How Much Is a Pool Business Worth?

What decides the value of a pool business?

A pool business is often several businesses under one name. Construction earns project by project and has to be won again each time, servicing earns every week from the same customers, and a shop earns from whoever walks in with a water sample. A valuer separates them, because each is judged on different evidence. An owner who started as a tradie on a service round may now run construction, a shop and a team of technicians as well.

The earnings are rebuilt in the usual way. An owner who services rounds, quotes builds and serves at the counter is replaced at a market cost, and family wages, private vehicle use and one-off jobs are put right. The wider list of factors is on our page on pool business valuations. Every figure below is illustrative. None is a benchmark and none describes a real business.

Are service rounds and construction valued the same way?

No. A service round is judged on its customer list: who the customers are, what each pays, how long each has stayed and how many leave. Construction is judged on its order book, its licence, the margin on completed pools and how many it can win in a year. We split revenue, contribution and overheads between the streams for several years, and where overheads are shared we say how they were allocated.

The service stream supplies 61.5% of the earnings but 73.7% of the value, because its earnings repeat. The construction average also hides a wide spread, from $85,000 to $260,000 across the three years, which is why we use the average and not the best season. A single blended multiple would hide both points.

Construction margin deserves its own check. Pool contracts are usually fixed price and paid by stage, and rock, access, council conditions and weather can erode the margin. We compare quoted and actual margin on completed pools, and look at customer deposits held for jobs not yet started, since a buyer would have to complete them.

How does customer churn change what a service round is worth?

Customers leave when they move, sell the pool, switch to a cheaper provider or decide to look after it themselves. The churn rate decides how long recurring revenue lasts and how much has to be spent just to stand still.

The direct cost is small beside the revenue that has to be replaced. The more important point is what churn says about the customers a buyer inherits. As a rough guide, 10% a year implies an average customer stays about ten years, and 20% implies about five.

We measure churn month by month over several years, how quickly lost customers were replaced and whether the round survived a technician leaving. The customer list, price history and routes matter as much as the revenue figure. Our guide on recurring maintenance contracts and business value explains how recurring revenue is weighed more generally.

Chemicals sold to service customers add to gross profit, so we check whether they are included in the visit price or charged separately. That changes both the price per visit and the margin, and it is one reason two rounds with the same revenue can earn different amounts.

How does seasonality affect a pool business valuation?

Pool work builds ahead of the warm months and falls away in winter, more so in the southern states than in the north. A winter balance date shows low stock, low receivables and little construction in progress. A summer one shows the opposite, with customer deposits held for jobs not yet started.

We look at monthly revenue and cash flow over several years, so that the seasonal pattern is seen and not mistaken for a trend. We also check that deposits and stage payments are matched to the right year, and how the business keeps its technicians busy through the quiet months. The valuation date changes the working capital figure, but not the earnings a buyer is paying for.

What reduces and what increases the value of a pool business?

These are the points that most often move the risk applied to a pool business’s earnings. None changes the method, and the report should say whether each one changes the earnings we adopt or the risk we apply to them.

• Increases: a high share of earnings from regular service customers. A documented list with start dates, prices and visit frequency is evidence a buyer can test.
• Increases: dense routes. Technicians who spend the day servicing and not driving make each round more profitable and easier to staff.
• Increases: customers who know the business, not just the technician. A round survives a technician leaving more readily when the relationship sits with the business. Our guide on valuing a business with owner dependency covers the same question for the owner.
• Increases: repair and equipment work that follows from the service base. Pump, filter and heater jobs that come from existing customers cost less to win than advertised ones.
• Reduces: construction profit concentrated in a few good summers or in the owner’s builder licence. Licensing rules differ by state, so we describe the facts and leave their interpretation to your adviser.
• Reduces: a round with no customer list. Revenue that cannot be traced to customers, prices and routes is hard to support.
• Reduces: warranty and leak claims, and deposits held for jobs not yet started. These are obligations a buyer takes on.
• Reduces: franchise terms that restrict a sale. Consent on transfer, the term remaining and the fees all affect what a buyer acquires.

Compliance records count too. Pool chemicals are dangerous goods, and where a state requires pool barrier inspections the accreditation may sit with the owner and not the business. We check the storage and handling records, and who holds any accreditation.

What should a pool business owner prepare for a valuation?

• a service customer list with start date, frequency, price and route
• a churn report showing customers lost and gained by month for three years
• revenue and gross profit by stream: construction, servicing, repairs and retail
• monthly sales and cash flow for three years, to show the seasonal pattern
• builder or contractor licences and who holds them, plus any inspection accreditation
• construction contracts in progress with stage payment schedules and deposits held
• warranty terms, a claims register and the franchise agreement, if there is one

An independent valuation then sets out each adjustment and the evidence behind it, and a draft report is provided before it is finalised. Whether a franchisor or a licensing body must approve a transfer is a question for you and your lawyer. When your records are ready you can start online.