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In this episode of Owned and Operated, John Wilson welcomes Luke Weiden from Deljo Heating and Cooling. They discuss the importance of profitability in business sustainability and strategies for operating more efficiently. Luke shares his experience in partnering with Heartland Home Services, his approach to cost management, and the significance of leadership development. They’ll talk about field efficiency, head count reduction, and optimizing service calls. They also explore how improving financials can support growth while driving high revenue per employee.
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Episode Guest:
Luke Weiden: On LinkedIn
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Owned and Operated #154 Transcript
Luke Weiden: Profit is not a bad word because it's just sustainability is what it is.
Luke Weiden: I had to inspire and trust my management team and leaders to buy into this philosophy of we have to run more lean. So this is not kindergarten. We're not trying to be fair. Everybody doesn't get a chocolate milk around here. We're giving the calls to the people that are performing. For going on
John Wilson: two years, I've partnered with service scalers.
John Wilson: To do our Google ads, PPC and SEO, and the results have been huge. It's been really exciting to watch as our website consistently jumps up rank as we're using more technology and we're moving faster than our peers who are all using legacy home service marketing companies. We use service scalers for PPC, our local SEO.
John Wilson: Our on page website SEO and our LSA. So give them a call if you're looking for leads. Welcome back to Owned and Operated. Today I've got my friend Luke Wyden on with me from Deljo. Welcome to the show, Luke. Hey, John, happy to be here. Pleasure, dude. I'm I'm glad to have you on. I'm doing like the Chicago tour right now.
John Wilson: I just had our mutual friend Brian on a couple of weeks ago. His episode was great. But, and you're running a HVAC company out of Chicago. I'd love it if you got the listener started a little bit with your background and what the, what dojo looks like and how you got there. Let's,
Luke Weiden: let's set the record straight.
Luke Weiden: Brian is not from Chicago. He's from the suburbs. Yeah. Clear distinction. Yeah. Anybody that's close to Chicago says they're in Chicago. He's a, he is a, my good friend out in a playing field. Good hour outside of the city. But anyways yeah, we're Deljo heating and cooling here, North side of Chicago, been in business for 102 years.
Luke Weiden: I personally been in the trades for the last six, say 16 years. Just quick background. How I ended up here was working at the board of trade. For a options company and had been there for a year and it was, my dream to get into that world, finance world and to stock market crash, economy crash.
Luke Weiden: And I found myself looking for something to do. And my wife's family owns a plumbing heating business in central Illinois. And with, without any knowledge of the industry, I, we moved down there and work down there and learn the industry and spent a lot of time working with family down there and did a good job of helping them get.
Luke Weiden: In the direction they needed to go before we moved back to Chicago. And landed them on the Inc 5, 000 list back in the day and set them in the right direction. And now my brother in law to the day still. Runs the company. It's a great, being at family dinners and all you're talking about is HVAC and plumbing.
Luke Weiden: It's a, that's basically our world. So anyways, been with Deljo for now 11 years worked in sales management, worked my way up in the general manager. When we partnered with Heartland home services in April of 22. So we've been in the private equity world for the last, say, two and a half years.
Luke Weiden: And it's been a phenomenal experience. I've learned a lot, tremendous amount and learned. A lot of what we shouldn't be doing too, so it's been good and bad in that respect that, there's a lot of things that environment brings to you that you just don't know as a business operator or, so that's the 30, 000 foot view of how we got to where we're at now.
Luke Weiden: That makes sense.
John Wilson: Yeah, no, that's great. How large was the family business in middle of Illinois? So right now,
Luke Weiden: Yeah. When you were there and now when I was there, I want to say there was 20 some ish employees and now I think they're pushing around 60 or 70. That's a good size business.
Luke Weiden: Yeah. And it's central Illinois. So it's big footprint, a lot of rural communities. And they do a lot of everything plumbing, heating, electrical, sewers, drains, wells. Septics, you name it they can do it. Yeah.
John Wilson: Yeah.
Luke Weiden: That's cool.
John Wilson: And then how large is Deljo now? We are roughly pushing 80 employees.
John Wilson: Nice. Nice. And how large was it? You said 11 years. So how large was it 11 years ago?
Luke Weiden: I think we're doing about 5 million and 35 ish employees at the time. We've always been slow and steady, focused on growth more just trying to stay profitable over the years. Never had a big, huge jump in, in revenue year over year.
Luke Weiden: It was just slow and steady trying to build as we went on.
John Wilson: Yeah. Yeah. There's a there's an operator locally. Who has taken the same perspective. He's still private. And I think I want to say they're like 15 or so million. And I've honestly always admired that because I think like the way we tend to grow is we unlock the next step.
John Wilson: So we go through these very step by step growth patterns where each step unlocks the next thing. So the last few examples we've done is like weekends unlocked 5 million of revenue. And that's a very like attributable thing. Cause we just look at the performance on the weekends.
John Wilson: And what was the other one we have? Like adding comfort advisors, like this thing. And then we're working on one now that like you think it's 5 million next year. So like growth is just this sort of and it's not slow and steady. And that's my point in saying that is I really admire the slow and steady because our way is chaotic.
John Wilson: Like it's, I wish it was slower and steadier instead. It's Hey, you want to surprise 7 million? Go figure it out.
Luke Weiden: And that's why, you and I get along so well because give me those growth ideas that, cause we, I need to post growth. That's an important piece of our puzzle too.
Luke Weiden: And so I think that's why we've gotten along so well is because you can help me out in that front,
John Wilson: yeah, I think if there's one thing we can do, it's grow. And that, that has yet to be the problem. All the other problems come below that, which is where you're a world class.
John Wilson: When I thought about bringing you on to the show today, I was like Luke is one of my thought partners in how to run an efficient and profitable. Business and you've really helped me a lot with understanding HVAC too, which I'm just super grateful for. But so you run a, and it's only HVAC.
John Wilson: I think you guys are starting to talk about plumbing.
Luke Weiden: We just hired our 1st plumber. So that's be my growth mechanism for 2025. Nice. Yeah, we're 1st plumber on board. Nice. Nice. When was the start date? September 10th, like a couple of weeks ago. What have numbers been good? He's already at 12, 000 in revenue.
Luke Weiden: So for that feels pretty good. Yeah. For a week. Yeah. Yeah, a couple of week and a half. So he's doing good. And we've got the support system built around them to grow. So yeah, I think it's going to be great. I'm hoping don't quote me, but do a million in plumbing next year is my goal.
John Wilson: Yeah, no, I think that's great.
John Wilson: I think that's great. Okay. So we And your big focus is running best in class HVAC and best in class profitability too, which is great. And I take a lot of inspiration from that. That's really what we're going to spend some time on today is like how to unlock higher profit inside.
John Wilson: inside of, residential home service company.
Luke Weiden: Yeah, for sure. And I'll just a little background, like over the last, say 18 months, it's been a strict focus on efficiency improvements from the top out from the down here at our organization, because I realized last year, this year, and I'm also projecting next year is going to be a difficult market for us to manage.
Luke Weiden: And you can't do that when you're running a fat organization. We took about last year, tried to take very specific steps to increase efficiency, lower overhead and increase our profits. That's been the focus that we've taken just give an example, John, and we're, you're flat on sales year over year, but our EBITDA is up 25 percent now, and that's freaking insane.
Luke Weiden: Yeah, it's a pure focus on being deliberate on everything. So happy to dive in and give you some kind of areas that we focused on to look at, yeah.
John Wilson: Yeah. And I'll be the first one to I'll be the first one to say it. We've, we here have focused a lot. On our top line growth and it's because that's something we've been one.
John Wilson: It's been something that we've been good at but two you have to earn the right to get Faster and better financials and we hadn't quite earned that right yet. So we couldn't even You know have a great conversation about improving our margin, year over year, but we've had a few of our A recent guest, Tommy Mello was a specific example where he said, look, up to 50, 60 million.
John Wilson: All I talked about was revenue. And I was the dumbest guy in the room because everybody didn't, no one cared and all anybody cared about was your EBITDA. And I think that has been, I know for me and a lot of the circles that, that I'm spending time in, that's becoming the conversation. Is we're all at that size.
John Wilson: We're like, Hey, yes, we ran fat to get here. And now we have to run effectively.
Luke Weiden: Exactly. Because if we have a 2025, like 2023 was like, you need to be able to sustain that and you can't do that running really heavy like that. So yeah, that makes sense.
John Wilson: Yeah. So yeah, walk me through the last 18 months, 24 months of what you guys have been up to.
Luke Weiden: Yeah. So like it just started with a deep dive P and L dive and my partners at Heartland and that's really where they can point me in the right direction and say, for example, we were paying outrageous merchant fees and we were paying outrageous financing fees. So I started there on those two things.
Luke Weiden: We redirected some of the. Financing fees for consumer financing, the programs we offered. We really, I really spent a lot of time on that and we were able to cut that by three or four points. And that was a huge number, and that really isn't just saying, Oh, I'm going from one provider to the other, that was really diving into the programs you're offering.
Luke Weiden: Yeah. On your sales proposals.
John Wilson (2): Yeah.
Luke Weiden: How you're coupling that with down payments on offerings. We started, we rolled out like every 0 percent finance when you offer, we cut off the high end. We don't offer 60 months anymore because it became too expensive. I started just saying, listen, we're going to, we're going to need a 25 percent deposit from the customer to do these.
Luke Weiden: Hesitation. Every customer came up with that 25%. We did not lose one job. Yeah. That cut our financing down tremendously. And also the offerings based on the equipment packages changed too. So this is
John Wilson: something that we just did where as we rebuilt our sales packages, we did the same thing. And and then we were able to, you're, what you're probably about to say is like we were able to negotiate specific.
John Wilson: Dealer fees on this specific plan for this specific equipment through the manufacturer. And the difference is probably a hundred thousand dollars a year.
Luke Weiden: Yeah. It's big. And he's crazy. And as we were going through this process, you start tacking on those little wins and they just add up and add up.
Luke Weiden: Really the Merck merchant fees and consumer financing fees, people are getting destroyed by them and they just continue to get up, go up. And it's It boggles my mind that these contractors just accept it. I
John Wilson: think people don't think about it. Like I was talking with I do want to know what you're paying for your merchant fees now, but I was talking with a friend of mine and I was like, Hey, when was the last, 20 million contractor.
John Wilson: And I was the last time you negotiated your merchant fees? He's what are you talking about? And I'm like you're processing like 14 million on plastic right now. And you don't, you're not looking at the. 4 percent that they're charging you like my guy. So we just did our merchant fee negotiation.
John Wilson: How often are you keeping up with that?
Luke Weiden: Oh, like now I'm going to do it every year. Listen, vendor negotiating is my thing. I love it. Yeah. I love going to bat for these things. And I think there's a science to doing it. Like it's not just beating up your partners. I think, again, they are your partners at the day, but it's gotta be a win for everybody.
Luke Weiden: They can't just be fed on the hog and you're taking in the pants. So that, and then like on equipment. Negotiation dry. We used to carry a lot of inventory. I carry zero now setting up consignment deals with vendors and just going down the list, John, and there, you'd be surprised if you just can tweak things by 1 percent here and 1 percent there, it adds up,
John Wilson: We've been doing this.
John Wilson: We got into the habit of this a few months ago. So we're, it was like March. And we look at our cellular bill and it was 20, 000.
John Wilson (3): Yeah.
John Wilson: And we didn't think much of it because we, it had been 20, 000 for two years. So 20 grand a month. And that just kept happening. So if you were budgeting, you would just continue budgeting the same thing.
John Wilson: Anyways, we ended up opening it up and we found out we're like, Oh, this is all out of whack. This is insane. And we tore it up. And then I think it's down to six now. So 14, 000 a month in savings, 180 grand a year of savings just to Verizon. And that's one. That's one thing, right? So then, so what ended up happening is we started developing we call it the fuck up list.
John Wilson: So once a month, there's a fuck up list of Hey, here's the 10 things that we're going to fuck up this month. And could be HVAC pricing or it could be water heaters or it could be vendors or software merchant fees, right? So our fees, we cut them in half. Or that, the interchange part that we could affect.
John Wilson: That's amazing.
Luke Weiden: Yeah. I don't say take it, taking this one step back. This wasn't just me that took this idea on, I had to inspire and trust my management team and leaders to buy into this philosophy of we have to run more lean. So every leadership meeting we have one segment where we talk about, Hey, bring to the table, one cost saving improvement.
Luke Weiden: And it might've been something, a 10 a month thing all the way up to 10, 000 a month. But I'm trying to get the, try to get the whole team on board in this mindset of we have to run super lean to be profitable. And. Once I got that momentum going every month, I'd have 5 to 10 ideas and we might not use them all.
Luke Weiden: Some of them are outrageous. I said, that's fine. Bring all of them. And then let's talk about the two or three that we can implement every month. And we just chipped away at it and chipped away at it. And a lot of that cost savings also came down to people. It's I think in our industry, we're very quick to hire somebody to do X, Y, Z.
Luke Weiden: When there's another person in your building that would be doing, that would be willing to take a pay raise to do another task instead of hiring a whole another body. And I think really our head count reduction plan and strategy that we rolled out worked really well. We, so we're probably, I want to say our head count is probably down 15.
Luke Weiden: Yeah. Yeah. But again, I'd rather pay an all star more money to do an add on a task here and there, then bring on a whole nother employee with head count related costs, insurance, that kind of stuff. Yeah. Cause all that adds up. Yeah. So that's the approach to on the other end was just taking a look at our head count, what people are doing.
John Wilson (3): Yeah.
Luke Weiden: And if they were the right people in the right seats and like the organizational structure and how we're dividing the departments up and how much overhead we have in each department, how much revenue we have per head. Like all these things are factors that I'm looking at all the time.
John Wilson: Yeah.
Luke Weiden: What is your revenue per head? Three 50 per employee.
John Wilson: Yeah, that's amazing.
Luke Weiden: It's it goes up and down here and there, but roughly that's where I'm shooting for is to stay like, if we think we need to add somebody, I take a look at the impact of adding another person to
John Wilson: that number.
John Wilson: I want to walk through that a little bit deeper. Cause I think that's really interesting. So that's 30, 000 of revenue a month per employee. So just to give the listener perspective here are we're counting. You, we're counting call takers, that's per employee or per field employee?
John Wilson: Per employee. Okay. Alright, so in order to achieve that, you have to be producing a half a million of revenue per field employee. Does that sound right to you? Yeah, something, roughly,
Luke Weiden: yeah.
John Wilson: Yeah. That's a lot. The other side of this is like, how do we, how do you manage that effectively?
John Wilson: And where was it two years ago? Were you in the two fifties? Were you in the two? I would
Luke Weiden: say it was in the like 200 range. Okay. Yeah. It was an insane
John Wilson: improvement.
Luke Weiden: Yeah. And again, this has been a process over 18 months of trying to just chip away at caught expenses that are not needed. I think when you get to our size, John, there, there are so many hidden costs in there that float through that you don't even know you're spending it on.
Luke Weiden: Yeah. I think leveraging technology has had a lot to do with that as well and leveraging people's talents too, like I said, back to, instead of having two people doing two separate tasks, I tried to get one person to do two tasks exceptionally well and pay them well.
John Wilson: Yeah. So when you're looking at like that, some of us had, I think I get some of this, but even a half a million per field employee is likely achieving higher than many of our listeners.
John Wilson: Yeah, so how are you driving infield performance to be able to maintain that
Luke Weiden: It's that's a great question So that's like another strategy that we're focusing on is just field efficiency, right? So let's take the service department for example, like every day. We're looking at zero dollar tickets Our service team is diving into those.
Luke Weiden: And why do we have 10 percent of our calls were 0 tickets. And I need answers on why those are. And there's going to be some exceptions, but a lot of the times it's let's identify what the, why this is happening. Look for trends. Maybe it's one guy, maybe it's five guys or gals. And we look to where we need to coach and improve and.
Luke Weiden: On their process and it really comes down to a process thing. So we're trying to look and dive in deep into every day. What, why are we not billing efficiently on the service side? And why do we have zero dollar tickets or why do we, what really really. Pisses me off is why do we have diag only tickets?
Luke Weiden: John calls Joe up and says, I need your help. And then I leave with 129 or whatever it is. What, why did they are paying us to leave? Yeah. They're not paying us to solve a problem because obviously you didn't create any work.
John Wilson (2): So
Luke Weiden: like those are the most intriguing to me. So like my service manager, Jordan he's on top of it and he's trying to dive into the reason why behind those things are happening.
Luke Weiden: And sometimes, and there's been an evolution here in our service department over the last 12 months too. It's yeah, there are service techs out there that just go out there and go through the motions. We have to decide is our, do they get it? Do they want it? Do they have the capacity to do the job we're looking for?
Luke Weiden: And if they don't, if they can't check those three boxes, they're not the right person on our bus. If they do, then it's our problem. We haven't trained them properly. We haven't given them the resources they need to do that. To improve those 0 tickets or the IAG only tickets. So again, back to the full circle, the billing efficiency, like we really take a look and really try and keep an eye on how we're doing that.
Luke Weiden: Because again, I would rather, I would like to pay my technicians more and more, but they're going to produce more.
John Wilson: Yeah. All right. So you're managing I would say a high performing field team at a half a million of revenue apiece. And then your team is getting 350, 000 or so revenue per employee.
John Wilson: So how often do you measure that? Is that like a trailing 30? Just like trailing
Luke Weiden: 30. It's not something I'm looking at every day. I'm probably taking a look at it every quarter just to make sure it's not. And at the end of the day, John, I could probably not look at it for a year. Okay. Cause all the stuff we're doing daily really drives that.
Luke Weiden: I think it's something that contractors need to look at, see where they're at, create a baseline and say, in 12 months, this is going to be 50, 000 more per head. And these are the steps you take because really that trailing number is Not going to go up and down dramatically overnight.
Luke Weiden: It's the small improvements that you're making overnight, over time that are going to lead to that. So again, to answer your question, I'm not looking, it's not something I look at every day. I look at numbers all every morning. That's my thing. Like I'm looking for trying to be proactive on KPIs and Financial numbers and, but that's not one thing that I'm looking at every day.
Luke Weiden: It's something I look at probably every quarter, every six months, just to see where we're at. Because I know the things we're doing daily are driving that number.
John Wilson: Yeah. Are you tracking like EBITDA per head too? Is that like a similar? Yeah. Okay. What are the five main numbers you look at every day?
John Wilson: What's, what are the things that get you up?
Luke Weiden: It sounds high level, but really every day we're, I'm look, we're back to blocking and tackling simple stuff. Call board. How many calls per tech do we have today? How many opportunities do we have on the board today? Who's getting the calls?
Luke Weiden: That's my big thing. Who is getting the calls? Yeah. How are we dispatching the calls on service and in sales? And if we can really massage those two things, yeah, then we can almost generate an outcome before it happens. So on a high level, we're looking at really the blocking and tackling.
Luke Weiden: Do I have a minimum number of calls per technician? Check. Do I have I'm looking for 33 percent of our calls on the board every day to be opportunities. I define opportunities as anything 10 years and older. Yep. And I have a minimum goal of 40 percent of those opportunities. I'm turning over. So if we have 10 opportunities on the board today, I'm turning over four leads to the sales team.
Luke Weiden: We have a stretch goal of 50%, which we can get to. We've gotten to this summer. And that takes a lot of cooperation between dispatch and the service leaders and the team and the distribution of the calls. So that's the kind of front end we're looking at every day and how we manage that, and then we're looking at, all right, so John, I got 10 opportunities only today, who's getting these opportunities.
Luke Weiden: We're very specific.
Luke Weiden: We've just recently got on dispatch pro. It's helped out a lot with that. Takes the subjectivity out of the dispatching role. And really focus on making sure that the people that are hot are getting those same thing on the sales side. I got five sales guys. If I have three calls, they're going to one guy.
Luke Weiden: This is, we don't have, this is not kindergarten. We're not trying to be fair. Everybody doesn't get the chocolate milk around here. We're giving the calls to the people that are performing. And when there's a deviation from that, I get a little excited. It's especially sales guys, I was a sale.
Luke Weiden: I've done HVAC sales for a long time. I was managing the sales team. It's we got the highest paid people in the industry that are crying because they don't have a lead today.
John Wilson (3): Go
Luke Weiden: find one, right? Bring your own leads in, so anyways, to answer your question, like I'm really just trying to focus on blocking and tackling every day.
John Wilson (3): Yeah,
Luke Weiden: because I try to keep my leadership team and I like to say just freedom within the framework Here's the framework we've laid out go to town do what we need to do You don't need to come to me to make the right decision. We had
John Wilson: a couple major pain points earlier this year and those pain points were how do we contact our unsold estimates more frequently?
John Wilson: How do we book our membership appointments faster? How do we stay in contact with customers and let them know that we have promotions and how do we run a speed? process for Angie's Leads. When looking around for solutions, we saw a couple great softwares on the market, but our favorite one was Hatch.
John Wilson: So when we started using Hatch, we had just switched over from another vendor. And Hatch's user interface was so easy. It directly tied into Service Titan. It automated the workflow of five or six employees. a day. We're now in contact with hundreds of additional customers. We're selling a ton of our unsold estimates and it's easier than ever to book our membership follow up appointments.
John Wilson: So Hatch has been a really big win for us. In order to book a demo with Hatch, click the link below. So I'm hearing the things you're saying. And as I like try to think about how that works in my business. So like the way we typically grow is we're going to remove a constraint. We're going to like, there's a wall preventing us from something.
John Wilson: And that constraint could be We don't do weekends, that's a constraint or Dispatch Pro, like that's a constraint. And what we'll typically, that's how we end up growing in these steps, is we're constantly like resolving these things preventing us from the next layer of growth. It doesn't sound like you guys are pushing on the growth lever.
John Wilson: Okay. And that's not a criticism. It's more if I'm trying to, I'm trying to imagine that same scenario in my business and our I think it's like the way that we're wired, like you and I were like, the way you're wired is, Hey, I just got that efficiency, which is awesome. And you're more profitable and that's awesome.
John Wilson: And then the way I would look at that is, Oh, I'm going to add five more service techs because now, Like we just unlocked the ability to dispatch better, cheaper, more effectively.
Luke Weiden: Yeah. Does that make sense? Yeah, totally. And I would agree with that. And that's really like this going into 2025 is how do I maintain this efficiency and pull the growth leather?
Luke Weiden: Cause I need to get both of them going at the same time. And that's the real tricky.
John Wilson: That's hard. Yeah, I know. I was talking with the folks from Gettle a couple years ago and they were growing it like 20 or 30 percent. With a 18 percent EBITDA and I'm sitting here that's a lot that's that is hard to do.
Luke Weiden: That's hard to do. Yeah, I really tip my hat to people, contractors that can pull both leather levers because it takes a lot of focus. As it takes a lot of focus to grow. It takes a lot of focus to be profitable and to get, Both those plates spin at the same time is my challenge next year.
John Wilson: Yeah. I mean us too. It's just, it's the opposite challenge, right? So like we can grow, but like maintaining double digit EBITDA is hard while growing like 30 whatever percent we are up this year. Like it's a lot, takes a ton of work.
Luke Weiden: Yeah, exactly. I, my, my personal goal is to add a million dollars of plumbing without any overhead.
Luke Weiden: Yeah. That's my goal next year.
John Wilson: Yeah, just a quick, yeah, so we that's a good goal. We're, the thing that we're trying to do is we're trying to add this new sales team. Yeah. And it not, it also not impact overhead. And I think it'll have four people in it. So I don't know. I don't know if it'll actually work, but like that's the goal.
John Wilson: And we're trying to, I almost like it'll impact material, but I don't even know if it'll affect cogs very much. I don't think it will even impact labor. So find out,
Luke Weiden: we'll do a recap September of 25. So you were where we're both at.
John Wilson: Yeah. All right. So the last 18 months, I really like the getting alignment from leaders and like bringing that up in, in your, is that like during your L10s or something?
John Wilson: Yes. Our
Luke Weiden: weekly meetings. And as when you're the only person shouting at the, on the mountaintop. It's gets very difficult, right? Especially at our level, our sides, you need a team that are all cascading this the same message. So really, it's been for me also, we, but I've also invested a lot in leadership development over the last 18 months to help me get my team.
Luke Weiden: The places they need to be, and it's paying off. I think that's really a gap in our industry is leadership element that field management, leadership level. Because those people are hard to find and. You hear it all the time is you never want to take a tech out your best tech out, make them a service manager.
Luke Weiden: I'm guilty of that, but yeah, I think that's one focus is we, I've been really focused on also building my leadership team, just share a quick story with you. Like earlier this year, I had three managers walk out on me. All at the same time, go 30 days before summertime, like worst possible time ever.
Luke Weiden: And, I just had to take a step back and recoup and think, all right, how are we going to get through this? And, when people leave, there's always a vacuum to be filled, right? So overnight I had people step up, fill in and, raise their hand and say, I want to help.
Luke Weiden: And we filled those roles. And I'm happy. I'm super happy in my team because we are gonna for Q3 here. We're going to hit our budget numbers that were on, were laid out a year prior. We're going to be above budget, both on revenue and EBITDA and that's with losing three managers going into the summer, so like we've been able to take a step back, readjust, recalculate and move on.
Luke Weiden: And time goes on. But yeah, I think leadership development is important for myself. Yeah. I'm immersed in it personally, and I expect my leadership team to also do that cause if you're not growing, you're dying.
John Wilson: Yeah. It's been a big investment and I would I'll give a next hour plug here.
John Wilson: That has been something that we've really. Struggled to do in the past. And I think the ability to offer Nextar leadership development, that wasn't even something that I, that we had in mind when we joined Nextar, like nine, 10 months ago. And that ended up being one of the biggest benefits that we got, which I was surprised by, but yeah.
Luke Weiden: We had Heath Betts on site here from Nexstar. Yeah. In May or June. And it was phenomenal. It's just what the team needed. Yeah, no, that's great. Yeah, that's great. But yeah, outside of, so we're Nexstar. I know you guys are Nexstar. So we were focus on their leadership development.
Luke Weiden: We're also like we've been through the map programs most leadership team has. We're trying to bring it from different angles and different perspective on, on where we need to improve it.
John Wilson: Yeah, something that something that I was thinking about that's been. It's been on my brain recently.
John Wilson: We do this like every Friday we share a takeaway and my takeaway last week was, and I think that your example of 350, 000 of revenue per employee is a that's like really good. And for people that don't know that if that's not best in class, that's damn close. That's far better than me.
John Wilson: And I think the big takeaway that I had last week was optimizing around the bigger ticket. which I think that HVAC does naturally because the replacements are large. But even in HVAC, like you could be optimizing around repairs and obviously you guys are optimizing around replacements, that's a lot of our big growth over the past year.
John Wilson: Like our head counts barely changed, which is astonishing to me and anybody else that I tell that because our head count has barely changed, which tells you how ineffective we were 12 months ago that we were. It's good and bad. It's wow, A year ago. Damn. But our headcounts barely changed, but we're optimizing around the higher price in almost everything that we do.
John Wilson: So HVAC went from selling tech to comfort advising, and the difference is 10 extra thousand dollars in an average ticket.
Luke Weiden: Yeah, that's crazy.
John Wilson: And then our plumbing average ticket went from like 600 to $3,000 and electric is at 3,500 average ticket. And we're starting to think about our like inputs of time and energy and where does it go and like we have one department where their average tickets 250 and we're just like, I think it's time to just shut that department down, take that same amount of energy and Let's go do this.
John Wilson: And the average ticket is six or 7, 000.
Luke Weiden: Yeah. It's just in, those are the things that areas that you need we both need to focus on because we still have some areas that, we can improve on in terms of, yeah it's maximizing every call is what it comes down to. Like in, in the most ethical way possible.
John Wilson: Yeah. Yeah. And I also think just what type of calls do you take? Is probably the point I was trying to drive here is, if you're a multi trade business it gets more complicated to optimize it because you're dealing with different things and like plumbing, your average ticket in plumbing might be 500 bucks, whereas like it could be 3, 000 or 4, 000 or something like that.
John Wilson: Yeah. So we're really trying to optimize around that higher ticket, which seems like the big value for you guys.
Luke Weiden: Yeah, exactly. And one also thing that I think we've done, and this has been for years and years, is we've our kind of service area has been so compact in the north side of Chicago that we're not chasing calls that are two hours away it might take us an hour to go five miles here sometimes.
Luke Weiden: We've always been very narrowly focused on areas in the city, and we're starting to, expand the service area, but that's really helped us become be efficient too, because we don't spend a lot of time on the windshield time. We do and we don't depending on where we're going in the city, but and we try to optimize the route to, so yeah.
John Wilson: Okay, so you're you've been optimizing cost, you've got your leadership team on board you're driving strong revenue per employee, which is both optimizing cost and running an effective sales side. And you've added plumbing to As your growth lover for next year.
Luke Weiden: Yeah, exactly. And I'm gonna be calling you a lot about plumbing because I know you're the plumbing guy.
John Wilson: Plumbing is still just such a machine for us. HVAC, we're getting better. We're getting better, continuing to get better with HVAC, but plumbing. It's almost like you can't put the beast down, like HVAC grows and then plumbing is still ahead of it. We're around a million a month in plumbing right now.
John Wilson: Oh,
Luke Weiden: wow.
John Wilson: Good. And 55 percent gross margins, just machine month after month. It's great, man. It's a machine.
Luke Weiden: And, like to speak to efficiency, like on the install side, it's sometimes I talk to these. I'll talk to contractors that were out, doing installs in basements with condensers on the ground in the backyard and they're spending, they got four guys, it might take them a day or two.
Luke Weiden: And I was like, how is that possible? We have guys on our team, they'll be hanging out. Out of a window on the 30th floor of Lakeshore drive. And they're parked 15 minutes away. And every time they need a tool, it's a half an hour. We're doing a change out in a day. So I think it's on the install side.
Luke Weiden: We are super, super efficient. We don't, we do have some days at trail or jobs that trail, but your standard change out we're doing residential rooftop crane lifts in the summer for ACs every day. Yeah. So the application here in the city is a little more challenging than it is, say, out where Brian's at, with AC on the ground.
Luke Weiden: So I, I think that on the install side, we've always been efficient. Yeah. We've always maximized our labor over there because the crew we have, like my tenure on install is crazy. 20 years. That's amazing. Yeah it's unbelievable. I got some installers been here for 30 years. So we've never had a problem in that department.
John Wilson: Yeah, that's amazing. And that's the profit driver and really revenue driver of the, yeah. Cause if they started turning into two days, your revenue would be cut in half.
Luke Weiden: Yeah,
John Wilson: exactly. Yeah, that's wild. But if you wanted to share sort of a parting lesson here on optimizing costs in your business and where to start and how to make a plan, what do you think that looks like?
Luke Weiden: I would say, I took on the idea of being a no man saying, I say no to the majority of things that are come up in terms of expenses. I make my leadership team present a business case for any expense that's, above and beyond. I just started saying no to a lot of stuff no, we can do without.
Luke Weiden: Yeah. Trying to, cause it's easy to say yes and expend money, right? It's a lot easier to say yes, but it's more of a no for now.
John Wilson (2): Yeah.
Luke Weiden: Explain to me why this makes sense for the business and how we're going to recoup this, if there's a software improvement or something like that.
Luke Weiden: So start I have started by saying just being a no man and then really getting critical on. The things you are spending money on, and you'd be surprised how many vendors that you go to and say, we're leaving, or we need a discount, or we're leaving, and you'll get savings right out of the gate. So twofold, if you're looking to be more efficient, start with saying no to things and start really with going through with a fine tooth comb of what, where the money's going.
Luke Weiden: Yeah. And the savings are there, they're right in front of you.
John Wilson: Yeah. Yeah, we we really have been, Tommy Mello said this a lot of the interview lives rent free in my head, but he kept saying yeah, everywhere we look, we find a pile of money. Yeah. And we Around the office quote that because it's exactly what we find where it's less money than what he was finding, but we'll look like, oh, we looked at Verizon and we saved 170, 000.
John Wilson: That's insane.
Luke Weiden: Or
John Wilson: yeah, we looked at our VoIP. We just looked at it and I don't even think we were thinking that hard about it because it's 3, 000 a month. It's our phone system. We just weren't even thinking that much about it. It became 1, 500 a month in like overnight. Yeah, in two hours.
John Wilson: And it is crazy, like bit just echoing what you're saying. You just slightly glance at something and you can shed 10 grand a year.
Luke Weiden: Yeah, I think if you just have a practice where once a week you look at something on your PNM and dive into it and ask yourself, do we truly need this? Or can we do, find this cheaper, better, faster?
Luke Weiden: You'll find it. And if you do that once a week for a year, you're going to be highly profitable. Next year.
John Wilson (2): Yeah, no, I agree with you
John Wilson: without growth. Where do you think a target percentage like what do you think target gross margin or target EBITDA should be for a home service company?
Luke Weiden: I really honestly think if you're in single digit profit, you're just, it's a hobby.
Luke Weiden: Like you can do that in a lot of different places with less brain damage,
John Wilson: right?
Luke Weiden: If you're, you could go and get a money market and make 5 percent on your investment right now without, with minimal brain damage, for the struggles that owners and operators go through these days and with people and you name it, we, I think you have to be north of 15%.
Luke Weiden: To make it worth your time and energy. Yeah. Now I think true players are north of 20, 25%. Yeah. And that's really profit is not a bad word. It shouldn't be because it's just sustainability is what it is. Yeah. But I think no, everybody's goal should be at least 20%.
John Wilson: Yeah. Yeah. I think that's a, I think that's a good goal.
John Wilson: And I think when you think about that target obviously like effective cost management. But also effective gross margin.
Luke Weiden: Yeah.
John Wilson: So is that, do you think 60 is the target or 50 is the target or like, where, how do you think about that?
Luke Weiden: I, I think 50 is a good start. I like, if you can make leaps and bounds above 50, that's where you're going to really see those trends.
Luke Weiden: North of 20 percent profits. But yeah, I think a minimum you have to be at 50%. And I think a lot of it is, it's really simple, right? Buying right and effective labor management. If you took it, your labor, we talked about this a couple of weeks ago. You took it, look at your unapplied labor. At any given time that's a big problem in our industry is that there's so much unapplied labor that we're not taking advantage of and this whole mindset of, oh, we have to have this labor standing around in the spring for summer.
Luke Weiden: I don't buy into that. There's other ways to go about it. That's a whole other conversation. But I think those 2 big things, labor management, labor efficiency, and make sure you're buying right. And if you are just blindly accepting distributor increases, that's wrong. I've literally wrote letters to distributors saying, we do not accept this increase and see what happens.
Luke Weiden: Yeah. This was great. This was a good class in cost management. Yeah. I appreciate the time. It's been great. Hey, we got a lot to learn too, and I'm hoping to be on here again next year and talking about growth. Yeah
John Wilson: I think it takes both. I really do. I think it I think it takes both. And I think like the equation that we're trying to get better at is effective, profitable growth.
John Wilson: And we've talked about that a little bit on the show, but yeah, we can grow like a weed, but the problem is if you're moving really fast, no one's looking at the cost and no one's looking at, Hey, why are we spending 20 grand a month on Verizon? Or what's going on with this bucket over here?
John Wilson: And. That's the balance that we're trying to find. I think we're, I think we're getting there where we're still growing really fast. Like we'll throw 35 percent above last September, I think. Wow. And we passed last year's revenue already. So the last four months of the year gravy, but now it's okay, how can we do that? At 20 percent EBITDA. Like, how do we make that happen at 20 percent EBITDA? And that's the trick we're trying to solve. I think you got a great guy in Brandon over there that can solve that. He I'll delete that part so his head doesn't get too big, but I agree with you.
Luke Weiden: Thanks for coming on. Thanks.
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