Running a route

How to Value a Pool Route Before Making an Offer

Value a pool route with a payback method you control. Verify revenue, subtract your cost to serve, model churn and set a ceiling price. Example included.

This page does not give a price multiple for pool routes. Any figure would be a guess about a market that changes by city. It gives you a method: work out what the route would earn you, then decide how many months of that profit you will pay for.

All dollar figures below are examples. Use your own.

The method in four steps

1. Verify monthly revenue. Use payment records and bank deposits. Ignore the seller's summary until they match. Count only accounts you can confirm.
2. Subtract your cost to serve. Use your costs: your time at your cost per route hour, chemicals, fuel, truck, insurance and software. The route profit calculator helps.
3. Adjust for churn. Some customers leave after a sale. Choose your own estimates and test several.
4. Pick a payback period. This is the number of months of profit you are willing to wait for the price to come back. It is a risk decision, and a shorter wait means a lower price.

Ceiling price = monthly profit after churn x payback months.

Worked example

Say a route has 50 accounts averaging $160 a month, confirmed with deposits.

• Monthly revenue: 50 x $160 = $8,000
• Your cost to serve, from your own numbers: $5,600
• Monthly profit: $8,000 - $5,600 = $2,400
• Payback you will accept: 18 months
• Ceiling with no churn: $2,400 x 18 = $43,200

Now test churn. For this example, assume costs shrink in proportion when accounts leave.

In real life some costs stay put when an account leaves, such as insurance and truck payments. The table shows the best case at each level, so the true ceiling is usually a little lower.

Your own costs move the answer more than anything else. Rerun the example with a cost to serve of $6,200 instead of $5,600. Profit drops to $1,800 and the 18-month ceiling drops to $32,400. A $600 difference in monthly cost moves the ceiling by $10,800.

If your alternative is to build a route yourself, compare the ceiling with what that would cost you in time and ads.

Test the payback period too

The payback period is the number you control, so see what it does. Using the 10% churn row, with $2,160 of monthly profit:

A longer wait raises the ceiling and raises your exposure. If accounts leave faster than you planned or a big customer cancels, a long payback is where it hurts. Pick the shortest period that still fits your own price floor, and do not stretch it to make an asking price fit.

A sanity ratio

Divide each asking price by the route's verified monthly revenue. At $38,880 and $8,000 of revenue, the ratio is 4.86 months of revenue.

Compute this for every offer you look at. It lets you compare offers with each other. It does not tell you whether an offer is good, because the ratio ignores your costs. Your payback math does that.

Factors that move your ceiling

• Short drives between stops. More stops fit into a day, and your cost to serve drops. See route density.
• Long account history. Check start dates. Accounts that have stayed for years may be less likely to leave, though you cannot be sure.
• Prices unchanged for years. There may be room to raise, and a raise right after a sale can trigger cancellations.
• A heavy share of problem pools. Tree-covered, green-prone or large pools take more minutes and more chemical.
• Autopay and signed agreements. They make revenue easier to verify. Read what the agreements actually promise.
• Seller help. More introductions and a longer handoff usually mean fewer cancellations.
• Equipment and truck. Value these separately with receipts or an independent appraisal.
• Days required. If the route needs more hours than you have, add the cost of help before you set the ceiling.

Questions to settle before you make an offer

• What is the lowest monthly profit at which this deal still makes sense for me?
• How many months of cushion do I have if a third of the accounts leave?
• Can I cover the route's days with my current schedule?
• What do the signed agreements, if any, let customers do?
• Who reviews the deal for me, and when?

Mistakes people make

• Using the seller's cost to serve. The seller may have underpaid themselves or ignored truck costs.
• Valuing revenue you cannot cover. A 50-account route that needs a hire changes the math. See hiring your first pool tech.
• Paying for unverified accounts. If an account has no payment record, count it as zero until it does.
• Skipping a worst case. Test a loss level that would hurt, and see whether you could still make your payments.

Before you sign

Valuation is a pricing tool. It does not cover how the deal is structured, how the price is allocated for tax, or what the contract says about customer transfer. Those depend on your state and your situation, so take the draft deal to a local attorney and an accountant. Buying a pool route lists the records to collect first.