such as salaries, advertising, and occupancy costs) in order to maintain strong operating margins.
Work In Progress
The Work in Progress (WIP) – or ongoing jobs for which a deposit has been collected but are not yet completed – of pool builders is a key component in its valuation and selling price. Most pool builders have a large amount of WIP due to pool construction jobs often taking months to complete from the point when a job is started until completion. When it comes time to sell, the WIP (along with the customer deposits) is transferred to the buyer minus the costs (including labor and materials) incurred by the seller as of the date of sale. A large amount of transferable WIP enhances the valuation of pool builders since the buyer will be entitled to complete the jobs and receive its profits. Owners of pool builders may always try and minimize the transferable WIP by completing as many outstanding jobs as possible prior to the closing date.
Tangible Assets of Pool Builders
Most large pool builders have a large amount of tangible or physical assets such as equipment, vehicles, and inventory of raw materials used in furtherance of the construction of new pools. Prior to selling, pool builder owners should compile an asset list of all included physical assets with approximate valuations. This way, the buyer will know exactly what is included in the sale, and will be able to later inspect such items in order to ascertain their condition and value. Items belonging to the owner (such as the owner’s personal vehicle or truck) should not be included in the asset list. The value of included tangible assets serves as a floor to the company’s overall valuation. Additionally, the tangible assets may serve as collateral in the event that the buyer is seeking external financing backed by the Small Business Administration (SBA).
Goodwill/Owner’s Role
Customer goodwill – or the reputation and brand name – of a pool builder is invariably its most important asset. Without a reputation of trust, reliability, and quality workmanship, a pool builder will not be able to generate new business and sign up new customers. Pool builders also have goodwill with their employees, and the ability to attract and retain talented workers is a critical aspect of a successful pool construction company. For a pool builder to receive a premium valuation, its goodwill must be transferable to the buyer even after the seller is no longer the owner. For active owner-operators who deal directly with customers and employees, this may cause a problem. The owner’s role should thus be minimized to the best extent possible prior to selling the business in such a way that the buyer is assured that all of the customer and employee relationships will transfer with the sale.
Pool building companies occupy a special niche in South Florida, and are frequently sold for premium valuations so long as it has a demonstrable period of growth, quality tangible assets, and transferable goodwill. Always use an experienced business broker when selling a pool construction firm so the business is valued properly and so the sale is conducted in a confidential manner without business interruption.
Give Martin at Five Star Business Brokers of Palm Beach County a call today at 561-827-1181 for a FREE evaluation of your business.