Water Treatment: A New Profit Opportunity
When evaluating a new business opportunity, you want a product or service that has the following characteristics:
- A large number of your present and potential customers need and use the service or product.
- Your existing sales, service, warehouse, delivery and office staff can handle the added workload and technical requirements.
- Start-up costs for inventory, training, permits, space and marketing are low.
- Profit margins are high and the break-even period is short.
- The risk of loss regarding liability for misuse, injury, transportation, storage and disposal is low and manageable.
- The potential for growth and expansion is good.
- The market place is not saturated; this will put you a step ahead of the competition.
Water treatment products and services for commercial properties are an often overlooked opportunity for profit that will enable you to better meet the needs of your customers and penetrate new markets.
Swimming pools and spas
In this article we will take a look at water treatment and how sanitary suppliers and distributors can develop these market niches into viable new profit centers.
As with any business opportunity, there are risks involved. A professional level of expertise must be developed and ongoing training must be provided. This along with a solid business and marketing plan and a commitment from management to support the venture with time, space and resources will help ensure success.
As a starting place let’s talk with several sanitary suppliers who currently handle water treatment products for heating and air conditioning systems and hear about their experiences.
Tom Martin, a salesman with Candy Peck in Dallas, Texas worked for a company in the water treatment market for several years. Martin believes water treatment chemical sales and service are ideal markets for suppliers and distributors looking for expansion opportunities. He notes, “Water treatment is a more stable market that offers higher profit margins than paper and cleaning supplies.” Selling water treatment is similar to selling the washware and laundry markets. You’re selling chemicals and dispensing systems along with technical support and employee training. The sales are ongoing-customers buy again and again because they go through a lot of product.
He explains, “A lot of suppliers are into the pool and spa water treatment market, but are unaware of the profit potential available in the building systems water treatment market.”
It’s important to narrow the field by concentrating on serving the needs of properties that have central heating and air conditioning plants in the 100 ton and below size. The technical expertise needed here is not as critical as larger properties where automatic injection pumps are used to feed the chemical into the system. These properties are too small for the big players to go after as they can’t afford to tie up a salesperson on these smaller buyers. They want to sell by the truck or tank car.
These smaller markets are an ideal add-on for sanitary suppliers as your sales people are already calling on the account for cleaning supplies and chemicals. You just have to ask for the name of the maintenance director and find out how they are handling water treatment in the facility now. This approach will work well with hotels, motels, apartments, condominiums, hospitals, nursing homes, schools and public facilities as well as smaller office buildings and industrial plants.
As Martin sees it, “The market is there and it offers a great opportunity for growth in a lucrative segment of the maintenance field that has little competition. Until now the sanitary supply industry has been unaware of its potential.”
Now let’s hear what the people who manufacture the chemicals have to say.
Sam Hatcher, Product and Marketing Manager for Amrep Inc., sells building system water treatment chemicals under the Misty and AmSolv brand product lines. Amrep has been manufacturing water treatment products since 1970.
The challenge has been to figure out how to effectively sell the line to end users and professional service contractors through established sanitary supplier and distributor channels.
Hatcher believes the answer lies in providing a turnkey package that includes support in the following areas:
- Technical and sales training for the salesperson
- Help in developing business and marketing plans
- Drop shipping service to limit inventory costs
- A detailed technical manual, catalogue and newsletter
- Counseling and guidance about business and products
- Market information regarding the competition
- Formal dealership agreement for a geographic area
- A water testing service with analytical report
- Quality products incorporating the latest technology
- Low entry costs and no minimum order requirements
One of the problems in dealing with suppliers is that they are product-oriented; they want to sell chemicals and then walk away. These customers need products and service. So we either have to change the suppliers mind set or we have to utilize them only as distributors who stock and deliver the product to the water treatment contractor who will sell, test, monitor and service the end user. This is actually a growing audience as there are more of these small service contractors going into business every day.
There are two primary buyers: the end user, normally a maintenance director or building engineer, and the professional water treatment service contractor.
Some suppliers are setting up a separate qualified division or purchasing an existing service contractor as a way of penetrating the market and getting the maximum return on their investment. Starting from scratch, it could take six to twelve months to get this type of operation up and running on a self-supporting basis.
As Hatcher sees it, “This is a growing business with a lot of p1otential. It is not nearly as competitive as the sanitary supply field, although there is some competition. My interest is in setting up suppliers so we can move product through them. We have a comprehensive yet flexible support system that is designed to help ensure their success. A top quality product only gets you to the starting gate; you must also have a value-added package to service the customer’s needs and move a product line.”
Hatcher has put together an excellent technical manual and catalogue that explains why water treatment is needed and how various products are used. For a free copy of the “Guide To Total Water Management,” call 1-800-241-7766.
Austin Hansen, President of Scaltrol Inc. in Atlanta, Georgia, manufactures a patented, non-electromechanical water treatment cartridge that constantly adds a chemical to the water that will prevent and remove existing scale from any water source, appliance or system. His polyphosphate-based treatment system is designed for use in any location where scale, minerals or hardness in the water will cause a problem. Some common uses include: small boilers, chillers, water towers, swamp coolers, ice makers, hot water heaters, steam tables, pressure washers, pools and spas in addition to anywhere water is heated, sprayed or misted.
Potential markets for the device are widespread, but primarily focused on small businesses, agriculture, restaurants, schools, hotels, motels and private homes.
Some of the benefits of the system include: shower heads are clear and clean, there are no water spots on glasses or sinks, clothes are cleaner, hair is softer, water is hotter because heating elements are cleaner, more hot water volume is available because pipes are cleaner. Other benefits include the elimination of any scum line in pools and spas and reduced scale and scum build-up on shower walls in dorms, schools, health clubs and other similar locations.
The device and chemical are approved as safe for use on any water source by the NSF, EPA, USDA and FDA.
Units are available to treat from 35,000 to 500,000 gallons of water, the smallest unit has a $50 wholesale price with a suggested mark-up of 100%. Replacement chemical cakes come in a case of twelve and sell for about $70 with the same mark-up suggested.
According to Hansen, “There has never been anything like this. In the past you needed an expensive metering system on a slurry tank to get these results. It simply wasn’t economically viable for anyone except very large users. Now anyone can have the benefits of scale removal at reasonable price. The market of this product is tremendous. Just think of all the possible locations with your existing customers.”
Hansen believes so strongly in the value of his product that it comes with a 60-day guarantee. He also states that he will provide any supplier or distributor with a free trial unit for home or business testing. You can call him at 1-800-868-0629 and try the system for yourself.
Another major category of water treatment is for pools and spas. Some suppliers are already servicing this market but there appears to be a lot of room for further growth.
Richard Prutky, President of White House Chemical Supply Company in Hamilton, New Jersey, offers a full pool and spa product line and supports it with equipment sales and service.
According to Prutky, “If it has to do with pools or spas, we sell and or service it. This includes chemicals, filters, pumps, heaters and diving boards as well as trouble shooting, repainting and repairs such as changing out equipment and replacing blown pipes.
“Year-round this market accounts for over 40% of our business. In the summer it can be as high as 80%, but it usually drops off as fall approaches. This year, for some reason it has remained strong right into December.
“One thing about this business-people want service and product right now, not in three or four days. During the summer we can move 20,000 gallons of chemicals a week and service 300 pools on a regular basis. Scheduling gets pretty demanding, but the cash flow is good.”
The company operates a storefront for walk-in, cash-and-carry sales. The commercial side of the business is year-round, which includes schools, hotels, health clubs, condominiums and public facilities.
Ongoing training is important for sales staff, service technicians and end users. There are risks involved. You’re dealing with a regulated industry, hazardous chemicals, electricity and people who can make mistakes. Certification and a pool operators license are required for service technicians, as well as commercial drivers license with a hazardous materials endorsement for delivery drivers. You’ll also have the EPA and local regulatory agencies looking over your shoulder.
Prutky advises, “If you’re serious about this field, go slow and do it professionally or stay out of it. You need to know what you’re doing. If you screw up, people can get hurt. One of the best things you can do is join your local Pool and Spa Association.”
For more information on the National Pool and Spa Association and to see if they have a local chapter in your area, call (703) 838-0083.
Jim Siebert, National Sales Manager for BioGuard Products, Decateur, Georgia, is upbeat about the opportunities available in the pool and spa chemical market. As he sees it, what holds back a lot of suppliers is the perception that water treatment is very technical, not real profitable and has a lot of problems involved with it. He argues, “The facts don’t support this. Much of what suppliers handle now is more complicated to use, margins average in the 35% range and can go as high as 60% or more for some specialty products and not a lot of warehouse space is required to stock items.
“Somebody is selling the market now and earning good money. I’ve always scratched my head and wondered why more sanitary suppliers and distributors aren’t handling these lines. Our research shows that the commercial side alone has an annual wholesale value of 60 to 90 million dollars. That doesn’t count the apartment and condo market, which is worth another 30 million dollars. And these markets are growing three to five percent each year. To me that’s too large a market opportunity to ignore, considering that most suppliers already have salespeople calling on the same accounts to sell them cleaning supplies and chemicals. I see it as just one more reason an existing customer should continue to do business with their current supplier.”
Siebert suggests the following for those wanting to go after a share of the existing market:
- Define your market. Talk with your sales staff and see how many are calling on accounts that have pools and spas. Have them find out where these accounts get their supplies now and would they be willing to give you the business.
- Locate several viable sources for the quality product lines you’ll need to carry. There are about ten national players and probably 30 regional suppliers that can sell you the chemical you need. Check the phone book under pool chemicals and read the national magazines for the pool and spa industry.
- Start the education process. You have to know what you’re doing in this business or you will run into problems. Many of the chemical manufacturers have technical information and training materials available. Another approach is to hire an experienced person to head up your venture into this market segment. It’s a good idea to develop a specialist who can stay current with the industry and act as your trouble shooter to help customers solve problems and provide on-site training for end users.
- Realize the risks, limitations and requirements involved in servicing this market as a new business opportunity. You’re dealing with chemicals that can be hazardous or dangerous if handled improperly. This is a seasonal business-April to August are great, then it slows down. Don’t expect to generate the same level of income all year-round unless you’re in Florida or dealing with the commercial buyers. Be prepared to make a reasonable investment of time, money and space if you want a good return.
BioGuard has two publications that are free for the asking, call 1-800-859-7946. The Spa Book and The Pool Book, are both excellent sources of information for those thinking about addressing these markets.
Jay Gordon, National Sales Manager for Jack’s Magic Products Inc. in Clearwater, Florida sees specialty pool and spa chemicals as a high profit item for those selling to the commercial and back yard pool markets.
As Gordon explains it, “We sell a line of specialty chemicals that allow property managers to clean pool surfaces and remove stains without draining the water. This saves considerable time and money, while improving the overall appearance of the facility. We train our dealers to become specialists in determining what is causing stains and how to prevent their reoccurrence.
“In every facility the pool and spa area is a showcase. Pristine conditions must be maintained or people won’t use the facilities. We currently focus on sales through retail pool and spa stores, but I see this market as an excellent add-on for the sanitary supplier and distributor. We don’t sell sanitizers. All of our products are specialty items, many of which involve new technology that hasn’t previously been applied to this market. Examples include a hair shampoo that pulls metals out of the hair, test kits, filter mediums that remove contaminants as small as two microns in size and products that eliminate the need for acid washing of pool and spa surfaces.”
Water treatment is growing field that warrants examination by sanitary suppliers and distributors who are looking for new ways to better serve existing customers as well as penetrating new markets that have previously been overlooked.