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Owned and Operated #179 HVAC, Plumbing & Electrical SOPs: Multi-Touchpoint Strategies for Business Growth
Looking to streamline operations for your HVAC, plumbing, or electrical business?
In this episode, we break down multi-touchpoint SOPs to help you improve efficiency, enhance customer service, and boost profitability. Whether you're managing service calls, optimizing workflows, or improving team coordination, having solid standard operating procedures (SOPs) is key to scaling your business.
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FieldPulse is an incredible Field Service Management platform that helps you save hours each week while keeping your operations running smoothly. If you're looking to streamline your processes, stay competitive, and focus on what truly matters, FieldPulse is a game-changer!
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💼 Shoutout to Avoca AI!
Looking to train your call center and improve technician performance? Avoca AI helps teams identify issues, improve call quality, and drive results from start to finish.
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Episode Hosts: 🎤
John Wilson: @WilsonCompanies on X
Jack Carr: @TheHVACJack on X
Owned and Operated #179 Episode Transcript
#179 - Multi-Touchpoint SOPs for HVAC, Plumbing, and Electrical Businesses
John Wilson: [00:00:00] If a process only hits one department, the likelihood of it failing is very high. I have a friend who runs a 60 million business and wasn't paying payroll taxes. And that is a you can go to prison offense. Everyone's like, oh yeah, I don't think I'm ready for an HR person. I'm like, bro.
We're about eight months into using Avoca. And Avoca's been an awesome partner for us in our call center. So what Avoca does for us is they do two different things. One, they have their Coach product. And Coach. has been helping us do what it says, coach our CSRs every single day. It listens to every call and uses AI technology to basically pick apart that call and tell us where we can improve.
And for the last eight months, we've been consistently improving our scores, which has been awesome. The other product they have is just conventional booking. And it's an AI tool that books over the phone customer calls in and it either handles overflow as in our phones are full, or it does [00:01:00] nights and weekends for us.
And a customer will call in and actually deal with an AI. Agent all the way through booking and the savings inside call center has allowed us to ramp up our marketing to continue to grow Even more. Thank you loca and thank you tyson for your partnership.
Jack Carr: Welcome back to owned and operated With your host jack the maniac
John Wilson: car
Jack Carr: And john wilson.
John Wilson: I really feel like you're living We talk about it every time but I just
Jack Carr: like having a microphone.
John Wilson: I think I think you're a white dude with a mic Which, you know, 100 percent and, um, and on top of that, I think you missed like this, this calling to professional wrestling. I think that that's what you wanted to do in life
Jack Carr: and watch a lot of WWF as a kid.
Yeah.
John Wilson: Yeah,
Jack Carr: mostly I think it's voice acting. I think I would have. I think I have a great voice for voice acting. Wow. Okay. I'm all right. [00:02:00] Not that not that. Not that anyone has told me that ever in my entire life. No single person.
John Wilson: I just personally love the sound of my own voice. I just like,
Jack Carr: I think that my voice would fit really well on a cartoon character.
That's it. That's the extent of it. Sweet, man. So. Awesome. I'm really excited to riff today. Um, because I got a text message right before we started. And this is how prepared and ready we are guys for all of these episodes is one of my managers. I told him to run a report because we're supposed to be running this specific report in service Titan every week.
And he said, Hey, Jack, that report that you told me to run, we have 9, 000 in uncollected completed jobs. that are falling through the cracks. If I didn't run this report, we wouldn't know about it and you'd be screwed. So I think today I just wanted to touch base John on like processes in place on the back end of like financial [00:03:00] procedures.
If that even logically makes sense
John Wilson: to
Jack Carr: make sure that you're getting paid and you're not getting screwed in every. Corner because I feel like as you grow like that's the last thing to grow you don't grow Your finance processes on how to make sure you collect first you just grow and then you go. Oh shit.
I'm missing money Let's put a process in place and that's where we have been and we put the process in place. But then What ends up happening is like who's going to hold it accountable because there's only 16 of us.
John Wilson: Yeah.
Jack Carr: And we're all wearing 10 hats each. We're all generalists still trying to become specialists.
John Wilson: Yeah.
Jack Carr: So, I mean, first one to start, I think, is collection. Like making sure You collect and I know people on here are going, what the hell is Jack talking about? Like just collect the money on site. Yes, for most things. But I think that there's a crack and that specific crack in our business is this junction between, especially as we took on plumbing, like with HVAC, you do the [00:04:00] job, you finish the job, you get paid.
With plumbing, sometimes there's this kind of waterfall of you do the job, you do the rough in, and then there's a three week period before the trim out. And then the customer doesn't know to call you back or something happens and they go with a different plumber for the trim out. And now you have a job where you still did the rough in, you're still owed that money.
Maybe you took a deposit, but there's still thousands of dollars on the line that has been It's technically not closed out and it's in, it's not an AR because the job's not finished. And so it's in like no man's land. I don't know if there's an answer to that.
John Wilson: I think there is. And I think, um, I want to give like the tactical for this specific issue, but I also think we should talk like higher level because this is, this is more it's a, I think it's Enterprise [00:05:00] wide philosophy of, Hey, I'm going to make this process, then what happens and the, or at least the way I think of it is who's watching the watcher.
So if I'm putting like that same issue that you just described, which again, we'll cut. We can talk about the tactical of how you solve that with your frontline managers, but that same issue could be any issue. So it could be like, Hey. We require background checks during the hiring process and maybe one day your HR person decides they don't want to do background checks anymore.
They forget and then it just falls off and then you find out a year later. Um, Oh, whoops, uh, or keeping control of cash in accounting, um, marketing budgets. I mean, it's, it's almost like who owns the process and then who watches who owns the process. I think like, that's the thing I think we can try to solve here today.
And the only reason I don't think we're [00:06:00] masters at it, I think we're farther along. And the only reason we're farther along is because we have made so many mistakes that are exactly like what you just described. We've had to, we've had to figure out how to resolve it.
Jack Carr: Let's just make sure though that we do get tactical, because this is an open problem.
I think we start with tactical,
John Wilson: I think we start with tactical.
Jack Carr: Yeah.
John Wilson: So we, this used to happen a ton. Um, and it still does happen. So it's not that it doesn't happen, it's just that we now have a process to catch it. So, uh, we, every month as a, the tactical. Every month as a part of our end of month process in operations and then held accountable by accounting.
We have a uncompleted jobs report. It's exactly what you just described. It's like, Hey, here's the jobs. And like, it could be what you're describing where it's like the job was complete, but we didn't go back. We didn't collect whatever. It also could be somebody made a mistake. So like what we find, well, we [00:07:00] found a ton and it used to be like 50 grand a month of revenue that like.
Oh, I forgot to clock out that day, and then dispatch clocked me out, but then when they clocked me out, the invoice didn't complete, so it says like three of four completed, so I have an open 9, 000 job that just was never completed, which means we didn't collect because it was on financing and we didn't go through the process there.
So it was 50 grand a month for us.
Jack Carr: The other one that we noticed a lot is, um, so those are two definite scenarios. The other one is that the job from a CSR perspective wasn't booked through the estimate. So the 0 ticket that was created, the 0 job was closed out, but the open estimate that was sold.
Totally. Is it sitting in an open estimates report? Not completed, even though we've completed it. So that's another one that we found. Yeah. And so our process actually is the same as yours. It sounds like it's just the follow up. It's we run that weekly. Yeah. The [00:08:00] managers are supposed to run that weekly and yours truly is supposed to follow up on that weekly, um, with them to make sure that they're running.
That's
John Wilson: how ours works. So it's now. Ours is now a three step process. It's the install coordination team is accountable for keeping jobs closed and running it weekly. The director of fulfillment is accountable for checking in on it monthly so that we can close out the month accurately. And then accounting is accountable for following up with the director of fulfillment to make sure that that gets done in a timely manner.
So it is, it is, uh, it's checks and balances is probably the best way to think about it because what we have, we have found just like, Um, and I'll give some other examples outside of just this, but we found on repeat is like. You have to create, if a process only hits one department, the likelihood of it failing is very high.
Jack Carr: Yeah, and that, that's what I'm learning is the [00:09:00] one department followed up by me is not a good plan. It's not a good plan. I mean, even if I'm, I'm, I'm considering even bringing on, I know you used to do it a long time ago for different scenarios. Um, but even like overseas talent. To just ensure processes were completed like hey this your job is just as a follow up person as Jack's VA that does Direct follow up on, hey, this process is supposed to be done.
Did we go through and ensure that the, um, that the report for Ferguson is correct? Like, did you do that? Did the manager do that? No? Well, that's someone that now that's a second department, which is going to be like quality assurance of processes is complete. Just because, you know, when I'm wearing all these hats, it's so difficult to maintain and track.
Like, hey, did you do what I asked you to do weekly? Type of deal.
John Wilson: I think there's a term for this. I don't remember the name for it, but our controller uses it. And it's something like [00:10:00] triple confirmation. It's mainly used in purchasing or maybe it's like three tag or something like that. But there's three different tags.
And this is like, if I'm going to go buy a part and one of the big issues that we have in our industry, and us specifically, is we have a low dollar, like average ticket is like three grand, low dollar, um, but high velocity of POs. So like, so I might buy. From vendors a hundred different PO's a day which for a 30 million dollar company that like that's a lot of PO's That's a ton of transaction volume Um, and they're all small POs.
So like the POs might be like 10 bucks, 15 bucks, 20 bucks. Um, then there's a few thousand dollar ones mixed in there, but it's a ton of volume of small dollars. Uh, so what inevitably happens is you run into the same scenario [00:11:00] where, Hey, this, this vendor build me and like, I don't even think I got these parts or like, Oh, I agreed on this pricing for this part, but they build me 30 percent more than that.
Like what the heck just happened? Um, or. Hey, they sent it, but I only got half the order. What happened to the other order? I'm being billed for the whole thing. Like any variation of those could happen. So we put in a, it's a triple tag system where like, it's like we have to, before we pay an invoice, we're going to check the PO.
We're going to check our PO confirmation. We're going to check our receive tag. Like, did everything happen the way that we thought it was going to happen? So we've taken a similar philosophy or are in the midst of taking a similar philosophy with most of the other parts of our business. So one area that this shows up in a ton, which like, frankly, scares the heck out of me for companies that aren't prioritizing in HR or accounting hire, like a high level HR accounting hire is it shows up like crazy in HR.[00:12:00]
Like you can also. Well, it's back to like triple confirmation. So
Jack Carr: just that the process is being followed. Is that what you're saying? It shows a blog that they're using
John Wilson: HR owns the process. Then are who's making sure that you paid your benefits on time, which by the way, you are personally legally liable for.
They can take your house, uh, who's making sure you pay your 401k contributions for your team members? Who's making sure you put your medical in on time? You have a strict amount of time to do that. Who's making sure you pay your payroll taxes? Like these are like, and this isn't like small business stuff.
Like I have a friend who runs a 60 million business and they found out that their HR director wasn't doing deductions properly and wasn't paying payroll taxes. And that is a, you can go to prison. Like offense
Jack Carr: offense. It's
John Wilson: crazy.
Jack Carr: I think the hard part around hr specifically too is like who Around finance, right?
Everybody's [00:13:00] responsible for some level of purchasing buying selling, you know the whole revenue generation Collection, but in hr, there's no secondary person, right? there's no secondary function or person that really does a check and balance on the HR systems themselves. So who do you have? I want to two part this question.
Who do you have for that? What's the, your solve? And then I want you, I mean, obviously your business, this, this three touch three tag system, it's more, there's, there's more opportunity because you have more people, right?
John Wilson: Yes.
Jack Carr: And so I don't want to shoot this over the heads of everybody under 5 million. I don't think so.
John Wilson: Because I'm involved in some of this, like this isn't like, Oh, I'll delegate it to wherever.
Jack Carr: No, no, no, no. I mean, I'm not saying it like that, because if you look at like Tommy's mellows business, if he has the same thing, obviously he has more people who can do that, but there's also more systems. So there's more connections and.
I'm not lost on that. My, my, what I'm trying to get to is, Hey, [00:14:00] I'm thinking for my businesses, I could do a two touch system, but a three touch system would still be extremely difficult just because I don't have the head count. Like, I don't know who the third person would be.
John Wilson: I'm going to give you an example.
So let's do, let's do this unsold jobs. And you have a service manager, ops manager, something.
Jack Carr: Yeah, service manager.
John Wilson: Okay, and is there an ops manager, or you're the ops manager, right?
Jack Carr: There is an ops manager, too.
John Wilson: That the service manager directs to? Correct. Okay, so this is perfect. So, like, titles are different, but that's my setup, too.
Now, granted, I have one more layer in between, but I don't think that matters.
Jack Carr: Agreed.
John Wilson: Every Monday, I'm gonna, I know you probably know this, but I'm gonna go through it, because I think this hits this. Every Monday from 1230 to three, I sit 30 minutes each. I sit down with each frontline leader by department.
So plumbing has two frontline leaders. Drains has one, electric [00:15:00] has two, HVAC has two, and restoration has one. So I sit down with each leader of the frontline, uh, teams and we go through their measurables and their measurables can be financial, but it can also be qualitative. So like, Hey, what was your gross margin month to date?
We on track off track. Uh, do you have anybody that's struggling? I am a 30 million business and I am helping them identify and then holding them accountable every Monday to, Hey, this guy is struggling. What are we doing? Coaching wise? How are we helping support them? Are we doing ride alongs? When was your last one on one?
And then what we do from there. So that's two touch and that's me like skip leveling. That's me multiple levels away from this, this manager and orchestra structure. And then I informed their director of like, Hey, this was the plan. Here's the to do for this week. And now the director helps me. Hold them accountable to the plan that we set on Monday.
So that's a three touch. There's three [00:16:00] different people in there to help improve the performance of our field pros.
Jack Carr: Yeah, that's interesting, though, the way that you phrase that, because in my mind, I'm almost viewing that as you're creating two separate processes, and you're only two touching two separate things.
John Wilson: What do you mean?
Jack Carr: This SOP is, or the um, the issue, I guess if you will, the opportunity is tech underperformance if we're going to say.
John Wilson: Yeah.
Jack Carr: The one, the single touch is the manager knowing that he's tech underperforming. Right.
John Wilson: Is the manager watching and has the manager set his own plan?
Jack Carr: Correct. The second touch is you managing the manager asking him those questions, but then you've created a kind of an auxiliary system where you've let the director or a different level of position know.
But now like this whole kind of in my mind, and this could be completely wrong. I mean, I'm asking you the expert subject matter expert here is a question, but how is that not kind of a side leg in the sense that now you're [00:17:00] single touching a process to a director level to now handle. So you did complete the circuit in the third touch, but by doing so you created.
A single touch with the director level because who says that the director level is doing that? Who says that he's going through that process? You should find out in a year that hey, Joey hasn't had a conversation with a follow up conversation with the managers about that. So that's how we track it ever.
John Wilson: So we, so we, we track it in like public to dues.
Jack Carr: Okay. So when I'm sitting there with the front line
John Wilson: leaders, it's like, hey, this is what you agreed to do this week. Like you agreed to go on a ride along with this person. And then it goes into a public. To do so, his boss and his peers can all see the need to do that was agreed on.
Jack Carr: Okay. So it's an open ledger, essentially that, yeah. So that's interesting. Cause that was going to be my next question is, could you utilize systems and processes to actually be that third touch like automation [00:18:00] systems or, or follow up ledgers? And in this case, I would almost, I would almost say that the third.
Touch is actually having,
John Wilson: yeah, that makes it a director job to hold them accountable to the plan that they said themselves they would do. So in your case, I'm going to play this out for you. So you've got, you have the same work structure. I do. I have one more layer. Doesn't matter. You've got the ops manager and you have the frontline leaders that report to that ops manager and then you're above that ops manager.
So you'd have the same setup. So if I'm going to sit down every Monday. And I'm going to give an example that's non tech performance. We have a spreadsheet called job issues and job issues is typically like materialist issues. Um, Or like, Hey, this job went too long. So I think it's somewhat closer relates to the problem that you're going through right now.
Did we close them out? Um, so on Mondays, like we, we hit those job issues list. Like, Hey, these are the job issues. I'm not going to go over all 20 of them last week with you. Like, are [00:19:00] you up to date on coaching? Did you review them? Did you do the thing? Uh, and then the, we put in the to do if there's any to do from that public ledger of here's the to do and then the director, they have their L10 on Wednesdays.
So it's like, okay, did you make any progress between the meeting on Monday and today? If not, then I'll help you move it along. But yeah, it is sort of like a, it's a public accountability, but it is put on by you.
Jack Carr: Um, yeah, which is very interesting. That actually makes a lot of sense too, because that would solve a huge sloth of the issues.
Sloth, sleuth, a huge grouping of my issues is, Hey, like, okay, so instead of, you know, letting a manager know, and then following up with them on these individuals on items on individual days, you do essentially one on ones where you have a list of kind of, here's our top issues or KPIs or processes that need to be followed.
Are they being followed? And are you having any issues [00:20:00] subsequently? Right. Yeah. Um, it
John Wilson: also gets you in pulse with the organization. Now, this is my I was, uh, we did in this morning, we have a, we have like a leadership cohort on Wednesday morning. So Wednesdays are like the leadership day. So from seven to eight, we do a leadership training with up and coming leaders.
Like they're not leaders yet, but they're hoping to enter that leadership track. And then like Wednesday, late morning, like 10, we do existing managers. We do like a training for them. So this morning, um, they, from seven to eight in the upcoming leaders, they did a training on the six different styles of leadership.
And I was like, Hey, Brandon, what's my style of leadership? And he said, like aristocratic or something. It's like I have full and complete total control. Like, so what I'm saying, I, I understand that like some people might look at it and be like, Oh, that's um, like your skip leveling. Like that's other people's jobs.
That's whatever. And like two responses. One, I don't care. [00:21:00]
Jack Carr: Number one is like, you know, it's worse of failing business. So I think like, I think
John Wilson: that frontline obsession. from the top of the org chart is more important than are we following the proper pecking order. Like it, it is irrelevant. Uh, so that's number one is like, I think the frontline obsession is more important than like ego of the org chart of, Oh, I shouldn't be doing that.
Um, and two, as long as accountability is still in the right spot, I'm good with it. Uh, and the accountability is created by creating a public ledger and holding the director accountable. And number three, I think you can only lead us who you are, and this is who I am. So, yes, but I do think, um, skip, skip levels are good and I think no matter what size of a business you are having a, Chris Hoffman did a tweet like a year ago and it honestly really like challenged us in a way that, um, I think was good.
And, and he [00:22:00] said it roughly exactly this and Chris runs 180 million business and it was, Hey, our entire leadership team has a frontline obsession. I know when individual texts are struggling and I know what the plan is to solve that. And when I read that, I was, this was like a year ago. I was like, I, I don't know that.
And I don't know what the plan is to solve it. And. Because of that, I think I'm out of tune with the day to day organization, which I don't think is good. I think having a 30, 000 foot view is good. I also think understanding the day to day issues. is important because otherwise you can't like my job is to like remove future bottlenecks.
But if you don't know what the current bottlenecks are, how are you supposed to remove the future ones? And then you just, you know, you pay intelligent people to solve the current ones, but you should know. Uh, so Chris's tweet in a business, six times my size, really challenged me to be like, if he knows it, I should know it.
Uh, so we started making [00:23:00] process changes around it and it happened to solve some of these like two, three point touch. SOP issues that we had. FieldPulse is the all in one field service management solution built specifically for field service teams. FieldPulse is designed to simplify your day to day operations by combining everything that you need into one platform.
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Jack Carr: I think that's really helpful because I do, I do foresee like that being a great solving point because this kind of reverberates throughout the entire business, right? Yeah. And specifically today, I mean, I'm, I'm talking just about like the financial in and out. Um, and where do you find those heads and where do you find the time and the bodies to maintain it?
But it sounds like the bodies are already there. The process is already there. It's just making sure from an accountability standpoint. That even though I feel like I'm swamped and that shouldn't be on my to do list that it does need to be, but if you created a system in place to manage [00:25:00] almost, I'm always thinking like monday.
com where you just have like all these SOPs. We
John Wilson: use 90 for this, like 90s are EOS software. So the to do's that we assign actually show up in their L10s.
Jack Carr: And we
John Wilson: like that because then it's like, you're going to talk about this. John assigned it, like you're going to talk about this and did you complete your to do?
Jack Carr: Yeah. And then here, let me ask one more follow up question, which I think is a very important part of this, right? So there's one part of it. For example, this specific instance, I'm going to use, cause it's a great one. Um, running a report to see how much is falling through the cracks. And then you holding them accountable for that action and running that S.
O. P. What if they're messing up? Right? So I'm running the report. He's missing. Or Jack is the front line manager. I'm running the report. I don't maybe my training's bad. Who knows? Maybe I'm lazy that day. Maybe I had too much to drink last night because I partied. Um, [00:26:00] and I just missed like a giant Uh, job that fell through and then six months later, the customer calls and it's like, Hey, I was supposed to pay you guys for this, but like you guys never followed up.
Yeah. So I, I think, I don't know if there's an answer. Cause like that's super hypothetical, but like what, what, how do you view that? Cause there's, there's an accountability and then there's, there's an assurance that the job is done correctly.
John Wilson: Yeah. Yeah. I, I think this was my point with HR and accounting.
Is it feels like such a black box, you have to build these systems, but I would say that like, it's easier to understand in HR because like, you're not thinking about HR 24 seven, like we had somebody in HR a few months ago that literally missed our open enrollment. Like it was a clusterfuck and fortunately we found it, but like we found it January 1st and.
Anthem gave us a 30 day window, but like she was fired on the spot because that is insane. That's your [00:27:00] only job is to make, is to take care of our people. But I think as my quick, my like take here, and then we can dive a little bit deeper, but from what I've seen and from what we have experienced, like how we have run our business, accountability of leadership, hardly.
Exists in smaller businesses. And we all are too willing to hold our salespeople installers and techs, highly accountable to measurement, but we will not give our managers the same respect. Like, so I, I will often see managers or senior leaders not held as accountable as they should be. And they run rampant or they don't, they aren't effective in their role.
But the problem is it's harder to measure. And it's over a longer stretch of time, like a technician, like, Hey, if you have two bad weeks, we're going to have, we're going to like talk and try to coach you and like help you like we want you to win manager or senior leaders [00:28:00] might be measured in quarters or months, um, for like effectiveness.
So it's harder to measure and it's really hard to measure if you don't have a target. So, you know, we've talked about budgeting, um, but like that same thing I do on Monday, I actually do on Thursday too. So I take two and a half hours of my day, two days a week. And on Monday is for our frontline ops leaders on Thursday.
It's for our cost center leaders. And it's the same thing like, Hey. Accounting. This was your budget. Salary wise, this is what I expected to spend on COGS. This is where I expect my credit card to be, my AR, my AP. Like, these are the rough metrics that I'm going to measure that you're doing a good job as the leader of my accounting department.
Did you do a good job? Like, yes, no, and if you didn't, let's talk about it. Uh, call center. We have a budgeted number of calls we need a week. Like, it's not that complicated. If you have eight techs, they all run four calls a day. You need 32 calls a day. So, um, we have that budget [00:29:00] and I meet with, uh, my call center manager, Lori, every Thursday for half an hour.
And did we hit, did we not who on your team is struggling? What are you doing to help support them? Um, so we took the same lessons that we learned in the frontline ops leaders, and we took it to our cost centers because we were seeing the same problem of like, oh, there's low accountability over here. We need to, first we need to set the target.
So I need 150 calls a week for this department, and then I need to work with them weekly on hey, did you hit what I expected out of your team, and if you didn't, what is your plan, and then great, did you complete your plan, was it successful, and that back line is where you start holding managers accountable and where jobs get at risk, like oh, you, you didn't complete your plan, you didn't do what you said you were going to do, then what the fuck are you doing here, like why am I paying you money.
But it's okay if we have [00:30:00] problems, but if you commit to doing something and you either don't do it or you do it horribly. Then, like, what are we doing?
Jack Carr: On those examples, let me ask you a question, because that, that, I think those are really good examples to try and, and showcase what I'm, what I'm asking here.
And yes, right, holding them accountable. But the metric in particular, I mean, I'm guessing that's where the, the secret sauce is, is pitch picking a metric that you, John, or your GM or your ops manager is able to measure effectively because what I imagine, right? So for example, we had something similar in HR where, um, somebody had quit.
And they, I go in two months, three months, four months later, and they're still sitting in our, we're still paying their benefits. And we have an SOP, we followed up with the individual and said, hey, this person was let go, like, are they off the benefits? Yep, they're off. [00:31:00] But realistically, they weren't. And so, like, the extra steps to ensure that the person is doing what they're supposed to be doing, um, it just, it feels like, I would have to go back behind everyone and do everyone in the entire company's individual job to get to that.
So I would imagine that. Instead of you going back through, there is some level of like, hey, you're number two, you're number three, the managers are going back through, and then the managers managers are following up. And the managers managers managers are following up, so that you don't have to get super intricate and down to the
John Wilson: Yeah, ideally.
And like, our plan, because I don't think we have it totally solved for HR or accounting, so our plan there is creating a who's watching the watchers. Like, I have been burned enough. By accounting and HR leaders making massive mistakes and me holding the bag like I'm good. It has happened a lot. So there's so much risk
Jack Carr: there.
There's
John Wilson: so much risk. [00:32:00] No idea. Everyone's like, Oh yeah, I don't think I'm ready for an HR person. I'm like, bro, like you have no idea. And like, there's no way to convince them and they're going to lose 200 grand and then they'll be like, shit. Yeah, I should have done that. Um, Yeah, but people, people are on their own journey.
Jack Carr: I, Such a good way to say that. Yeah, people are, they don't listen, they're on their own journey. Like, let
John Wilson: them go. They are. Like, if you're above 30 people, like, you need somebody in HR. We're at 16
Jack Carr: and we have someone in HR. I mean, they do HR slash recruiting, slash this, but like, payroll, but like, that person, I consider them HR, HR.
And then we hire a consultant that watches her. That's
John Wilson: what we're doing now for HR and accounting. Is we have a watching the watchers. So we're bringing on a, uh, in accounting, it's already done. Um, it's going to be like a, a monthly, uh, review of process, a monthly review of reports, like millions of dollars can go missing in a real quick hurry.
Uh, [00:33:00] and I've had it happen with so many friends where like their controller or their AP person or somebody makes a fake vendor and suddenly have millions of dollars gone in a year. Um, so we're looking at that. Not to
Jack Carr: mention Like, if you're in, if you're in California, as someone who used to live in California and a lot of other states, like, employment law is so, like, absolutely mind numbing, and there's so many rules and regulations that you have to follow to the T and, and track, and like, if you change someone's time card, you better have them, their signature changing their time card, and why, and where, and like, in ink, and all this kind of absolutely, I mean, that's not that wild, but there is a lot of wild rules.
Okay. And to a point where like, it is absolutely, you need to have HR and you need to have somebody who knows what they're talking about because the, the, the fines on the backside and like the back pay, it is, it's business destroying.
John Wilson: [00:34:00] People don't understand, like you don't, you don't know what you are personally liable for.
And, um, there's a book that really like. Who shook me up on this. It's by Jeff Sands, and it's like the business of turnaround or something like that, like payroll taxes is a great example, or 401k contributions is a great example. Like, if you don't pay those, you are personally liable. You will go to prison, they will take your home.
Like, it is not, there's no some like personal guarantee with the SBA, like no, you are just frankly personally liable. Um, and it is like business shutdown bullshit. And it, with 401k, it's, it's kind of the same thing. Anybody that touches the 401k program, it could be your bookkeeper, it could be you, it could be one ops manager.
They are personally liable if they touch that plan for the contributions of your employees. Personally liable.
Jack Carr: They will go to
John Wilson: prison. [00:35:00]
Jack Carr: Yeah. I mean, it makes sense to some extent, like from a logical level. It makes total
John Wilson: sense, but people have no idea what they're exposed to. So you read these books and it's like No one meant to do this stuff, right?
Like, I have a friend whose controller stole, or like, misallocated 4 million, two years ago. And, yeah, nearly business destroying. They got out of it, but it's, it was a crazy story. The, they didn't pay payroll tax for a year. They didn't pay 401k contributions. And like, I don't know how, like it was an army of attorneys, just absolute army of attorneys, houses were on the line.
It was like a real deal, but they never, it was like, it was never on purpose, right? It was just this, uh, Oh, I, I gotta make payroll. So I won't pay this part or I'm going to hold this back so I can pay this vendor and keep things going. And. It just turned into this snowball [00:36:00] where they have a million dollars of employment based liability that they are personally liable for, and they didn't even know that they were personally liable for it.
Jack Carr: So, the answer here, don't do a 401k program for your, no, I'm just kidding, just avoid altogether. I
John Wilson: think you should explain to anybody that is touching your 401k, because our HR people actually didn't know that, like our first HR person, they had no idea that they were personally liable. They were helping administer the plan.
Like this is a very real intangible personal risk
Jack Carr: that one reminds me of too. Like the people who do the sweepstakes, they do, they give away something for free. Yeah. The, the amount of law around sweepstakes in your state and in the country is absolutely wild. And you see a lot of these small businesses doing free giveaways or sweepstakes or lotteries of some sort and just blatantly.
Breaking the law in many cases, and on the back end, like not giving out the prize or [00:37:00] incorrectly giving out the prize we had when we did ours, the explanation by our lawyer on what would happen if we didn't give out the prize that we promised to every single person was It was business destroying fines over like a three or 4, 000 unit, like just crazy stuff.
And people forget they, you know, get lazy. They couldn't get ahold of him. Like, what do you do when you don't get ahold of the winner? Like, do you have that lined out? Do you understand what the next steps are? And if you don't and you do it wrong, absolutely business screwed, which is, which is wild. But I know that's a little bit tangential.
John Wilson: I think the point is like. Have a process. Uh, we're bringing on teams to review our team to make sure that our team is holding it up. So when you don't have the org, I think you were talking about like, Oh, you have more people and, and my backing on that is a hundred percent. I [00:38:00] do, but even for the people that we, like, I don't have a CFO and the CFO would hold the controller accountable.
So my alternative is an accounting firm, but like, even if I had a CFO. I would, I would probably be even more rigorous because the CFO would have even more power to indebt the company to spend our money to like, they could do way more damage than a controller could. So, uh, I think it gets more important and more important the bigger the responsibility you give out of how are we monitoring the, what we're, what we're giving access to.
Jack Carr: No, I, I think that that's, that's a good point. We naturally did that with the HR department just because we, like we said, don't have a full time person. It's an outside, um, vendor who they specialize in HR and making sure that they are coming through. Yeah. And we keep them on retainer. They, they go through the, the HR reports every month, make sure everything looks correctly or looks correct, um, is done correctly.
John Wilson: What, what does that [00:39:00] cost for you?
Jack Carr: It's like a hundred bucks a month. It's nothing.
John Wilson: Geez, that is, that is nothing.
Jack Carr: But I mean, we don't have a huge Who's
John Wilson: the firm?
Jack Carr: It's not a firm, it's an individual. Hmm. So they helped set up the program initially with our person, because our person, although they are in hr, they weren't like hr, uh, like a builder.
Like you have to build the program first. So they helped consult on building the program. Yeah. And then put the processes in place that we then run and follow. And then they come in on the back end and say, Hey, you did this correctly. Your taxes are correct. You've allocated correctly. Great. Perfect. Good job on the month.
So, yeah,
John Wilson: yeah, we're bringing in, we're starting with accounting and then HR is our next one. But we, we just brought on a new accounting firm. They're going to do our taxes and stuff. But, um, you know, I, I've heard something that was a really interesting challenge to me. Uh, similar to like Chris is like, oh yeah, I, I always know what's going on.
I'm like, oh dang. Um, I have a good friend, Mike, Michael, uh, Girdley and any, he like [00:40:00] incubates these businesses. Right. So he, I'm going to invest a hundred grand and we're going to start this And like, yeah, software business and, uh, coffee business, fireworks. Yeah. He has all these different things, but anytime a business crosses a million dollars of year, he begins an annual financial review, like an audit.
So he does a financial audit on every business, like more than a million dollars, which to me. And like, that's a true ownership. That's like, that's a good fricking idea. Like you're trusting people with a lot of money. That makes total sense to me. And I was, I had never completed an audit before. And my business was like 25.
And I was like, damn, like, what am I? I'm not really, we're prepping for our first one.
Jack Carr: Oh my goodness. That's gonna be exciting.
John Wilson: It's well it
Jack Carr: Like he's totally
John Wilson: right he's it's like who is watching the people that you're entrusting And like how do you build same as your oh, I didn't [00:41:00] build this and I just lost you essentially lost nine thousand dollars or you could have That's a
Jack Carr: we've lost way more than that's a
John Wilson: real economic loss.
Like that is a very real problem. So the harder part that people don't realize
Jack Carr: chew with that, sorry, just to like reiterate the point home to everybody is if our EBITDA margins or net margins are 10%, like the amount that you have to make to, to recoup that is you have to sell another 90, 000 worth of.
Stuffed hundred percent, the, the losses are 10 X what they actually are because of the way that the business works. So making sure that all that owed money comes in is so critically important so that you don't have to sell another 90 K to make that back.
John Wilson: We have the same conversation regarding collections.
It's like, Oh, we're, we collected 95 percent last month. I'm like. Okay, so that 5% was like most of the profit, like, because our business, if we're a 10 or 15% business, [00:42:00] that's half to one third of our actual cash flow that we just accepted. The fact that we didn't collect, like, that's not okay with me. So, and the problem only gets bigger 'cause now 95% is like, that's hundreds of thousands of dollars.
Jack Carr: Yeah, it grows. It grows quickly as your business grows. Yeah, I mean, and that's why I mean, you see, speaking of Hoffman, I mean, he does a lot of things really, really, really, really well because he has to. And one of the things he does really well is collection and HVAC and plumbing on site. Yeah. Because of this, I mean, I think he realized at some point in his journey that, hey, the margins are so low that if we don't collect and we leave that in AR, doesn't ever get paid.
So let's focus on it as a company. Yeah. Um, speaking of three touch, he touches it right when you, when they call in. Yep. Before they arrive, as they arrive on site, and then as they leave. So he's like, four or five touches. How are you going to pay today? Because it's due today.
John Wilson: Yeah, I think, uh, so if I was [00:43:00] giving input to anybody out there on like, Oh, I need to create a SOP, I just had this problem.
Is who's going to watch the, who is going to be accountable on who ideally, who are the two parties that are going to be accountable for that stop being completed. So you have the frontline person, which is like the day to day owner of this problem, but then you have their direct. And I, ideally that.
direct or appear that is also affected by the completion of that SOP. Multiple eyes. Um, because every time, maybe not every time, there's a few unique cases, but for the most part, if we create a SOP that starts and ends with one role, it does not exist for very long. Like it just, they just don't do it. You know, they get, they get a little bit busy and they get a little bit swamped.
No one's asking them about it. No one's holding them accountable. Uh, so it goes away.
Jack Carr: And on the back end of that, start creating SOPs as you grow. Don't wait till the [00:44:00] problem becomes a problem because you, once you go back and you try to collect that 9, a month, whatever the case may be. It's much harder to collect after the fact.
So run that report, um, in your business, figure out how to run a report similar to that in your business. Um, because as you scale, you, you as the owner cannot manage all the incoming money and Finishing of jobs and making sure you get paid like it needs to be a CRM or a system in place. Um, that's been one of the hardest things for me.
Same with actually AP as well, right? Yeah, AR and ap, both of those is, you can't be the one checking every single of your 270 invoices to make sure that you didn't get double charge. Yeah. So system, systems, systems start now when you have the time and it's not an issue because it will become,
John Wilson: one will become one.
100%. This was good. That was a good topic. So creating multi touch point for SOPS. Who knew [00:45:00] that this topic could be so fun?
Jack Carr: It's so sexy.
John Wilson: Yeah. The amount of money at this point, it would be measured in the millions over the course of my career. On this exact problem, like the multiples of the items,
Jack Carr: I wouldn't be surprised if we've lost between, like I said, AR AP on those two items, just fall through the cracks and then double pay Ferguson hundreds of thousands and we're not that big.
John Wilson: Yeah,
Jack Carr: we've been in business three years.
John Wilson: How crazy, how crazy it gets sweet guys. Well, if you like what you heard, five star wherever it is that you listen to shows, make sure you check out YouTube. Uh, we're. Like we just crossed 1300 subs, which I think is kind of fun. Um, and check out owns and operated.
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