Average Rate and why it’s so important for your pool business
TRACK YOUR AVERAGE RATE AND NOT YOUR MONTHLY RATE!!!
What is an average rate? The average rate is your total monthly service charges divided by the total number of pools. For example, $5,400.00 divided by 60 pools = $90.00 average rate.
It is NOT the same as the rate you quote. Remember that you have some pools that are at higher rates than others. If you have been servicing pools for several years your rates might have gone up, but maybe you have not increased the rates on those old customers to keep them all the same.
Why is this so important to know your average rate? The higher this number the higher your profit is going to be. That is more money in your pocket!!
When I got into the swimming pool business no one ever talked about the average rate. Everyone just talked about the “rate” they charged and we all know how everyone brags about those high rates they charge. But some of them were pool guys that had been doing this for 20 years and it just did not make sense to me that all of their pools could be at those high rates they were talking about.
I remember asking a good buddy of mine, that was in the business, what his rate was and his response was “the lowest I quote is $100 a month”. I kept thinking to myself “how does he do it”? “What is he doing that I am not doing”? So my next question to him was “how do you get all those old accounts up that high?” and that is where he spilled the beans. He had those old customers at lower rates and not all were at the $100 he was quoting.
I asked him if he knew what his average rate was but he did not know. He thought it was around $90.00. When we sat down and looked at it his average rate it was $84.00. It was a big shock for him. He was servicing over 200 pools and had 2 guys working with him so I could see where he had not figured out what his average rate was.
See there is a big difference between your pool service average rate and the monthly rate you charge. The average rate makes you keep into account your older rates, and makes you focus on pushing those up to keep up with your new rates. When you are in the pool service industry one of the key metrics you should be looking at it is your average rate and have a game plan to increase that average rate every year.
If you have 80 pools and increase the average rate by $1.00 that is $80.00 more per month. You might think it’s not much but it adds up to $960.00 per year. That’s almost an extra thousand dollars you are making for the same amount of work. It did not cost anything to make that $960.00, so it’s pure profit.
Some pool guys are afraid to increase rates because they are afraid that they are going to lose customers. So if you are afraid to raise your rates every couple of years then do it when you are quoting for service. Tell the customer that you increase your rates by a dollar every year. So for example, if you charge $100.00 the first year then tell them that the second year it will be $101.00 and then $102.00 and so on. Usually, customers are okay with that because it is only a $1.00 per month more and this will ensure that you are increasing your average monthly service rate.
The goal is to track your AVERAGE RATE AND INCREASE PROFITS.