H2O Pro
H2O Pro Pool Services, LLC “One-Time Clean”
Jessica Clemens
University of Phoenix
ECO/561: Economics
Dr. Jerry King
February 25, 2013
Introduction
There are many opportunities for pool cleaning companies in Arizona; with nearly 615,000 estimated pools, there is definitely a chance to make money. H2O Pro Pool Services, LLC seized upon this chance in 2011 and is currently servicing about 65 pools in the Scottsdale area. Looking to increase revenues and profits, H2O Pro developed a plan to create a new service called a “One-Time Clean” in which the company would provide a clean-up service to customers on a one time basis. With the housing market currently turning around, people are purchasing homes that have been vacant for months or years. The pools are in terrible condition, but the homeowner does not necessarily want the added expense of monthly pool cleaning. This is where H2O Pro can help. The purpose of this paper is to introduce the idea and review the potential costs and rewards of implementing this service.
Increasing Revenue
Because the variable costs would be minimal (travel, labor, and advertising) and fixed costs are already covered, the company has all the tools needed to implement this service. By promoting this as a “One Time Clean”, a slightly higher fee could be assessed as customers would view this as a one-time expense as opposed to something they needed to factor into their long-term, monthly budget. Additionally, the customer would then have H2O Pro’s contact information for any future repair issues that may arise, which in the pool industry, is where a lot of the money is actually made.
Profit-Maximizing Quantity
Determining profit-maximizing quantity requires an understanding that “as a business owner increases sales, so do expenses. When expenses increase to an amount that no longer maximizes profits, marginal profit becomes negative” (Hunter, 2013).
Jessica Clemens
University of Phoenix
ECO/561: Economics
Dr. Jerry King
February 25, 2013
Introduction
There are many opportunities for pool cleaning companies in Arizona; with nearly 615,000 estimated pools, there is definitely a chance to make money. H2O Pro Pool Services, LLC seized upon this chance in 2011 and is currently servicing about 65 pools in the Scottsdale area. Looking to increase revenues and profits, H2O Pro developed a plan to create a new service called a “One-Time Clean” in which the company would provide a clean-up service to customers on a one time basis. With the housing market currently turning around, people are purchasing homes that have been vacant for months or years. The pools are in terrible condition, but the homeowner does not necessarily want the added expense of monthly pool cleaning. This is where H2O Pro can help. The purpose of this paper is to introduce the idea and review the potential costs and rewards of implementing this service.
Increasing Revenue
Because the variable costs would be minimal (travel, labor, and advertising) and fixed costs are already covered, the company has all the tools needed to implement this service. By promoting this as a “One Time Clean”, a slightly higher fee could be assessed as customers would view this as a one-time expense as opposed to something they needed to factor into their long-term, monthly budget. Additionally, the customer would then have H2O Pro’s contact information for any future repair issues that may arise, which in the pool industry, is where a lot of the money is actually made.
Profit-Maximizing Quantity
Determining profit-maximizing quantity requires an understanding that “as a business owner increases sales, so do expenses. When expenses increase to an amount that no longer maximizes profits, marginal profit becomes negative” (Hunter, 2013).
References: Annmarierm. (2012). Marginal Revenue Wgu. Retrieved February 10, 2013 from http://www.studymode.com/essays/Marginal-Revenue-Wgu-1025797.html Huter, S. (2013). How to Calculate the Profit-Maximizing Quantity. Retrieved February 10, 2013 from http://www.ehow.com/how_6713701_calculate-profit_maximizing-quantity.html Mullin, S. (2013). Pricing & Non-Pricing Strategies by Different Companies. Retrieved February 10, 2013 from http://smallbusiness.chron.com/pricing-nonpricing-strategies-different-companies-12898.html