Getting the most value and profit out of trade-in spas
By Robert Stuart
A lot goes into the sale of a new spa: ordering the unit and accessories, coordinating delivery and making sure it all comes together.
So when a customer has an old hot tub to trade in, it exasperates the situation. In most cases, dealers assume that if a trade is involved, we’ll spend man hours picking it up and paying to dispose of it.
However, sometimes it’s an unpolished golden nugget many companies overlook.
Used and trade-in hot tubs are an essential part of the revenue stream in order to maintain margins on the overall sale of new spas, starting at what I call discovery. Discovery is the key to every customer transaction: knowing what they’re thinking, what they have at their house and what they need not only puts you in the driver’s seat, but also gives you the right to sell them something new. It also lets you know what challenges you will face, including the old spa.
Once you know they have an existing spa, put them in the mindset that it’s more of a liability to you than an asset. Be indifferent as to whether you take it in trade and stand by your price. On a positive note, customers who already own a spa who are out shopping for a new one are a definite buyer.
Many customers put a much higher value on their trade than you should. In fact, the first thing I tell a customer is that we charge $400 to dispose of an existing spa, but I’m quick to point out that if it has any value, we might not have to charge them. Once they realize I’m not excited about it, they often try to sell me on its resale value, after which I explain that a trade-in spa costs us $1,500 to $2,000 to bring in, check out, clean up and get ready for a new owner. Just the pickup and haul away involves man hours, and I walk them through the process by telling them,“The cost of taking that spa in for resale goes like this: the man hours involved with truck, equipment, straps, insurance and liability costs $250 to $300. Once the spa is at the shop, we put it on blocks and fill it to test, adding more hours.
Usually, we find something that takes another few hours to fix, along with parts, and then fill it one or two more times. When that’s done, we often install a new heater, pillows, filters, replace worn jets and overlays and put a new $300 to $400 cover on it. Then there is the cost of reselling it and redelivery. So you can see it adds up.”
They usually get this right away. Some will say the cover is in great shape, but I point out we can only resell it for $50 to $100 and really need to put on a new one to sell the spa as refurbished.
It’s not rare for me to get the spa free or even get the customer to participate in hauling it away. Once negotiations are done, make sure your delivery crew treats the trade (and all spas) as if they are new. Just because it’s used doesn’t mean it’s junk, and it’s not their job to determine that. Although there are spas they have to destroy to take out, they need to maximize your potential to make money on that trade, even if it means saving the equipment or cover. Sometimes the cost of haul away and disposal does eat into your profits; however, it will balance out.
Once the spa is back at your facility, set it up on blocks and fill it, just like you explained to the customer. If the cabinet comes off, remove it carefully and repair it while the spa is in testing, then have a safe place to store it. Older cabinets are fragile and often hard to find. In fact, if the spa isn’t worth saving, I always try to save any good cabinet pieces. You’d be surprised how nice you can make an old cabinet look with some of the cover-up stains and paints available today. A gallon of it can do many spas. If it’s a really nice spa but looks rough, I will buy a new cabinet from Highroad for around $600 or even the spa manufacturer if I can get it in that price range.
Next, fix any leaks, paying close attention to pump seals, bearings and heaters. At the initial fill/test you should know what parts are needed — such as pillows and jets — so get them on order right away. You want them on hand when the spa is complete. Replace anything worn, discolored or damaged to make the spa look as new as possible.
If the spa is nice but the equipment isn’t in good shape, you can often replace it with an aftermarket pack and topside for around $500, then sell the old stuff or put it on Craigslist. A shiny new topside or even a new overlay will make a dingy spa look better, as will pillows. The cost of pillows has gotten crazy, and often they are hard to get — so if I can remove them completely without it looking bad, I do. I’m also constantly rebuilding used pumps with new seals and bearings so I usually have something to put in that cuts the cost.
Many people trade a spa in because they were quoted exorbitant amounts to fix leaks. Doing this in your shop with the unit on blocks and a forklift greatly speeds the process. If you have to dig out foam insulation to fix leaks and re-insulate, either buy expensive boxed spray foam or spot foam it with a canned product like Great Stuff Large Gap Filler. Recently, I’ve been buying rigid insulation from Home Depot for around $10 a sheet, and cutting it to fit between the frame boards behind the cabinet panels. It’s quick, easy, effective and makes any later repairs simpler.
I try to target the $2,000 to $4,000 range in used spas with a minimum of 50 percent profit. If I sell a new spa for $4,000, it’s rare to make 40 points on it nowadays, so filling this gap with used and refurbished hot tubs is a great stepping stone towards a more expensive, new spa. That way, a customer doesn’t have to make a decision between cheap or expensive; it becomes a matter of new or used. When they come in sounding like a baby bird (cheap, cheap, cheap), you don’t have to give up money on a new unit. Take them through the used program. Car companies have done this successfully for years!
There’s no need to put the best or most expensive cover or accessories on a used spa, so don’t go overboard. A quick shot of black paint will dress up old cover lifts, but I usually sell those separately. The key is to give someone a good working spa, not a new one.
Once the spa is complete, make sure it’s presentable. Clean it up, paint motors if you have to, and paint any bare frame wood — like equipment panel boards and baseboards — black for conformity. Make sure no old parts or plumbing pieces are lying inside the cabinet and cover; clean any spillover of PVC glue. Presentation is everything here!
Put one person in charge of this part of your business, with their compensation based on the profit. As the company owner, used spas were always my thing; I used them as cash and incentives for many things. I’ve traded used spas for my children’s braces, my dental work, mechanic work, framing my basement, house painting, landscaping and even carpet.
For some reason, getting a customer to pay $200 to $300 more on a used spa for delivery is much easier than a new spa. They are usually happy to pay, however I’m not opposed to them picking up the used spa. (For warranty purposes, dealerships tend to dissuade this for new spas.) Having that mindset makes it easy to put a value on delivery!
If you do your job correctly, you will make money on the pick-up, parts (if you have to dispose of it) and money on resale of the used spa. In addition, the refurbished spa will increase the value of your new spas and help sell more of them.