Pool Routes In High Demand
Most homeowners in South Florida prefer to let a professional pool service company handle the cleaning and chemical maintenance of their pool. Such pool service companies often sell their routes to other pool service company owners or to entrepreneurs desiring to enter a lucrative service industry. The recurring revenue model of pool companies along with high-margin repair and replacement fees make pool routes a highly sought after business for many buyers. Let’s explore the best way to sell a pool route in South Florida.
Monthly Regular Billing is Key Valuation Factor
- The single most important factor when determining the value of a pool route is the monthly amount of the route’s regular service billing (with no extras and without repair or replacement charges).
- This is the recurring nature of the route, and what the buyer of the route can expect (at minimum) to receive in revenue every month.
- Most pool companies are owner-operated (with no employees other than the owner or perhaps a spouse) and the costs of chemicals to service the route is typically only 10-15 percent of the regular service billing.
- A pool company that is owner-operated can thus expect to have net margins of around 80 percent (minus their truck expenses and fuel).
- Similar to landscaping routes, the seller’s tax returns or profit and loss reports often are not even asked for by the buyer.
- As long as the monthly billing of the route is known and confirmed, the typical buyer is comfortable making an offer to purchase the route.
- Equipment such as truck or trailer is usually not included in the sale, since buyers will be expected to use their own vehicle and equipment in order to service the route.
- Pool routes typically sell for 10-12 times the regular monthly billing, where a lower or higher multiple may be affected by a number of different factors.
Factors Affecting Multiple of Monthly Billing for South Florida Pool Routes
Ideally, buyers of pool routes want stable, longstanding, and well paying customers that are primarily in just a few subdivisions. This ensures a steady stream of cash flow, a low cancellation rate, more lucrative pool repair and replacement charges, low fuel expenses, and more time to clean and service pools (rather than driving to different pools spread out over a large geographic area). As a part of their formal due diligence, buyers will analyze the quality of the route’s customers by examining the pool company’s route sheet and bank statements. This reveals customer payment history and relevant customer data.
Importance of Confidentiality When Selling Pool Routes
- Unfortunately, some potential buyers of pool routes may use unsavory techniques to ‘steal’ customers from the seller of the pool route.
- It is much easier to convince a customer to switch pool service if the customer feels abandoned because their pool man is selling his or her pool route.
- A professional business broker will avoid this scenario by first having the buyer sign and complete a buyer’s Non-Disclosure Agreement (NDA) before the buyer is told the actual name and identity of the pool route seller.
- The NDA clearly states that the buyer may not contact the seller’s customers directly, nor in any way interfere with the seller’s business operations.
- Additionally, the business broker should qualify the buyer by ensuring proper financial disclosures are made showing that the buyer has the financial means to purchase the pool route.
- This will avoid having to deal with the many potential buyers of pool routes who simply do not have the funds to purchase the route.
Pool Route Buyers Will Want to do ‘Ride-Along’ Prior to Closing
Most buyers of pool routes will eventually want to do a ‘ride-along’ where the buyer and seller jointly service the customers’ pools for a few days or so. This is the best method for the buyer to ensure that the route actually exists and to determine the quality of the customers on the route. However, this is also the best way for the aforementioned unscrupulous buyer to try and ‘steal’ the customers since it gives them access and contact directly with the customers.
Funds Must be Placed in Escrow Prior to ‘Ride-Along’
Prior to a ride-along and prior to the route’s sensitive customer information being disclosed, the buyer must make a deposit by placing a negotiable amount of the purchase price into escrow. The purchase agreement specifies the terms of the escrow deposit, which is typically refundable (unless the buyer does not abide by the confidentiality provisions in the NDA). In reality, a buyer that is serious enough to place money in escrow toward the pool route purchase is far less likely to steal the pool routes’ customers or interfere with its business operations.
Transitioning Pool Customers to Buyer After the Sale
It is essential for the buyer and seller of the route to agree on the best way to transition the pool customers over to the buyer’s new pool company. Typically a letter is sent to the pool customers explaining that the seller has taken on a partner that is able to give them even better service. Some customer attrition is unavoidable but should be kept to a minimum. If the buyer has reason to believe that customer defections will become a problem, then they are less likely to pay a high multiple for the route. A key transition of the customers after the closing is crucial to a successful sale.
Pool routes can provide steady income for many years to either active owner-operators or more passive owners. Valuing a pool route correctly, having a deposit in escrow prior to formal due diligence, and providing for a smooth transition after the sale are key elements to successfully selling a pool route.
Give Martin at Five Star Business Brokers of Palm Beach County a call today for a FREE evaluation of your business.