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Owned and Operated #185 - From Roofing to Riches: The Blueprint for Business Growth
Thinking about buying a roofing company or scaling your home service business? John and Jack almost bought a roofing business—but after a deep dive into the financials and seller materials, they walked away. In this episode, they reveal why the deal didn’t work, the red flags in roofing business listings, and what you should know before buying or building a home service company.
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Episode Hosts: 🎤
John Wilson: @WilsonCompanies on X
Jack Carr: @TheHVACJack on X
Owned and Operated EP 185 Transcript
John Wilson: [00:00:00] So Jack and I are like, should we buy a roofing company
like my dream business dream with me, Jack? Lead sale, fulfillment. One of the reasons that I find HVAC complicated is because we are optimizing three things, roofing. Is two. I'm convinced that roofing is fake at this point.
Earlier this year, we started an outbounding campaign and we really didn't know where to begin. So we were using dialing on the phones, we were sending text messages, we were trying emails, tried a couple different softwares, and ultimately we ended up with Hatch. Hatch has been an. Awesome partner for us.
We started with them about five or six months ago, and we've just continued to ramp. Every month we add three or four more automations, and my personal favorite thing about working with Hatch is Hatch comes out of the box ready to go. With Hatch, you get automated, multi-touch outreach across text, voicemail, drop, email, and a ton more.
[00:01:00] So every single lead that you have gets worked. Every invoice that you leave gets retouched and rehashed, and it's freaking awesome. Check out. Use Hatch app.com/. OAO welcome
Jack Carr: back to owned and Operated. Today he's back. We have John Wilson. It's me, it's him.
John Wilson: I'm back.
Jack Carr: The man, the, the man, the legend, the
John Wilson: the plumber,
Jack Carr: the Ohio Maniac.
Yeah, man, me, Jack Carr. Should see me on a set of skis. I'm so jealous. I mean that you, you're going to HoldCo like I know ability, dude. You honestly should be,
John Wilson: you should be jealous next year. Yeah, it is kind of funny. Not even funny, but like, so, you know, my friend and I, Kelsey, we started HoldCo Comp in 2022 and uh, so this is our third HoldCo comp.
And it's a lot of fun to like build an event that sticks. Like it [00:02:00] sticks, like we're literally on our third one and we sold out. Like we literally have no tickets left. Like that is in, that's insane. I don't know, like Kelsey thought, ah, we've got a one or two year run out of this thing. And like on the third year.
Like, like hundred 40 people. Yeah. It's just like totally, totally crazy. So yeah, it's a lot of fun for, for those that don't know, I've been running this conference for three years, uh, this year. I, I'm like. We had, we partnered with Michael Gridley and his team's doing an awesome job. It's been in Cleveland for two years and the whole idea is HoldCo.
So like if you're running a HoldCo, which is just running multiple businesses, which is obviously how Wilson ran for a few years. We ran different p and ls. We were figuring out growth through acquisition. So HoCo Comp is based on how do you grow with AC Avia acquisition, and then how do you incubate new businesses, like start them from scratch based on something else, which is also something we've done like cut and dry restoration.
Yeah, our restoration arm. That was an incubated business. So it's been a ton of fun and I'm there next week. It's in Salt Lake City.
Jack Carr: Yeah, I mean, I think the, [00:03:00] the only key difference with what you're doing now is now you've. Mashed 'em all together. I, I, I love the whole club model, especially if you're doing different industries and like Yeah.
You know, it, it's a great model for a lot of people, not me at this point in time. 'cause I'm in the same boat as you like. Mm-hmm. If you're going to create a brand that, that owns, uh, something all in the same vertical. Yeah. Our industry shouldn't say vertical 'cause there's multiple verticals, but same industry and they can all work together.
Why wouldn't you run it under a singular brand?
John Wilson: Yeah. Yeah, I, I obviously agree. Uh, we did that. Now what has been kind of funny is we went from this like HoldCo running different brands to like one company, but with owned and operated, it's almost like we're running two different things again. So what has been kind of interesting for me.
Is as we try to, 'cause I, I get this question, uh, I'm sure you probably do too. Like, why are you doing this? [00:04:00] Like, why are you doing this? And I'm like, Hey, that is not a bad question. The way I see all of it is I think of that, and I always do this every time I describe it, but the way I see all of it is like I'm actually working on one problem.
It's just that you see it as multiple problems, but it's all one problem. Not you, Jack, but like you, the listener. Where like, like owns and Operated Pro. Let's take that for, for instance, it's our new community. Honestly, I'm really pumped up about it, but the reason that we're doing it is I have three wins out of owns and operated pro for my core business.
So one. There's a buying group component. By combining our buying, we can get better discounts. Namely me, I get better discounts, but so does everybody else. So I'm using, I'm leveraging our members and I tell them all this when they join 'cause it's a win for them too. I'm leveraging your buying power to increase my buying power and it should be a win for both of us.
That's a big win for us. Uh, two training leaders is really [00:05:00] complicated. And the easiest way I've grown over the years is like having friends like you and friends like Rich, and people that I can ask like, Hey, how did you handle this specific problem? And have them in group chats where I can just go talk to them.
So I wanted to be able to offer that to my, my managers too. My directors, my service managers install managers. So that's my second big win, is it allows us to continue to develop our leaders through peer groups. And my third big win is I get to continue to develop myself. I get to be around peers and I get to continue to learn.
Uh, 'cause peer groups have just been such a big win for me. So to me I see like, yes, it's a HoldCo and that we're running like two things. And obviously like owned and operated has workshops and sponsors and there's a revenue driving component here. But at the end of the day, it's all. Like I work every day to try to make it one problem.
Like how am I always working on the one problem? Because I do feel like you get farther when you work on one.
Jack Carr: Yeah. And I think though that, that a lot of that comes from your greater mission is. You know, [00:06:00] is that whereas a lot of hold code owners have a different mission. Like for example, I, I think if you were to ask, um, Brent Hor, I think is how he pronounce his last name, bho be, yeah.
Bho, one of my, you know, all time favorite people that I've never met and just like I love his content. Owns an the, you know, forever hold style HoldCo. Yeah. And, um, like really good operators and good businesses from, at least from the outside perspective. Good insights. And I think he would have like a completely different mindset around it.
Like his objective in the long term is just Yeah. You know, different. And, and it's interesting.
John Wilson: Yeah. And you know, the way the way sharing on the internet started was it was a totally different thing. But over, it was like last year, you and I, we were working deeper on home service and, and I turned to Kristen, who helps us run on it operated.
And I was like, this, this has to become the same thing somehow. Like I have to be able to, yeah. Like how can, how can [00:07:00] every hour of my energy that goes into anything solve all of the problems? Like, how can I be working on this over here? Uh, and by doing that I can, I can win in Wilson, which like, frankly. I think it's worked.
Having, the joke I have is like, there's nothing white dudes love more than a microphone and being able to invite a
Jack Carr: middle-aged white guy does. Yeah. If you're a middle aged white guy without a podcast, I'm more surprised. Um, yeah. Yeah. Uh, totally. Um,
John Wilson: and I being able to have like the best in our industry on this show and ask them about the roadblocks that I'm about to have to figure out.
Has been one of the biggest growth levers that we've had in our business. Yeah. Because I, I had a friend the other day being like, are you trying to be a guru? I'm like, no, I'm trying to build a really big home service company. This is actually the craziest shortcut that you've never thought of.
Jack Carr: Yeah. Um, which it makes a a lot of sense because the way that I view quick staffers is very similar in the sense that [00:08:00] we have been able to get better talent Yeah.
Into my own personal business because I've somebody now recruiting the top level. You know, overseas talent all the time. Yeah, a hundred percent and hundred percent. So I might or might not have taken one or two off the table just because like it's such a, an opportunity. Yeah. Yeah. I mean, don't get me wrong, everyone is great that we're putting, but yeah, at the same time, like.
The ability to have a full-time recruiter that's looking for that talent, who I can drive to my person, to my other business. Like yeah, the Syner. Having multiple businesses with synergies, definitely, in my opinion, overcomes having multiple businesses without synergies that are just running 100%.
John Wilson: Yeah, 100%.
And I feel like real estate agents do this the best. So when I'm, when I'm looking at real estate agents. Like, they usually have a bunch of different stuff. So like if I'm a high performing real estate agent, I probably have like a title agency relationship where I get a kickback. I probably have a home staging business.
I might even have a moving [00:09:00] business. Uh, I might have a photography business or a home inspection business so that it's like, Hey, I'm a high performing agent. I sell. 10 million of homes or $20 million of homes a year. And then around me, I have this like ecosystem of other ways that I'm still working on the same thing.
Jack Carr: Yeah,
John Wilson: but I, I'm able to like increase my breadth.
Jack Carr: It's interesting. That's not the direction I was expecting you to take there, but,
John Wilson: well, I just think they do it the best. Yeah. I think real estate agents are fascinating when you find out about all the different relationships and like equity stakes they have in all of these different things, and it makes sense, like it's a hub and spoke.
Their, their transaction is the hub. But hey, I have a mold, you know, if I'm a real estate agent, like they'll, they probably have a flipping business, so if they find the right thing, they, they fix and flip. They probably have a retail investment business, so they're just gonna rent it long term. They might have a short term rental business, maybe home staging.
So they have these whole like multimillion dollar [00:10:00] ecosystem built around the fact that they sell houses.
Jack Carr: I was gonna say most of our, most of anyone who's who we worked with that are like private, non corporation Private, yeah. Large scale renting companies, like two, 300 homes they've been buying since the eighties.
Yeah. They're also real estate agents. A because they get a better Yeah. They get a better terms on their, you know, yep. They don't pay the percentage, but b, because they also get like a really good deal flow of like high quality deals that they can buy too. Well, they,
John Wilson: and they know the
Jack Carr: industry and they know the industry.
They know the market. They know Yeah, the sub-markets as well. And so it's just like, yeah, the, the more you immerse yourself into an industry and every aspect of that industry, the better off you will do in the long term.
John Wilson: Yeah, I think it's like play games, you know, you can win. Mm-hmm. Like I wouldn't, I would never open up a restaurant.
Never say never, I guess, but like, I don't think that's a game I can win. I have no strategic advantage in restaurants
Jack Carr: unless, um, it's a pizza parlor and they are the [00:11:00] catering company for Wilson.
John Wilson: There we go, there we go. And
Jack Carr: boom. Now, hey, synergy come, come work at Wilson. Free pizza. Yeah. Our healthcare's a little bit higher because everybody's a little thicker around here.
Everyone's
John Wilson: too much dairy. Yeah. Yeah. Just saying. But I think, uh, you just play games. You can win. Yeah. And, and when you're, I like the idea. I. Like similar to what I described with Wilson and owned and operated and how I think it's all, this is all actually the same thing and it's just a shortcut, I think, like building an ecosystem around one thing, uh, works and you know, that's what honestly we, you know, back to whole Cocom and then we'll cover what we were actually gonna talk about.
But that's a lot of what we see there is usually at whole cocom. Somebody has one big business. Then they built an ecosystem of businesses around that one big business. So there was somebody I met at the, at HoCo Comp last year. They had a huge e-commerce business. And then around that they built, um, like agencies for e-commerce companies.
So like there was a bookkeeping for e-commerce, there was a [00:12:00] marketing for e-commerce. He had 20 agencies. Yeah. Uh, and altogether it was a hundred million dollar business. It was insane. And like it was every two or three months they spit out a new service provider. They had three PL built on serving e-commerce clients.
It was fascinating.
Jack Carr: Yeah, I mean, and, and that's a great point 'cause I think it makes sense when you think about from a logical standpoint, the more energy you put into something. The better off that something will do, the better off, you know, the industry. Yeah. The better off you can network in the industry.
Yeah. Like it just makes sense across the board. I just think, yeah. You know when there are holdcos out there though that are just kind of randomized, totally decentralized. Yeah. They'll do, they'll do the back and, and they still try this model I think to some extent. Right. They'll still. Own all the backend bookkeeping.
They'll still own all the backend advertising like they still try to do. I just think the leverage
John Wilson: is so different.
Jack Carr: Yeah,
John Wilson: so different. But yeah, they, they do. And I just think like, I think leverage is the right thing. Like how, how much leverage can your time have? And if [00:13:00] my time can make an impact on this and this at the same time.
While solving problems in both, like that's a victory.
Jack Carr: I, I fully agree. And so with this, um, that's why John is in the market for, I, I, not sounding businessing. Oh, yeah. Oh yeah. Nevermind.
John Wilson: Yeah, dude. Roofing. Roofing, man. Wait, roofing. Wait.
Jack Carr: One more point for everyone listening. John, if you, if we host any kind of event like this for owned and operated in the future,
John Wilson: yes.
It also
Jack Carr: needs to be in a ski destination so that my energy while I'm. Helping people buy businesses and man being owned and operated. I can also spend my energy networking while skiing, because that's skiing, that's a big, that's a big draw for me. I, there's
John Wilson: no easy way to tell you that our, we are gonna do a home service conference and it is not in a ski town.
It's tough. And, and you know what's even worse than that, Jack? It's also not in a scuba town. Which makes me wonder, like asking like in the beach, what the fuck am I even doing? [00:14:00] No. What am I even doing here?
Jack Carr: I'm telling that we need to rethink this. Let's take it back to the drawing board. We
John Wilson: gotta take it back to the drawing board.
Jack Carr: So,
John Wilson: alright. Roofing. Yeah, roofing is kind of ticking me off, honestly. Like I love all these guys we've had on the show, but like roofing is, it makes me mad. It is. And I'm not saying this to be a dick. Mm-hmm. We have asked people. On recorded pods. Is roofing harder or easier than HVAC Plumbing? Mm-hmm. And everyone's like, oh yeah, dude is so freaking simple.
And I'm like, what am I doing? Yeah. Like, why am I not in roofing? Because you don't have to control the install you, it's like you're a sales and marketing business and that's all you have to do. And that sounds amazing.
Jack Carr: Yeah. I mean, you control the install, but like from a management perspective and not from a labor perspective.
And that's a huge. Yeah. Um, benefit, right? At the end of the day, you don't have to hold 16 headcount. That sole purpose is installation. And so like if, could you imagine if you [00:15:00] took installation out of plumbing or out of hvac? I mean, you would solve 30% of the issues. Yeah. And then you could optimize for different items.
Right now you're optimizing. Yeah. For, Hey, how do I make sure that the parts are correct and material's correct? And now I'm focusing more on, on advertising and sales versus focusing on getting the ins. Like, yeah, half of the half of the job in, in service or, uh, HVAC install is like, how do I set them up for success and make sure that they got, went out there and installed the unit correctly so that 'cause I've to warranty it.
And so if you could remove that aspect, I'm like, oh my gosh, that's amazing. I know. I, gosh, that's amazing. Forgetting that I'm in front of a microphone.
John Wilson: Yeah, we, we, I tried to, I still think there's a way, uh, I do think there's a way to do this in plumbing. Um, I, I brought this up to some friends, uh, last year and the idea was like, Hey, if I [00:16:00] built.
Like an e-commerce platform or like if I could figure out the lead and I could sell without you going in the home, would you install water heaters for me just nationwide? I got a shocking amount of nos, which was kind of funny. Um, 'cause I think people are just so used to the whole thing. But I was like, let me be your busy work,
Jack Carr: John.
You know what the hardest part of that business to overcome would actually be? Huh. It would be getting the contractor, because you'd have to, you'd have somebody reaching out to the contractor saying, can I drive you 30 more leads per year in your. This damn guy doing the same pitch that ever, like we get 30 times a day.
I know. On every platform you're No, no, no. I think it has to be like, I'm real, like this is
John Wilson: actually illegal. Giving you real, this is a real part of what we're talking about. Yeah. I, as we expand our geographies, we're getting ready to do more locations, like we're building our own little mini lead aggregation thing and we're trying to figure out what we do with leads and sales outside of our area because we don't want 'em to go to waste.
Yeah. So ideally we, [00:17:00] we partner up with somebody. But yeah, it is hard to overcome the, Hey, Angie's List has been calling us with the same pitch for 10 years. Yeah.
Jack Carr: We're actually gonna do it right and correct and, and really give you like actual leads. Yeah. But no, I, I'm with you on that one. I think that the, the e-commerce, no one's really cracked it yet either.
I think there's huge opportunity there, um, especially with water heaters and kind of the more simplistic items, the high ticket, simplistic, um, no one's crafted. Well, we've done it.
John Wilson: So we've actually, I don't think we've cracked it, but we have done it. So we have, we price them on our website and we sell them over the phone now.
Yeah. Via the pricing on the website. Uh, so we do feel like it is ha, partially scalable. It. I think the bigger issue is like how do you install 'em?
Jack Carr: I mean that, that's the same as we've talked about on here before. The hot water heater Pros. Yeah. That's the same as their business model. Like they have their pricing all on the website.
It's, you don't like click to add to cart and then an installer just show up, like they still send out somebody to confirm everything and. Then go install same [00:18:00] day. But like the, I'm talking about like real e-commerce level efficiency. Yeah. Nobody's been able to really crack it. Just, there's a
John Wilson: couple examples in the south.
Jack Carr: Is that of HVAC is, I haven't, yeah, I haven't seen them.
John Wilson: Yeah. The, they're actually kind of big businesses, like 30 to $50 million. The, the issue. Is that gross margin is very low. Very low. It's like bottom. It's bottom feeding, install. Mm-hmm. So it's like landlord, like it's drop ship HVAC equipment, and then they pay.
It's like, hey, you can, you can just buy the equipment from us homeowner. You have to figure out what you need, but you can just buy it. And then for $2,000 they install it, they'll find a subcontractor to slap it in.
Jack Carr: Yeah.
John Wilson: So obviously tons of warranty stuff, like nobody gives a shit basically. And very low gross margin.
Uh, they tried to sell a couple years ago and they just couldn't.
Jack Carr: Yeah. 'cause I know Well, like HVAC direct is kind of the same way, right? They don't actually find the installer for you, so you have to find them. Yeah. But for like a savvy homeowner, they can go [00:19:00] find somebody for pretty low quality, but also fairly cheap to go do it for them.
I mean, we don't, I actually
John Wilson: wouldn't even know, just like Facebook, I don't even know where somebody would. We would never touch somebody else's.
Jack Carr: We get calls every once in a while and, and the answer is, we'll do it. It's gonna be very expensive and we have no warranty on any of it 'cause we didn't buy it from us.
It's like, we don't know if your lines are flushed or anything like that. Yeah, yeah, yeah. And so we, we, we've never done one, but we've definitely received the offers to do it.
John Wilson: We probably have, I just, I just don't get told about it. 'cause I'm sure we just say no,
Jack Carr: but yeah. Anyway, so roofing, like commonplace roofing, like this is commoning, they send out a sales person who sells it, schedule it over the phone or Yeah.
Schedule it however they schedule it. Show up with a project manager and a subcontracted crew. So it's like, yeah, in the loop you have three. Yep. Employees who do that work, I mean, there's probably a warehouse guy as well who orders material. Um, yeah, I would imagine. But the sale, like salespeople could technically do [00:20:00] parts ordering on large scale projects like that.
Yeah. Depends what, how much they're selling. So, so
John Wilson: what I wanna, what I wanna. Point out here as far as like a simplicity of the business. One of the reasons that I find HVAC complicated and drains complicated is because it literally is complicated. There's one extra step, and I know one extra step doesn't sound like a lot, but it's, you're wrong.
It's a lot. It's your overall, like you are like, it's one more thing to optimize for. Like my dream business. Dream. Dream with me, Jack. Lead sale fulfillment. Yeah, you are optimizing three things and that's why I think we knock plumbing and electric just absolutely outta the park is 'cause we could optimize around three things.
The moment you have the fourth thing, it gets really complicated, which is service, sale, install. So that is just more complicated. Roofing is two, like you are literally doing two things, lead and sale, handing it off.
Jack Carr: Our roofers are [00:21:00] yelling at you saying. But awesome. You have to manage the program for the install and the install can be tricky,
John Wilson: and I would tell them that we've had three roofers on this podcast that are larger and they have told us otherwise,
Jack Carr: whether you're starting an outbound program to keep that schedule full or you need a CSR for your growing business overseas talent is the answer.
It's half the cost with better service. The big problem is how do you find these people and how do you get them trained? That's where Quick Staffers comes into place. We will place talented, trained individuals in your business that will start showing results day one. Go over to quick staffers.com and fill out the interest form today.
Yeah, I mean, I think that there, there's an optimization on that fulfillment portion, which is Yeah, the, it just looks different, right? Yeah. So there still is like that third, but it's more like if you were to hold up three fingers, the third one's your pinky. Like it is you're optimizing training the install, sub training the subcontractor to do the [00:22:00] job your way and make sure that your, your project manager is ensuring that that's happening.
Yeah, but like, once again, you're not holding on to. 10 head count of people up on a roof with licensing. Yep. And all of that nightmare of like, that's somebody else's problem. You're not optimizing. Oh yeah. You're just optimizing to make sure they're doing their job correctly.
John Wilson: Did they show up? Did they do it?
Yep.
Jack Carr: Yeah.
John Wilson: So it's a dream scenario. I think you have a deal that you saw.
Jack Carr: Yeah. So. And that's why we're talking. So obviously, so
John Wilson: Jack and I are like, should we buy a roofing company? I think that's like, you know, as we spent the first episode talking about how to stay focused, the back half of the episode is how to be distracted,
Jack Carr: how to be wonderfully distracted at all times.
And so I sent John out a couple days ago, this, this roofing company out in, um, yeah, Ohio. I think it's South Ohio though. Classic. Classic. Um, asking price, [00:23:00] $6.75 million. Yeah. Gross revenue. $3 million.
John Wilson: And I would say it says flat three. It just says $3 million. So like already red flags. Right. Well.
Jack Carr: And then it says cashflow, a million dollars.
So another red flag, like there's no exact number there. Yeah. And then once you go into the description, wait, by the way,
John Wilson: we're screen sharing this, so check it out on YouTube. We're actually going through this. Uh, interesting. Listing.
Jack Carr: And then with the SDE, it's like a million dollars plus an sd. So now it went from like cashflow, which you would expect on a business like this at this price point that it actually was going off of EBITDA and real numbers, not seller discretionary earnings.
I mean obviously seller discretionary earnings are real. I mean more so from like, I would
John Wilson: like to add back my marketing budget exactly because I discretion to spend $1.8 million handling trailing 12 months. So I would like to add that back.
Jack Carr: Y. Exactly. So there, there's a lot more funny business that happens in SDE that [00:24:00] doesn't happen with just pure basic ebitda.
And so the fact that they're trying like s d's meant for, in my opinion, for like a sub $500,000 price. Like Yeah, yeah. Number, a cashflow number. Yeah. Not for a million plus EBITDA business, which this is. I mean, assuming, claiming to be, potentially, potentially. I don't, I dunno. I mean, if you're adding a, like, unless the, the owner's taking like 300,000, like just, it, it just muddies the water.
But anyway. Well, I
John Wilson: think the weird thing about all of this is like, this is a, so when I look at this deal, million bucks of fake cash flow, $3 million of revenue, which like for a roofing company. It says establish, like if you're a brand new roofing company, great, but this has like established long history, like $3 million for roofing with an average ticket of like 15, 20 grand.
That is not a big business. I don't, I just don't understand, like I would've expected this level of a deal, like as in crappy, like put together terribly [00:25:00] to be put up by the seller themselves. Because no broker would or should take this seriously, but this is actually brokered by somebody,
Jack Carr: and it's not only brokered by somebody, it's brokered by trans world, which is not.
It's not a small brokerage like that's a nationwide brokerage firm. Yeah, I'm sure there's, you know, there's some kind of 10 99 that they do with their brokers maybe so that they're independent contractors. But still, like, like you said, this is, this is an apps like this is a serious brokerage firm posting this without any real numbers.
Yeah. And what else do we have inside
John Wilson: this description?
Jack Carr: SD, a million dollar SD on three. $3 million gross. I mean, that is crazy margin, net margin that they're claiming.
John Wilson: I, I'm convinced that roofing is fake at this point after interviewing all, all the folks we've interviewed. So I think it's all just like fake,
Jack Carr: but it's not, I mean, even like a really well run roofing company, are they running 30%?
Bottom line. I
John Wilson: don't know. I, I don't know. I mean, my take is I thought 10 to 15.
Jack Carr: That's what I, that's [00:26:00] what I was like, even a 20% wouldn't surprise me. Yeah. But a 30% is just not something that seems realistic.
John Wilson: Yeah. I mean, I just don't believe any of it. It is just $3 million of revenue. 1 million do like flat rounded revenue and cash flow.
That's weird. Okay, so what? What else do we have in here? See? Key roof custom roofs. Unmatched qualities. Roof. Every roof is a custom
Jack Carr: roof. Yep. Comprehensive service. Roofing installations, repairs, replacement, inspection, maintenance, custom sheet metal as well as gutter systems and siding. Nothing out of the ballpark there.
Local clientele. So they're not storm chasers, which is I think, oh no, it says loyal. Just loyal,
John Wilson: which doesn't make much sense. Yeah, because like roofs are like one in 20 years. Yeah. So I don't know how they would be loyal, but Okay.
Jack Carr: Skilled team, dedicated professional employees to ensure smooth operations.
John Wilson: I mean, there's probably literally five employees. I was just gonna say five employees, six employees in business. Four or five. Because the rest of it's subs, you know?
Jack Carr: Yeah. [00:27:00] There, there's, there's a estimator, there's a sales person. I bet. Like a good sa Do you know this number? I don't know it off the top of my head, but like a good sales person in roofing, what should they be doing?
So for example, well,
John Wilson: Paul Reese said a couple million bucks each. So it's same as like we're doing like five or six now.
Jack Carr: Yeah. So half, yeah. HVAC is about half like a good sales person. HVAC is doing two to 3 million. As a comfort advisor, like that's a really good HVAC comfort advisor, but I could see double.
Right? For roofing higher average tickets, it's higher. Average ticket. Yeah. Yeah. I mean, you're not waiting on service, you're just waiting on marketing. So if you can dial marketing in, you could fill service schedules or same sales schedules. Skill team. Yes. Six to eight people. Well maintained fleet. Okay.
Yeah. Because they're maintaining six trucks.
John Wilson: Yeah, well probably three trucks. I, yeah, I think like, it's obviously dumb, so I'm gonna answer the dumb part 'cause I feel like I have to, and then I'm gonna answer like how to, how to think about this stuff later. But like someone's [00:28:00] valuing, like not even a company yet, 2.2 times revenue.
So I think they literally misunderstood the multiple component, right. They multiplied revenue and like if I just look at common sense, I obviously, I'm sure everyone's like following along pretty nicely here, but like, look, you've got five employees in a couple of trucks and you're doing one time every 20 year projects like that is not worth.
Much
Jack Carr: or they said, Hey, if we hit a million dollars in ebitda, it's worth six to seven x, which is what the market's getting. And so then they're like, oh, well, our SDS kind of like, we can, we can massage it to hit a million. Yeah, let's shoot for six or seven. Yeah. Somewhere in between there.
John Wilson: Yeah. I mean, it, it's a, it's a silly, it's a silly deal.
Do you think, um, I also think like buy verse build is a real conversation that people should be having. So like, let's say this deal was reasonably priced [00:29:00] at a million dollars, which I think is probably like a reasonable price point for this company, maybe even a little bit less. Can you rebuild this in 24 months or in 12 months for less than $900,000?
And the answer is like, yeah, yeah, duh. Like we're talking about a couple of vehicles, we're talking about a few salaries, and we're talking about a lot of marketing. You will spend less than $900,000 to achieve this outcome
Jack Carr: because the other side to this, which I don't think people understand very well, is.
And I didn't understand getting into HVAC is like HVAC specifically plumbing close second, but, and then when we were talking with Tim Ryan Pools, same kind of thing. Yeah. When you're letting somebody in your house on a regular scheduled basis. Like they get super passionate about becoming a member and, and like being part of this, this cultish [00:30:00] company because you're in their house.
Like you're with their dog. Yeah. You're their family's in the house. Yeah. Like it's a personalized thing. Whereas when I think about my roof. I know of a few of the big people in the area just because I'm in the home service industry, so I, I look at trucks. Sure, yeah. You see the trucks. Yeah. But I can't tell you before I bought this company in any of the last cities I've lived in, I don't know a single roofing company.
Yeah, I do not. Well,
John Wilson: roofings are like, they're unbranded. It doesn't matter. It's because you only use 'em once every 20 years. That's
Jack Carr: what I'm saying. So if, so that's why I think like. If you came, well, now they're branding though, unnecessary. Now they're branding. It's becoming like, hey, it needs to be a slight branded play from a marketing perspective.
Uh, I don't even know that
John Wilson: it does, like, I guess I kind of feel like. I don't think that's right
Jack Carr: here. That is in, in Nashville. I think it's a differentiator, right? If you top dog roofing is the one that comes to mind. Like if you can brand and do a good job with branding and make it a memorable thing, I think in that subconscious like [00:31:00] it, it clicks over time.
But anyway, I mean, I think this proves the point that you were trying to get at. Yeah. Was that realistically there's no, like there's no draw or love or. Like loyalty to a customer base here. Like it, yeah. Yeah. It's once every 20 years.
John Wilson: Yeah.
Jack Carr: Yeah. By the way. Yeah. To fix your f uh, the ff and e do you think they're, I I bet they're including vehicles in that, like that is their vehicle base.
I.
John Wilson: It has to be. Yeah. And so that comes out. 'cause what else would they have?
Jack Carr: Yeah. At $60,000, they're running around in a bunch of F1 fifties, which is what they all drive a hundred percent. It's six vehicles. It's 5.8 vehicles.
John Wilson: Yeah, yeah, yeah. So if you
Jack Carr: cut off 50,000 for like actual FFF and e Yeah. At their shop or whatever.
And material, like at, at their shop, they're, they're, maybe they have like some kind of press or something like they're, they're running five trucks.
John Wilson: Yeah, I think this is like, I, I don't think a searcher, like 6 [00:32:00] million would be above probably for a searcher, like a six and a whatever times multiple.
There's definitely, um, I like, I think a large multiple for a bigger business that is established makes sense. Like there's real value built in some companies it's just this, wasn't it, like this was a small company that's trying to get almost three times revenue.
Jack Carr: Yeah. So let's look at a different one just based on like, okay.
Blank. My ranch, this is, this is actually what I see more common is like, this is a great one. Hamilton County, Ohio, same woman is running the, she must specialize in roofing, but this makes more sense. Right. It's 810. Yeah. In asking price, it's doing 1.3, so almost half of the other company, it's, it's doing half of the revenue of the other company.
And it's running at
John Wilson: Yeah,
Jack Carr: a 20%, two 50 a a 12%. Yeah. Um, 10 to 12% cash flow, which actually makes sense, right? Yeah. Like that is what I expected. It [00:33:00] has the same, you know, it has, you know, two trucks maybe, um, at 60 K in FFF and E. Yeah. Um. Let's see, let's see. It's been a pillar in the industry for 30 years, which is okay.
What I think you see a lot of is like a lot of these old school roofing companies that just, they don't know how to scale past. Yeah, yeah. Past that. Yeah. Um, high growth revenue 2022 is up 30%. Yeah. Year to date still 23, 10%.
John Wilson: I have, I have fully. Lost my appetite for like million dollar revenue businesses.
Uh, like I feel like, I don't know, like some of the deals I've done to, to get where I am. This is definitely a perspective that's changed. Okay. Like what I did to get here is, is not what I would do to get to the next step. So like, just 'cause I'm saying this, it might not apply to your situation. If you're growing and like a million dollar deal would move the needle for [00:34:00] you, great pop off for me.
A million dollar deal would not move the needle and it would take a lot of energy, but it's really hard to get excited about a deal, like even $5 million. I'm like, yeah, that would be good for like five, $5 million. I'm not trying to be like negative, but $5 million would be good. Like 10 million would be sweet, but 1 million is like, like, I don't know, do you want 50 grand for it?
Like I, I just don't see. Value.
Jack Carr: John, you're crossing into that unrelatable territory here with 99% of the population. But I get where you're coming from, right? You, you run a $30 million shop, like of course, 1 million on 30 million is not gonna move your needle. Whereas if you're a 1 million, well, and
John Wilson: it's just not worth that much because like
Jack Carr: I agree
John Wilson: like this, this deal is $1.3 million and the asking price is 810.
And, and I, I know I keep going back to this, but it's just like how my brain works. What would it cost me to replicate $1.3 million inside my business? And the answer is, sure, shit not 800, $10,000. Yeah. [00:35:00] It would cost me like maybe 150. Yeah. Like it just wouldn't cost that much money. So I get re. I just get, I don't understand the value proposition of deals under $5 million.
At $5 million. Yeah. I, I start to get a lot more interested at like $3 million or $4 million. I do struggle to understand, especially if it's in the same market. If it's in a different market and you're unlocking new territory, I think that's a different game. But like, if it's here in my home turf, it's tough.
It's a tough sell.
Jack Carr: I just, I mean, I'm, I'm gonna disagree just. Just on like the premise. Just because like a two or $3 million when you are two or $3 million to double your business, if you could do it effectively. No,
John Wilson: no, I totally agree with that. Yeah. If it moves the needle for you, do it, it's a step
Jack Carr: change, right?
You, you can bypass five. Yes. Yes. From two to five is a huge, you know, jump. No, I,
John Wilson: I totally agree with that. I feel like I said that when I started like, Hey, I did this. I bought a [00:36:00] bunch of these companies in order to get here. So like, I'm not immune to that, you know? I know that this is exactly what I did.
Yeah. It's just like now it's hard to find these deals attractive.
Jack Carr: Yeah, no, I get it. And you know, I even actually, yeah. If I was a
John Wilson: million bucks, I'd buy another million dollar company all day. You double.
Jack Carr: Yeah. And so that, that's the only thing I look at. Like this one, like that's the only thing it's good for.
Its owner. Owner operated like. One owner manages the team and customer service. The other owner, owner manages all the, the paperwork, financial, payroll, everything. So it's like, Hey, this is two guys, which is what we set up here. There's 60,000, two $30,000 used trucks. Yeah. You know, they're, they're generating a million dollar off two people, and they probably have eight installers, which when we go down to the bottom, total employees.
10. 10. So, so that I, I'm guessing they're including the employees in the, um, as the subcontractors though. Like they don't 10 people? I would
John Wilson: assume so. Yeah. Yeah, I would assume so.
Jack Carr: Um, they do everything, so [00:37:00] that's fascinating. Interesting. And I'm gonna pick up one more real quick to see if it, which one it close, closer manages to, uh, it's a construction company.
We'll do established roofing company in Dayton, where that one looks, Dayton rough. $500,000 for cash flowing. 13,000. 13,000.
John Wilson: A cash flow. Yeah. Jesus. We should rip into some plumbing con plumbing companies. Next one. What's the one up in Sandusky? Here. Scroll up.
Jack Carr: Look at that one. That one. This one probably actually makes sense.
And it's com. It's commercial industrial, though. I Oh yeah. I've looked at these before. Ooh, this is in
John Wilson: my home turf. You've just been ga, you've just been feeding me. I'm trying, this is in northeast Ohio. This is where I'm at, four and a half million asking price 1.2 cash flow, 3.3. I mean, I still hate the, I could never buy a home service company for more than its revenue.
I couldn't do it unless that company is like $40 million with a hell of an ebitda. Uh, but [00:38:00] like at $3 million, I could never pay more than the one times revenue.
Jack Carr: Yeah. 'cause I mean, this is like a thi, I mean, this is, this is a more realistic version than the first one we looked at. 'cause it's, it's a cash flowing 1.2, 1.3.
Really? It's a real number. It's like one 1,271,962. They've actually done the math. Yeah. They actually have a real gross number, 3,382,691. So these are real numbers and that cash flow, they said, Hey, we're gonna shoot for about a three x three plus or minus x. Yeah. Which gets them at like 3.6, so maybe four x to put them at 4.5.
Um, little under that. So maybe, maybe high threes. Um, 12 employees. To generate that. This, I mean, commercial though, I think is a different beast than residential. I'm not actually sure that they, sub commercial is a different beast. I'm not sure they sub all that work out. Um,
John Wilson: I don't know. We should have Mill Snell back on.
He's got a pretty big commercial roofing. I think we're gonna go down a roofing. Roofing path. Dude, I think we gotta do it. I almost
Jack Carr: bought one in, [00:39:00] um, yeah, you did Marino, Nevada Commercial Roofing. Yeah, you did two point. I still remember it to this day. 'cause like I, we went pretty far, $2.8 million top line, but Oh my gosh.
At the end of the day, you know what? I didn't want to be on a fucking roof. Excuse the language. Oh, no. Especially not in Nevada. In, in, in Reno, Nevada. Oh, yeah. Sitting on top of a roof in like 110 degrees hard pass. So I went in, you know, HVAC so that we could sit in an attic at 140 degrees, you know, like.
Solid choices in my life.
John Wilson: Yeah.
Jack Carr: Yeah. Um, super interesting business. Yeah. Cleveland, Akron, Canton, they, they do your market, but in terms of like realistic, um, numbers, like this is more realistic. On, on.
John Wilson: Scroll down. Scroll down. The business is home based. They're asking $4 million and they don't have an office.
No lease
Jack Carr: facility. Lease facility, 1700 square foot warehouse, additional space. It's probably out of their back.
John Wilson: It's probably out of,
Jack Carr: [00:40:00] you're probably right. Their
John Wilson: warehouse in the back of their house. Yeah. Business is a home based with a leased facility.
Jack Carr: Or the, you know, the, the, the owner stays at home.
They have like a
John Wilson: random warehouse. Yeah.
Jack Carr: Yeah. The owner stays at home, drives traffic guy has
John Wilson: $4 million business.
Jack Carr: Mm-hmm.
John Wilson: And they don't have an office. I feel like there is a certain price point of a business where like, hey, you should probably professionalize enough to have an office spitballing.
Jack Carr: Yeah. I mean, even if, like, if, if I was to talk to this owner before sale, I would say like, Hey, huge red flag.
If you, if you mention it that way. Yeah. Go rent an office for, for six months. I.
John Wilson: Yeah. Well also that's gonna get added back in.
Jack Carr: That's what I mean. They're like,
John Wilson: Hey, our cash flow. But like, yeah, you're missing a hundred grand of rent. I'm, I'm not gonna base it outta this guy,
Jack Carr: but, but on like a, on a, on a good note though, like, the fact is, it, it, it kind of proves the point though that this owner at a home base, you know, he is running his office out of his, his his house and he's doing all the sales and lead gen and probably [00:41:00] estimation, and then he has a few other guys running.
Probably project management and Yeah. Uh, sales, maybe one guy each. So that's three of 'em. And then there's nine installers, like that's the company. Yeah. And so if you can sub that out, like that's three people just to generate four. I just don't think 3 million, a million head, two. I just don't
John Wilson: think that you've built four and a, like four and a half million is a, is a lot of money.
Yeah. And I just don't think that you've built four and a half million dollars of value. As a service company with trucks and inventory, if you're running it outta your house, like, I just don't think you've done it.
Jack Carr: Also, my, my guess because it's, um, commercial industrial, is that he's, it's probably less lead gen and less lead gen systems.
Yeah. And it's, it's a hundred percent relationships. Like he knows a bunch of property managers and, and is. Yep.
John Wilson: Yep. You know,
Jack Carr: and so the minute that he leaves, you lose all. A decent [00:42:00] portion of it. All
John Wilson: of it. Yeah. All
Jack Carr: of
John Wilson: it.
Jack Carr: Yeah. Because, 'cause all those property managers know another roofing guy. So a
John Wilson: hundred percent.
A hundred percent. This was fascinating. Well, next time I wanna dive into like water quality or something.
Jack Carr: Yeah. 'cause I, I do think that
John Wilson: generator businesses,
Jack Carr: yeah. We were going through like tier two industries. Yeah. And tier two industries, to me, are extremely fascinating.
John Wilson: Oh yeah.
Jack Carr: Yeah. Tier two
John Wilson: being like generators and then back, or like duct cleaning generators.
Then you can add a check.
Jack Carr: So like, we don't do electrical work, we just do generators. We don't do, uh, landscaping. We do turf, we don't do plumbing. We do water filters and like, that's your business. Yeah. Super interesting. And we should definitely dig into it on a, on another day.
John Wilson: Yeah. I'm, I'm, I'm totally down.
Awesome. This is great. Well, I'll be skiing next week at HoCo Comp. Uh, everybody have fun? Everyone else have
Jack Carr: fun. Just
John Wilson: everyone else have fun knowing that I'm skiing.
Jack Carr: Yeah, there. Thank
John Wilson: you. Uh, yeah. Check out on an operated.com. Make sure you check out on an [00:43:00] Operated pro. There's a big blue button on top.
Spend a lot of fun, and we will catch you next time.
Jack Carr: See you next time.
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