It’s time to get back to the nitty-gritty of running a successful pool care business. Today, let’s talk about one of the key pillars of positive cash flow. Watching your expenses is a critical factor that can make or break your operation.
Just to share a slice of my reality – I recently got hit by several significant price increases … The first came around the middle of 2023. My commercial auto insurance increased around 25%. I learned that insurance companies had all increased prices across the board for both personal and commercial polices. Our Statefarm personal auto policy had jumped about the same amount. After getting three quotes each for both our personal and commercial vehicles they were all within $50.00 plus or minus of one another. It didn’t make sense to switch when they were all about equal.
Just this month, the pool service app Skimmer upped their fees by a whopping 30% with the turn of the new year. Price increases like this aren’t just pocket change; each one affects the bottom line.
For those who aren’t using accounting software like QuickBooks online, such changes can slip through unnoticed. But ignorance isn’t bliss in business. Here are five compelling reasons why watching your expenses is a must if you want to make more money in 2024:
1. Every Dollar Counts: Understanding where every dollar goes helps you stick to your budget. Overlooking a price increase might force you to dip into reserves to pay your bills or worse, push you into the red. Keeping track of expenses ensures that your profit margins stay healthy.
2. Profitability: By monitoring expenses, you can see which services are most profitable and which are costing you too much. This insight allows you to adjust your pricing or negotiate better rates with vendors or suppliers, ensuring that your profit margins remain healthy.
3. Negotiate: When you’re aware of price increases as they happen, you can negotiate better deals or seek out alternative suppliers. Maybe there’s a more economical alternative to “Skimmer” that can save us money and doesn’t sacrifice quality. You don’t get what you don’t ask for. Make those calls now and get off to a great start in 2024.
4. Control Your Cash Flow (In & Out): Regularly reviewing expenses helps you anticipate and manage cash flow, ensuring that you have enough to cover all your costs. It also allows you to identify any irregularities or unexpected costs before they become issues. Now is a perfect time to look back at 2023. Run your profit and loss report for the entire year. If you have had accounting software for several years run a report that will show you the increase or decrease from the previous year. This will give you clear insights as to both your income and expenses. If you notice price increases in multiple categories it’s time to go to work calling your suppliers, distributors and providers to negotiate better pricing.
5. Pricing Strategy: Understanding your business costs is vital when it comes time to consider increasing your own service prices. If your costs go up and you don’t adjust your pricing accordingly, you could be undercutting your own success. This could ultimately lead to the downfall of your business.
Now, let’s talk about when it might be time for you to reassess and potentially increase the price of the pool care services you offer.
1. Cost of Living Increases: If the general cost of living goes up, your employees will expect higher wages to cope. Or maybe you might like a pay increase if you are the sole owner of your business. This increase in payroll expenses may warrant a reevaluation of your service charges.
2. Inflation: As with the cost of living, inflation affects the cost of your supplies, utilities, equipment, parts, fuel, insurance, etc. To maintain your profit margin, you’ll need to adjust your pricing to match these rising costs.
3. Enhanced Service Offerings: If you’ve invested in better technology, training, equipment, or are offering new services that add value for your customers, it’s reasonable to increase prices to reflect this enhanced offering.
4. Increased Operational Costs: As in my experience with “The Skimmer App” when your operational costs go up due to vendor price increases, it might be time to pass some of that increase on to your customers. In the case with Skimmer, the company increased their price twice in 2023. I enjoy using The Skimmer App so, I consider it a cost of doing business. The cost is not high enough yet to consider going through the hassle of switching pool service apps. That doesn’t mean I’ve completely removed it from my radar.
5. Market Watch: Keep an eye on what competitors are charging. If you’re providing superior service, don’t undervalue what you offer. Adjust your prices to reflect the quality and value you deliver. Never be the cheapest in town. Pool care is a luxury. Charge customers accordingly but you better provide the service to back it up or someone else will come in and clean your clock.
In conclusion, vigilance in monitoring your expenses daily, monthly and annually isn’t just about catching price hikes; it’s about maintaining a thriving business. Use this as a reminder! Turn on your radar.
Want to go back to the beginning and learn how to start a pool business off on the right path? Check out The First 7 Steps to starting your pool care business.
What’s on your radar? I look forward to learning how you are managing your expenses in your pool care business. Comment Below and don’t forget to subscribe to my weekly pool care business blog.