Turning Down, Tuning Up

We knew it had to happen. After several years of superheated growth, some sectors of the watershaping market are now slowing down – in some areas, dramatically so.

In my travels and through dozens of conversations with watershapers and their suppliers during the past several months, I’ve been hearing consistently that the volume-oriented, price-driven end of the market has been hit particularly hard – off somewhere between 30 and 60 percent in some areas.

That’s a big number no matter which end of the spectrum is closer to the truth. It represents an enormous change from the extreme demand that most all of us were experiencing just a year ago. So now, a great many firms that were

once flush with work are now suffering, in some cases to the point where their businesses are being threatened.

Among upper-mid-range and high-end firms, however, I have yet to hear of such declines. In fact, as has been the case for the past several years, the watershapers who’ve fully embraced an orientation toward design, quality and artistry are as busy as ever.

It’s a tale of two industries, and it’s so for plenty of reasons worth discussing.

WHAT’S UP?

You don’t have to be an economist to recognize that something serious is happening. The housing market has slowed, prices have fallen in many markets, new housing starts are way off, interest rates have risen, sales of existing homes have stalled and refinancing, once white-hot, has plummeted to a fraction of the levels it was achieving just a short time ago.

The result is that a great many people who once had equity and therefore the capital needed for home improvements are no longer flush with cash and are not looking to buy watershapes – or any other significant home improvements, for that matter. And the situation isn’t likely to improve anytime soon.

The brutal truth is that too many consumers overextended themselves. Now, with home prices dropping and interest rates rising, many are struggling to make ends meet. This means that huge numbers of homeowners who once would’ve looked to amenities such as swimming pools, watergardens and elaborate landscape treatments to increase the value of their properties have fallen out of the ranks of our potential clients.

Personally, I blame both homeowners and the lending institutions that went after them knowing how completely they’d be exposed during a downturn. We all know the real estate market is subject to ups and downs, and the fact that it’s been more than 15 years since the last time housing went south on us didn’t change that basic economic fact of life.

Consumers are at least as culpable as the financial institutions that have fed their addictions. As I see it, there’s a misguided ethos in our culture that says that all of us are entitled to every kind of luxury imaginable so long as we own real estate. Just a year ago, in fact, you didn’t have to be wealthy to have everything you ever wanted, from expensive cars to the latest plasma televisions: You just needed to own a house and watch its value appreciate.

Just how bad things might get is anyone’s guess. There’s all sorts of prognostication being offered these days, however, and most experts seem to agree that we’re currently on the front end of this cooling off period – and none know for certain when the next upswing will start.

A COSMIC BIND

From a business standpoint, it’s reasonable to assume that things are going to be slow for at least a year or two, maybe more. Just as the market became cyclically hot after 1992, better times will return – but in the meantime, we all need to determine where we stand and what we need to do to make it through to that brighter future.

As I mentioned above, so far the downturn seems to be affecting only the middle and lower ranges of the watershaping market. As those households go, so goes the volume market. Will things slide so far that even high-end clients will pull back? At this juncture, that doesn’t seem to be happening – and we all should remember that it didn’t happen to any great degree when things were at their darkest in the early 1990s.

The whole situation is, of course, brutally ironic: I can’t count the number of clients who’ve told me that, when they started looking last year for someone to design and build a watershape for them, they could barely get a return phone call let alone find anyone willing to take on their jobs.

What strikes me about that memory of once-searing demand is that the work of a great many companies pretty much echoed the shortsightedness of the market itself – that is, even firms doing what might be classified as substandard work didn’t have to try at all to drum up more business than they could handle. Just as the decline of the real-estate market has been driven by what I see as shortsightedness on the part of consumers and financial institutions, so, too, the volume builders have been caught by their lack of forethought and planning for an always-uncertain future.

This isn’t a blanket indictment: I know for a fact that many volume-oriented watershaping operations are professional and do a creditable job of creating affordable products for a predominantly middle-class clientele. That doesn’t alter the fact, however, that all of these companies – good and bad, reputable and deplorable – are now feeling pressure they couldn’t even imagine a year ago.

In considering what to do about it, there are no easy answers. First, we have to look at what we know for certain: The clients still available are those who were in stable financial positions and have what might be called real wealth rather than wealth on paper. In referring to wealth, however, I don’t mean the uber-clients who own their own islands and private jets; instead, I mean people who haven’t mortgaged their homes for every penny they once were worth and have amassed assets that insulate them from general downturns in the economy.

This is why the custom, high-end market is still rolling along at very nearly the same level it was last summer and I’ve yet to hear any worrisome complaints from high-end watershapers. Just as I’m describing conditions on two levels of a single industry, it’s as if we’re looking at clients existing in two completely separate economic realities – one occupied by those who were positioned to be relatively unaffected by fluctuating real estate trends, and another by those for whom the clock was ticking.

MORE FROM LESS

Assuming we all know it’s impossible to conjure clients from thin air, the most reasonable course is to consider how to make headway with those who are still in the market. And there’s no time like the present to start thinking about what that means.

To thrive in a market such as this one, it’s clear that change will be required of a large number of practitioners and businesses. Without question, those firms that set their sights on the high-end market long ago are prepared for leaner times and will be able to do a better job of riding the waves of change. Those that aren’t there at this point need to change rapidly – and the sooner you make the most important of these adjustments, the better your chances of success will be.

What does that mean in more specific terms?

First, I believe one of the areas in which a great many firms can make a substantial, effective and feasible change is by shifting the focus of their work to cover a broader range of exterior elements. For a long time, most firms in the volume business have provided only a swimming pool or a pond and nothing else, leaving associated hardscape and features to others.

As has been suggested for years in WaterShapes and elsewhere, there are tremendous advantages to broadening what you do to encompass elements such as decks, shade structures, outdoor kitchens, outdoor dining areas, landscape lighting, greenscapes, fire features and even exterior sound and television systems. In basic terms, this means instead of leaving potential work for others to grab, you need to bring those elements into your scope of work.

Second and certainly related to that first point, those who want to make the transition from low-end to high-end or make the most of what’s left in the middle need to get educated when it comes to design and creating integrated spaces that respond to a site, its architecture and the clients’ needs. To be sure, learning what design is all about and developing legitimate skills isn’t an overnight process, but none of the people I know who are worthy of being called designers are hurting for work these days – far from it.

Third, you may need to broaden your scope and diversify: If you’re into pools and spas, you should think about getting into ponds and streams or fountains – which in turn means you’ll need to learn to communicate differently about what services you provide. And of course, this third point relates back to the first two: In all cases, your aim should be to gain a greater understanding of the integrated nature of overall exterior environments.

SPREADING JOY

Look at it this way: If custom, higher-end work represents the stable slice of the market, then it only makes sense to move yourself in that direction. It doesn’t mean you’ll be able to walk in and land six-figure projects: There’s plenty of hard work involved in elevating your game to that level, and above all, there’s an essential focus on creating clusters of satisfied clients in whatever you do, for whatever price range.

Make no mistake: Succeeding in custom work has never been about price or the concept of not wanting to leave any money on the table. It’s always about appropriate designs, styles, materials and details for specific settings and clients. This isn’t about selling bells and whistles. Instead, it has to do with doing more in the backyards of fewer clients and making them exceedingly happy with your total effort and output.

The key here is creating satisfied, even ecstatic clients, because referrals and the future business they represent are what you’re pursuing on this level. Indeed, perhaps the greatest common characteristic of companies doing best in today’s market is that they largely work off of referrals.

As has been said time and again in this column and by many other voices in this magazine and elsewhere, there’s no greater marketing tool than a happy client. It’s no secret that volume builders do not tend to score high on this scale. When business was booming, this didn’t seem like an issue. Now, however, a lack of concern on this front might lead that side of the industry to a shakeout the likes of which we haven’t seen since 1990 and ’91.

Some degree of sorting out is, of course, inevitable in a downturn, and some companies will shrink or disappear altogether. It’s my belief that firms doing a reliable, good-quality job throughout their sales, design and construction processes – that is, companies that don’t leave clients with bad tastes in their mouths – will be those that can ride the waves of change far more effectively than those that rely on mass marketing or, even worse, rock-bottom prices to keep the phones ringing.

The dynamics of our business point us in a clear direction: First, if you have been among those who focus on leaving clients smiling and proud of their new watershapes, it’s time to do whatever you can to lift your game and legitimately, sincerely do what it takes to satisfy them. If you can’t get this simple message, then I wish you well in finding a new career.

Second, working with higher-end, more sophisticated clients and making them happy effectively puts an end to competing on price. This will be a real challenge to those who don’t know how to do it any other way, but as you’ll see just below, it’s yet another recipe for disaster.

DON’T GO THERE

If you’ve read through all of this and are in a grand enough state of denial to think you can brass your way through the current market situation – and if you see cutting prices as being just the ticket – think again: When you lower prices in a down market to keep business rolling along, you’ve given yourself over to the notion that it’s acceptable to make less money off each of a diminishing number of projects. If that isn’t illogical, I don’t know what is.

And not only is it illogical, it’s also desperate and a sure path to business failure. Instead, you need to head in the other direction, seek out clients who are still around, do more for them at a level of quality and design excellence that makes them happy and turn their referrals to prosperous friends and business associates into even more business and probably to greater profitability than you ever saw when you were grinding out projects by the bucket load.

None of this is new advice. It’s something I’ve discussed in WaterShapes from the very beginning and is also a key thread unifying the approach my partners and I have taken with Genesis 3. Personally, I’ve never understood why anyone would resist an approach that leads to larger, more profitable, more interesting projects as well as to greater stature within the industry and, more important, among prospective clients.

The bottom line is that it’s just more fun to work this way. Now that economic pressures are forcing the vulnerable fringes of our industry to wake up and face an uncertain future, it appears that a quality-first approach is not only the wise option, it’s also starting to look like the only option.

Brian Van Bower runs Aquatic Consultants, a design firm based in Miami, Fla., and is a co-founder of the Genesis 3 Design Group; dedicated to top-of-the-line performance in aquatic design and construction, this organization conducts schools for like-minded pool designers and builders. He can be reached at [email protected].