By Jim Haidet, Pool Business Brokers
Pool service owners can do things today to build a more profitable and more valuable business in the future. For many Florida pool service owners, September isn’t when they’re thinking about selling their business. They’re watching out for hurricanes and preparing for the busy snowbird season ahead. Seasonal residents will be returning, service demands are increasing, the holidays are approaching, and there are plenty of day-to-day issues competing for an owner’s attention. Meanwhile, many professional and private equity buyers tend to slow their acquisition activity late in the year before becoming much more active again after the first of the year. Then spring arrives and after another busy season, some owners start asking themselves a question they weren’t asking in the fall: “Do I still have enough gas in my tank to do this for another year?”
That’s when we often see owners begin thinking seriously about whether it is time to sell. Unfortunately, that’s also when they discover that some of the things that could have increased the value of their business are hard to fix overnight. The good news is that most of those improvements don’t just make your company more attractive to a future buyer; they can make it more profitable today. So, whether you’re thinking about selling next year, five years from now, or not at all, here are some things worth working on today. Get your pricing where it belongs. If your service rates are below market, don’t wait until you’re ready to sell to address them. Your operating costs increase every year and if you aren’t raising prices you’re losing money. Proper pricing improves margins immediately, and every month you postpone the needed increase is money you can never get back. It also allows you to establish a history showing buyers that customers have accepted those rates.
A buyer will place more value on profitability you’ve already demonstrated than profitability they might be able to create later. Tighten up your routes. A customer isn’t necessarily a good customer if your technician spends too much time driving to get there. Look for opportunities to improve route density and eliminate inefficient outliers. Less windshield time can mean more pools serviced per technician, lower labor and fuel costs, and better margins. That’s money in your pocket today, and a more scalable operation for a future buyer. Clean up your financials. You may know your business is profitable, but someday you may need to prove it.
Make sure expenses are properly categorized, personal and business costs are clearly separated, and your financial statements accurately reflect what’s happening in the company. Clean financials don’t create profit by themselves, but they often reveal where profit is being lost. They also make it much easier for a buyer to understand the business they’re evaluating. Make the business less dependent on you. Here’s a useful test: “What happens if you disappear for 30 days?” or even 24 hours? If everything comes to a stop, you’ve created a successful job for yourself, but not necessarily a highly transferable business. Develop employees who can handle more responsibility, delegate routine decisions, and put systems in place that allow the company to function without you touching everything.
Besides increasing value, you might discover that owning the business becomes a lot more enjoyable. Don’t wait until you have an offer to get advice. Another common mistake is assembling your professional team after a buyer is already at the table. Sophisticated buyers enter negotiations with experienced advisors already in place. Remember that they are not like you and they do this professionally. They know what they are doing and how to get the best deal for themselves.
Sellers should have experienced people protecting their interests as well. You don’t want to find yourself in a situation of being a checker player at a world class chess match. That outcome is easy to predict. A transaction-experienced accountant, qualified business broker, and M&A attorney can help identify issues before they become problems and help you understand the value you’ve actually created before you begin negotiating it away. Profit now, value later. Perhaps the most important point is this: preparing your company for a future sale and running a better business are largely the same exercise. Raise under-market pricing and you earn more now. Tighten routes and you improve margins now. Develop your employees and you get some of your time back now. Improve your systems and you reduce headaches now. And if you eventually decide to sell, those same improvements can translate into greater buyer interest, stronger cash flow, and a higher valuation.
You don’t have to decide today when, or even if, you’ll sell. But the next buying season will arrive whether you’re ready or not. The best time to build a more valuable business isn’t when you’re ready to sell. It’s while you’re still enjoying the profits from making it better.
