Pool plastering is one of the few aspects of the trade that is a mix of both art and science. Sure there are set standards and recommended guidelines to follow, but the actual application of plaster, how the startup is performed, and the maintenance which occurs after the fact is where true artistry comes into play. The plastering process can transform a backyard into a beautiful oasis, but when things go awry, it leads to a cascade of blame. Homeowners blame the builders, builders blame the plasterers, plasterers blame the pool techs, and round and round the circle goes. Today, we explore some of the common challenges and misconceptions about plastering, with insights from industry expert Jon Temple, owner of Tempool Inc. and educator with Watershape University.

Addressing The Blame Game

The rise of social media has significantly impacted how issues in pool plastering are perceived and addressed. Homeowners and builders frequently turn to platforms like Facebook and Instagram to share photos of pool plaster jobs that show signs of problems such as stains, cracks, delamination, and other defects. These posts often ignite the blame game, with various parties pointing fingers at each other, exacerbating an already complex situation.

Temple who often responds to questions from homeowners and builders addressed the issue, “Sometimes there’s some bickering, there’s a little bit of arguing, which I love. Some people sometimes get offended when somebody critiques them or something, but that’s how we learn,” he remarked. Social media can be a double-edged sword: it offers a platform for education and sharing best practices, but it can also fuel conflicts and misunderstandings.

Pointing The Finger Elsewhere

Temple candidly discussed the finger-pointing which occurs when pool plastering doesn’t go as planned. “Our whole industry is about that blame game,” Temple notes. “In the past, when I came up, you built the whole swimming pool. Now it’s all subbed out. There’s a lot of moving pieces involved in making the homeowner happy.”

“When I just started plastering, and I didn’t know what caused a job to go sideways, I’ve said it a million times, ‘Hey, that’s bad startup, that’s bad chemistry, that’s bad maintenance’. That got old real quick because you’re still in that fight. You’re still meeting those homeowners after work and they’re mad. So we started figuring out what could we do to create a better process,” explained Temple.

Changing Methodologies Introduced a Greater Need for Education

Each pool season, social media is alight with photos and videos posted by homeowners and pool professionals alike. Many of the posts are open-ended questions about the cause of cracking, a particular stain, or mottling after fresh plaster.

Temple, who has spent the better part of his career as an applicator, says he’s seen plaster jobs go sideways for any number of reasons over the years. However, since the introduction of newer pool building methods, he has seen an increase in the number of faulty application photos making their way to social media.

“Over half of my career, we had wet mix shotcrete. It started out at around 4,000 psi but after curing, you know, was in the 5,000 or 6,000 psi range and we had perfect shotcrete. Well, about 15 years ago, a lot of the industry got into the dry mix. With that came a lot of challenges,” noted Temple.

“There were a lot of cut corners which created shells that didn’t hydrate correctly. Lots of structural problems, weepers, bleeders. The switch also caused more chemistry issues. Lots of staining and lots of hydration. So what we went after first was how to stop that. That’s when we started using a perma coat or a bonding agent. We started rolling it on, and we started getting good results with that. And then we started spraying it on. We wanted it to look a certain way and developed a sealing texture in-house.”

“If you’re going to paint a house a certain color, you paint a primer on first so that it all looks even. When you look at a brand new pool or remodel, there are maybe three, four, sometimes five different colors happening. Tile line, build out, dry spots, wet spots. You’ve got water standing. You’ve got a lot of different things happening and it’s hard to make something look consistent if you don’t have a clean surface to start with,” explained Temple.

“We started spraying on three coats of bonding agent,” explained Temple, “and we found out that this helped our plaster dry more evenly. We didn’t have a sunny wall drying faster than the other wall or gunite with more sand in it, drying faster than a spot with weepers.”

Finger Pointing Over Maintenance

One of the most frequent complaints Temple has identified on the maintenance side of plaster issues has to do with acid washing. “I was really concerned about muriatic acid,” said Temple, “specifically, about sending people out to apply it. At first, I didn’t know the effects that muriatic acid had on pool finishes, but I knew the effect it had on my employees and on my equipment. I knew the impact it had on outdoor kitchens, screen enclosure rooms, and decks. Ultimately, I knew that muriatic acid was not my friend”

“We started looking for other products that could take its place. Eventually, we found a product that we were able to take to a friend of mine, he helped develop it. We started using what we call Pool Wash. That took the place of the muriatic acid.” said Temple, “We found out we weren’t getting any streaks or footprints. We had no fumes, and it didn’t kill the grass if we pumped it out into the yard. We weren’t getting any plaster dust. Scaling pools went away, hot startups went away. We had an incredible-looking pool from day one.”

A Shoulder-to-Shoulder Approach

With good education and proper communication between applicators and service professionals, Temple believes pool professionals can become proactive rather than reactive in their approach.

“In the end it’s all of our faults. It’s not one group’s fault and I think the best thing to do is make the service company your partner. I tell the service techs what I’m doing, and why. We included them in on our education and figured out we could do better as a group, rather than blaming each other,” emphasized Temple.

Listen to our entire conversation with Jon Temple on the Pool Magazine podcast.

Selling a pool business requires more than just crunching numbers and applying a basic formula. A friend and colleague of mine in the pool industry, learned this the hard way. Despite having yearly sales of $2 million and an EBITDA of $200,000, he initially believed his business was worth between $600,000 and $1,000,000. However, a deeper analysis revealed that the true worth was closer to zero. One thing became clear to me, if you’re thinking of selling your pool company, it certainly helps to know your worth.

Figuring Out What Your Pool Company Is Worth

Understanding the key components that determine a pool company’s value is crucial for anyone considering selling their business. The primary drivers are EBITDA (earnings before interest, taxes, depreciation, and amortization) and multiples of EBITDA.

EBITDA: The Foundation of Value

EBITDA serves as a fundamental indicator, representing the operational profitability of a business. Investors often look for businesses with a 20% profit margin, valuing them at three to five times their EBITDA. For example, a pool company generating $1 million annually with an EBITDA of $200,000, the estimated value could range from $600,000 to $1 million.

Some simplify the valuation process by associating the value directly with revenue. For instance, a business with $1 million in revenue might be considered worth $1 million. However, this simplistic approach neglects the nuances that savvy investors scrutinize.

Factors That Decrease Value: Beware of Red Flags

Merely relying on the EBITDA formula is insufficient. Investors consider various factors beyond the numbers. For example, a business owner not paying themselves a salary, might falsely believe their profit is the true measure of success. However, investors aren’t just buying a business; they’re buying a sustainable operation. Industries with low profitability or thin profit margins are sure to deter investors.

Moreover, risks such as high turnover rates, equipment issues, or seasonal businesses with no new customers can decrease confidence, making investors hesitant to pay a premium.

Going Beyond Simple Math To Find Value When Selling a Pool Company

As businesses scale in revenue, the multiples of EBITDA change significantly. Larger companies with steady revenue streams may be valued at five to seven times EBITDA, or even higher if they go public. Patents on proprietary technology can further elevate the valuation.

Consider Instagram, a company with only 13 employees valued at $1 billion when acquired by Facebook. Patented technology can attract major players and launch bidding wars, driving multiples into the stratosphere.

What Are Investors Looking For?

Investors typically look for several key factors that can make buying a pool company more attractive. These factors can contribute to the overall value and potential return on investment. Here are some important considerations when selling your pool company:

Stable Revenue and Profit Margins:

Consistent and growing revenue streams are attractive to investors. A pool company with a stable customer base and recurring revenue from services such as maintenance contracts can be more appealing.

Healthy profit margins demonstrate the company’s ability to manage costs effectively.

Customer Base and Contracts:

A large and diverse customer base with long-term contracts can provide a predictable income stream and reduce the risk of revenue fluctuations.

Contracts for pool construction, maintenance, and repair services can enhance the company’s value by ensuring ongoing business.

Reputation and Brand Recognition:

A strong reputation for quality service, customer satisfaction, and reliability can significantly enhance the company’s value. Positive customer reviews and testimonials contribute to brand recognition.

Established brand equity can be a competitive advantage and attract new customers.

Geographic Reach:

A pool company that serves a broad geographic area or has the potential for expansion into new markets may be more appealing to investors looking for growth opportunities.

A diverse customer base across different regions can help mitigate risks associated with local economic downturns.

Technological Integration:

Companies that leverage technology for efficient operations, customer management, and data analysis are often more attractive to investors.

Integration of smart pool technologies and other innovations can position the company as forward-thinking and responsive to market trends.

Experienced Management Team:

A skilled and experienced management team is crucial. Investors often look for a team with a proven track record in the pool industry, as well as a history of successful business management.

The presence of knowledgeable and capable leaders can instill confidence in investors.

Compliance and Regulatory Considerations:

Adherence to industry regulations and compliance with safety standards is essential. Companies with a strong commitment to legal and regulatory compliance are generally viewed more favorably by investors.

Financial Health and Growth Potential:

A strong balance sheet, positive cash flow, and manageable debt levels are indicators of financial health.

Clear growth potential, whether through expansion, diversification, or innovation, is attractive to investors seeking a return on their investment.

Environmental and Sustainability Practices:

Increasingly, investors are interested in companies that prioritize environmental sustainability. This may include energy-efficient pool systems, responsible water management, and eco-friendly pool chemicals.

Market Trends and Industry Outlook:

Awareness of and adaptation to current market trends, such as the increasing demand for home improvement services, sustainable practices, and smart home technologies, can enhance a pool company’s attractiveness to investors.

Becoming More Attractive To Investors

For pool companies looking to sell, the time to enhance value is now. Going the extra mile by pushing sales, increasing social media presence, and staying relevant can significantly impact the company’s perceived worth. Introducing innovative products can lead to substantial increases in EBITDA and future sale value.

Even small improvements, such as a 1% or 2% increase, can translate into millions of dollars. Building confidence in your company not only attracts investors but also maximizes the return on investment when it comes time to sell. In the dynamic pool industry, strategic efforts to bolster value will undoubtedly pay off in the long run.

Determining The True Value of a Pool Company

Valuing a pool company requires a multifaceted assessment that encompasses financial metrics, industry dynamics, and qualitative factors. Investors seeking to determine the company’s worth typically delve into the financial health, examining revenue sources, profit margins, and Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA).

Additionally, the composition and stability of the customer base, existing contracts, and backlog of projects are crucial indicators of future revenue and growth potential. Tangible assets, liabilities, and cash flow analysis provide insights into the company’s financial structure, while an evaluation of the management team’s experience, brand reputation, and compliance with industry regulations contributes to the overall assessment.

Beyond financial considerations, investors scrutinize the company’s position in the market, competitive landscape, and its alignment with industry trends. The geographic reach, technological integration, and commitment to innovation are also pivotal factors. Evaluating risk factors, including customer concentration and potential challenges in the regulatory environment, is essential. The investor’s exit strategy and the company’s future growth prospects, whether through market expansion or service diversification, add further dimensions to the comprehensive valuation process.

One thing is certainly for sure, selling your pool company these days isn’t always so cut and dry. Ultimately, the valuation of a pool company is a nuanced undertaking that requires a combination of financial expertise, industry knowledge, and a thorough understanding of qualitative factors to arrive at a well-rounded assessment of the company’s value. Finding the right buyer who truly understands what your company is worth is the key to getting the right price.

The 2022 PHTA Builder of the Year shares top tips for service providers looking to get into pool construction

When Kyle Chaikin began building pools, he dove in head-first. He had been servicing pools for more than a decade and just completed his first renovations when a long-time customer asked him to build his hotel pool. “I told him I had never done it before, but I would sure like to try,” he says.

With the customer’s support, he built his first pool. Not long after, Chaikin found himself with two more hotel jobs and his service company progressing into the construction space — a move he says he never intentionally planned.

Fast-forward past a merger in 2011, and Chaikin is now president of Long Island, New York-based Chaikin Ultimate Pools and was named the 2022 Builder of the Year by the Pool & Hot Tub Alliance (PHTA). His company still services pools under the business arm The Ultimate in Pool Care, and Chaikin himself oversees residential and commercial builds — many of them high-end — on the construction side.

To build or not to build

For both service companies and builders alike, the grass often seems greener on the other side. Builders often turn to service to maintain business with customers they built pools for, but the draw from service to construction is just as strong.

“There’s always a push to get into construction from the service side,” says Chaikin. “Sometimes it works out great. In my case, it seems to have worked out, and we’re very happy, and I know lots of companies that have done it.”

However, Chaikin advises that service companies weigh the pros and cons of making the change carefully, as the big jobs in construction can mean “big money, but also bigger headaches.”

“There’s always something, there’s always an issue, whether it’s with a piece of equipment or not being able to get a piece of equipment, or perhaps even the timing of it,” he says.

Scheduling projects can be especially challenging on the commercial side, where you often must meet the demands of customers while at the mercy of general contractors’ timetables.

However, while the world of construction can bring big risks, it can also yield big rewards.

“Monetarily, if you’re doing it well and doing it right, there’s money to be made by being a good builder who does the job properly and on time,” says Chaikin.

How to build a construction business

For those service companies determined to make it big as builders, Chaikin shares his top tips for getting started and ramping up.

Tip #1: Get the prerequisites first.

“The best advice I can give is to go through the proper channels,” Chaikin says. Before starting, you’ll want to have the necessary education, license, experience, and insurance needed to build safely and properly.

• Education and licensure — You will want to obtain and maintain the Certified Builder Professional (CBP) certification if you are to build pools that are economic, efficient, and safe, according to Chaikin. You can earn all four levels of certification, from CBP to Master CBP, through the PHTA GENESIS® education program.
• Experience — “Classrooms are great, but get out in the field and check it out first,” says Chaikin. If you’re starting at square one, his advice is to subcontract out a builder and observe the job start to finish until you can understand and avoid common obstacles yourself.
• Insurance — Make sure your insurance will cover construction work. The insurance you need to build pools is not the same as the insurance needed to run a business or service pools.

Tip #2: Get the proper people in place.

Ensuring you have the correct workers building your projects is critical, as the pool of qualified skilled builders is currently small.

“If you’re building a swimming pool these days, even in a backyard, you need a pretty high level of knowledge to make sure that you’re building it properly and engineering it correctly,” he says.

As safety is paramount, you’ll want to make sure those who are building the pool and overseeing the build know all the building codes in the jurisdiction in which you are working. Be aware that commercial and residential codes are quite different. The laws will vary in different locations as well. For example, in New York an engineer is required to design all the hydraulics and structural components of commercial pools.

Tip #3: Get pricing right.

Supply chain issues have begun to resolve, but builders are still dealing with some unexpected price increases for materials. Chaikin says including escalation clauses or force majeure in building contracts can help provide financial relief. However, this can be difficult on the commercial side.

“These general contractors and developers have become savvy, if not shark-like,” he says, adding that most will refuse escalation clauses and look for someone else.

If you cannot protect against escalation, you will need to make sure that all parties stay on schedule, so your project is priced properly. You can limit your liability by getting a substantial completion date.

Tip #4: Get involved in the industry.

Chaikin says his involvement in the industry has been the most beneficial thing for his business. This means committing to continuous learning, as well as helping to teach others.

“If all our peers are doing the same education tracks, the more knowledgeable everybody is, the better educated everybody is, then the better the industry will be.”

Photo Credit to Chaikin Ultimate Pools