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In this episode of “Owned and Operated”, John catches up on recent activities and dive into the topic of service businesses. They talk about the problems and chances that come with growing service businesses, especially when it comes to plateaus and the need for more infrastructure and management. The hosts also talk about how traditional business models are changing and how roles within organizations might be able to overlap. They look at appliance repair as an example of a possible new service line and think about how it can use their existing leads and add to their current businesses.
Episode Hosts: 🎤
John Wilson: @WilsonCompanies on Twitter
Jack Carr: @TheHVACJack on Twitter
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John Wilson, CEO of Wilson Companies
https://www.wilsonplumbingandheating.com
Jack Carr, CEO of Rapid HVAC
https://rapidhvactn.com
Episode 56 Transcript
John: Welcome back to owned and operated Jack. It's been a couple of weeks. How's it how's it been going? What have you been up to?
Jack Carr: Hey John, how you doing, man?
John: Ready to play I'm ready to talk service businesses. Yeah,
Jack Carr: honestly, like you said it's been a couple weeks I've been really missing this actually I was like itching looking at businesses again that weren't anywhere that I should be touching whatsoever And I got some exciting stuff today But it's been good, man.
Jack Carr: We we are, it's may or it's April, not even may yet. It's getting hot here in Tennessee. And that new project manager, comfort advisor, whatever you want to call her, that we, we hired on. Oh my gosh, man. She's been absolutely killing it. We are booked, overbooked. It's a good problem to have though.
Jack Carr: Yeah. I'm really excited.
John: That's awesome. Yeah. How have you been doing? Good. We just got back from Arizona. So we were there for two weeks hanging out with the family and then. My brother got married, so that was a lot of fun. And I've been back for two days getting up to speed.
John: Basically when I left I don't really get, I get involved in some things day to day, but for the most part, it's like project by project. But when I left, I had a ton of active projects going and it's usually like capital projects, like the building or we're working on acquisitions or we're like launching new service lines.
John: So I was excited to get back to it. So this week I was able to dive in and just catch up where we were. And honestly, I was pretty proud of the team for the most part. I was afraid that some of these projects would fall. Cause they took, it was like me pushing on some of them with the team picked them up and they did a great job.
John: It was exciting to come back to.
Jack Carr: That's awesome. I heard, I remember you were saying that you're trying to get out and go see some big boys out in
John: Arizona. I did. Visiting some big boys. Yeah. I saw some really big boys. It was pretty cool. It was cool. I don't think I can give their names, but was awesome.
John: I was able to walk through some just best in class operators. And we took a lot of notes and whenever we're doing that, whenever you're seeing a business, that's like just better than you or doing a site visit in general, even if it's not in your industry, I really, there's always so much to take in, but I go into it open minded, but generally with two or three problems that I'm trying to solve.
John: Look for some ideas on, and I was able to get, I was able to get those some progress on those. Like one of the big things we're struggling with right now is scaling one of our verticals above a certain point. So I've talked in the past about how businesses hit plateaus and then they get stuck there, but we're dealing with a plateau, not in the business, but we're dealing with a plateau inside one of the verticals.
John: So like one of our trades is so big that it needs additional infrastructure that we have yet to give it. And we're going back and forth. And we have been for a few months on exactly how that has to look. We're not totally decided. So that was one of our big things that we went there focusing on is how do we take this business that's at 5 million and how do we get it up to eight?
John: In the next year, is that possible? What are the infrastructure needs? What are the management needs? So we got some really good answers on that. And then warehousing was the other big one.
Jack Carr: Okay. Okay. And just out of curiosity with that vertical, what does that look like in terms of where do you view the big milestones that you have to reach to in a business, right?
Jack Carr: You have the 1 million milestone, which is obviously the first milestone in revenue. Where's the second and the third?
John: I think it's the same. When we've talked about plateaus in the past, it's like one, three, five, 10. And if you're in the, if you're in the business like if it's a, if it's its own vertical or if it's a, it's own business, like either one of those two things, I think they're roughly the same.
John: Cause you still run into the same thing. So like at 1 million, you need to learn how to get out of the truck. So we have the same thing. Like when we have a new greenfield service line that hit a million Hey we have to figure out how to get whoever's team leading that team to spend more time in the office.
John: Maybe not full time because it's only a million bucks. Sometime at 3 million, that's when you've got a full fledged manager and usually like an assistant, or you've got some delegation going on. At 5 million is where it's a multiple management team. And that's where we're finding ourselves with these trades.
John: We do have a couple of trades that have multi management. But they're laid out differently than this trade. So we have to, we're trying to figure out what is the fastest path to scale and how does, what does our team composition look like? So what we've been working on is we don't want assistant managers.
John: We don't want service install managers. We don't like that model, which is how most companies scale. Cause we feel like it's less efficient. So what we're trying to do. Is take our current, we call them trade managers, but they're basically ops managers over each vertical. And we're trying to put more and more people under them and then build out new roles underneath them to help support.
John: So maybe that's like supercharged dispatchers or selling techs that have extra authority. Or micro teams. So maybe it's like a, there's a selling tech that has three techs underneath him and all they do is install the selling techs work all day and then the selling tech is accountable for those texts.
John: So we're experimenting with a few different versions, but we got some clarity from a few of the companies that we visited on how to move this forward. And we think we can take it to 7 to 8 million. With the model that we're going to be trying.
Jack Carr: Yeah, I think that's incredibly interesting and something that we could probably do an entire episode on in the near future is this this new, I don't want to call it new wave, a new style of business, but it seems like what we're.
Jack Carr: We're noticing across industry, at least at our company, is that there's been a lot of changes to the traditional models, right? So there's additional models. You had a traditional organizational structure. You have a traditional, what does this tech do? What does this tech do? What does the dispatcher do?
Jack Carr: But now there's this cross pollination of, CSRs selling or CSRs doing duck cleaning sales. And I think Rich just posted a great thread on he's getting rid of the two hour window model and he's moved to on like his on demand or call on the way model. And I think that's extremely interesting moving forward, how the shift.
Jack Carr: Might take place in the near future.
John: Yeah. I think team sizes is something that people start running into pretty quick and you want to deal with it because one, it's hard to hire new ops managers and the best way to hire somebody near the top of the org chart is you promote them because they know your business, they know your values and you know that they get it.
John: So when you're dealing with. Hey, I need someone to run my plumbing company. The best people to run it are probably already in your company and maybe they're just in the wrong seat and they haven't been trained enough. But when you start, when some of these verticals start hitting 5 million, 10 million, it becomes, this is now its own thing.
John: This is a portion of our company, but plumbing did 9 million last year in total. And plumbing this year is probably gonna do 13 without any deals. And we're working on a deal that might get us up to 20. So that's a complicated business and that's just plumbing. That's just a portion of what we're doing here.
John: And it's hard to it's hard to hire in, it's hard to promote. So what we end up doing is we increase team sizes under the managers that are competent. And now we're just trying to find the best ways to support those managers. So instead of the, it used to be in the trades, you'd have one manager to six to eight techs.
John: You really can't do that anymore because overhead doesn't make sense. You can't be competitive when hiring managers. So now it's 16 to 20 techs per manager, which is big. That's a lot of lift. So now you need to figure out, okay, that's a lot of people. How can we give them leverage through technology or support staff?
Jack Carr: That's a great conversation. Do we want to keep going or do we want to jump into, I'm so excited. I know I love this, but I'm so excited to go for the businesses today. So you want to start today?
John: Yeah. Yeah. I'm amped up. I'm ready to go. Okay. So what I have brought forth today. Is a business unit. Now I'm looking for some genuine feedback here.
Jack Carr: Okay. And
John: For anyone that's on my team, just tune out what I'm about to say. So this is a business that I'm actually thinking about getting into. And we're thinking about it for a couple of different reasons. I'll. And it's a appliance repair. So that's what we're talking about getting into here.
John: So appliance repair, I'm going to get, I'm going to give a general like theory on why we've done stuff in the past. So we are a we've acquired companies, obviously that's certainly what we're known for, but just as frequently, we have launched new service lines. And new service lines. Some people in the trades, like I was talking to A friend earlier and he was like a service line in the trades is like you just go buy a power washer and suddenly you're in the power washing business like, yeah, maybe if you're unsophisticated for us, we're trying to figure out how to get a service line up to scale as fast as possible.
John: So how if I launch something today, how quickly can that be at 3 to 5 million? How quickly can it actually contribute meaningfully to what we're doing? And is that the highest and best use of our resources? Or do some of our active businesses, can they use those resources better? So we run what's called the BCG growth share matrix.
John: If you've ever heard of it, but it basically, it helps you identify your rising stars, your cash cows, your question marks. You're trying to figure out what to do with them and your dogs, like the things that should probably be put down. So we run that with all of our profit centers every quarter and we try to plug new potential ideas into it.
John: So that's our general theory. So we've greenfielded a lot of new services. So we, we started electric service inside our electrical company. We've started a remediation company. We've started a handyman company. We've launched drain cleaning. That was a new vertical for us. And obviously we've just as often bought verticals too.
John: When we think about getting into new verticals because we're a rollup, it's always, how does this help the whole what does this give us and how does this make us better as a company? So it's, you're typically sitting there thinking about your current capabilities. So when we launched remediation, our current capabilities where we have leads, we have three to five leads a week in water damage.
John: And we know that is a million dollar water remediation company. Let's do exactly. So appliance repair. I didn't invent this one. Chris Holland. Who's on Twitter. I think he's down in your market. He has an appliance repair business and I asked him about it. I was like, Hey, what's up? Do you guys are a hundred million dollar plumbing, HPC and electric company, and you have an appliance repair vertical walk me through this.
John: And his response was that it provides the other businesses leads, which, okay, that makes total sense to me. You pair it into your You add it on your membership and. You can hand out referrals all day long. That's what our existing businesses do. Like 20, 30 times a day. One of our trades is referring another one of our trades work like, Hey, water damage.
John: Hey, I need an electrician. Hey, we need a plumber all day long so I can get how appliance repair would build onto that because it's touching electrical, it's touching HVAC and it's touching plumbing.
Jack Carr: And are you seeing those currently coming in? Do you have a threshold for taking a look at. repair or remediation?
Jack Carr: What's the incoming request threshold that you have to hit to even think about opening or
John: buying? So usually two a week Is the number that's our magic number for when we feel like we can do something. It's not very sophisticated, but that's just always what it's been. So like when we launched a drain cleaning business before we invested a hundred grand in all of the drain cleaning stuff, we wanted to make sure that we could do two jets a week because jets are, that's a lot of money.
John: You have to have a truck, you have to spend 60 grand on a jetter. It's a whole thing. So once we could sell two jets a week, we invested in the equipment. We did that with excavation. Same thing. We didn't, we launched an excavation division. We started digging sewers before we invested anything in there. We subcontracted it.
John: We did two a week, we bought equipment, we made a division. Now we do 15 digs a week. Duck cleaning is the same thing. We hit two duck cleanings a week. We built out a team, we started training, we do this. So appliance repair is probably the same thing for us, where if we can see two leads a week, which I believe we already do, we're just not doing anything with them.
Jack Carr: Okay. Yeah. That's a great, that's a great threshold number. I don't know if I'm going to break down
John: the business a little bit here, cause I think I'm
Jack Carr: excited about this one. Cause that was the first company that I actually, Got to the very finish line with not to the finish line cause then I would have bought it, but two LOIs in and right at the very end and lost the business.
Jack Carr: So I love appliance repair. Like it was my first one that I almost got, and it's the one that got away. So yeah, I
John: think appliance repairs, I think appliance repairs are interesting because you can do it standalone or you can do it like how I'm describing as a portion of a platform. Okay. There's a couple of different segments inside appliance repair.
John: You have commercial which is like restaurants, or you're doing, it's a lot of refrigeration work. You're dealing with walk in coolers. You're dealing with that's like a thing you're doing vent cleaning in restaurants ice makers, all that stuff. Yeah. Problem as anything else in commercial, longer payment times specialization, the techs have to be more specialized than.
John: Somebody fixing my dryer here at home. And then there's just homes. There seems there's two buckets. There's a normal home and then there's premium homes. And that's just set up by, what type of appliances are we touching? Are we dealing with sub zero? Are we dealing with Viking or are we dealing with like my Honeywell downstairs?
John: My little French door thing that didn't cost, 10 grand. And then the third bucket is landlords, property management, landlords, a lot of just small repairs, trying to cost save basically and prevent them from trying to prevent them from replacing the appliance.
Jack Carr: Yeah. Just pure on pure volume on those ones.
Jack Carr: It sounds like.
John: Yeah. Yeah. So as you can imagine, each one of these has a different average ticket component. I didn't get it for commercial. But I would assume that's probably five to seven hundred in a premium in these sort of premium homes You can expect five to six hundred in normal homes. You'd expect two to three hundred I assume in landlords you're expecting like 150 to 250 somewhere in there It's really a volume game and that's I have to figure out How this matches with what we do because we don't have any other businesses like that where there's no business model Upsale, there's no like options to offer.
John: Like our whole thing is options. We're going to come in and we're going to offer you options. We're going to educate you on those options and then you get to choose. So it's ethical sales through education. This is we're a car mechanic and you just like wham, bam, knock them out, and if you've got a referral to send, you send it.
John: And I, I think that's a bit of a culture shift for us, but I do think it's interesting. The hardest dynamic. Is that you're dealing with a really easy to calculate an easy to stomach repair verse replace. So an HVAC repair verse replace like if your furnace is broken, you're going to do, you're going to, you're going to do something.
John: And you might do it with a competitor. You might do it with us. You might fix it and you might you might replace it. And the difference between those is usually very large, right? So like maybe your furnace is six grand or eight grand, and maybe the repair is four or 500 bucks. That's a really big difference, but either way, it's like, there's a reasonable amount of money either way.
John: In appliance repair, like an appliance might be 400 bucks. And I think that's hard to generate leads and it's hard to provide value to a customer. Like I've never called an appliance repair person in my life. Maybe I will one day, like we're in a house that has nice appliances now, but my first thought if my washer breaks is I'm going to replace that washer because washers are 600.
John: Like, why would I pay someone 200 to come and look at it? It just doesn't make a lot of sense. Whereas, With a water heater, that water heater might be two grand. I'm probably gonna pay somebody to come and look at it and tell me what's up.
Jack Carr: Exactly. And so this company that you're looking at it which category does it fall in or which I'm looking at two right
John: now.
John: Yeah. And one's commercial and one is a normal homes.
Jack Carr: Okay. Yeah. Cause the one that I was looking at was that the luxury sub zero Viking, all that, and that you hit the nail right on the head. That was their average ticket price was 650. I think the, they had to upcharge on the The truck fee to even come out there was like 250 bucks on a truck fee alone.
Jack Carr: Yeah, just because it's a 10, 000
John: stove. So it makes sense. Hey, this thing's down. Like no one is doing a repair versus replace before you walk in the door with HVAC usually. Because they don't know the price of what it's going to be. But with appliance, like that's a lead killer.
John: Is how many people are actually going to even have you out. Like our, this happened to me two weeks ago. My washer, my dryer broke. And my washer has been spotty for a couple months. I was like, you know what? Why go through the hassle of trying to find an appliance repair guy? I'm just going to buy two new pieces of equipment.
John: They were like nine years old anyway. So I was like, all right, yeah, sure. Let's be done with this. Yeah.
Jack Carr: The, when you look at the total price on something like that, when it gets up there, it's on those, the normal homes it's a lot less your average Maytag or your average, I'm trying to think of some of the brands that you would work on Maytag, Sony, something like that.
Jack Carr: You're just replacing that garage refrigerator that you have. You're just, Getting a new garage refrigerator. You're not paying more than the cost of a new one to have someone out there fixing it So that makes sense. I
John: think that's where I think that's where the other side of this business comes in which is the installation side.
John: So the installation side Is what it sounds like. And I think that's probably where a lot of leads come up from for the other divisions. Because again you're trying to one, provide value to your customer. If you're doing it as a part of a platform, if you're doing standalone, do whatever. But like the way I'm looking at this is I want my club membership to be extremely valuable.
John: I want people to need it and adding appliance repair to it helps. And When you're doing installs, that helps cross sell because when you're going to do an install, that's when you're going to find the bad water line, the bad gas line, the electric that needs work. So I think the installation is where you end up seeing a lot of the repairs.
John: I could be wrong on that, but I think service feeds into that. If you own it inside a platform where you go out, you determine that the best thing to do is replace it. So then while you're there. They offer electric plumbing and HVC or whatever the need is.
Jack Carr: Yeah. I could definitely see that how plumbing and electrical referrals would be a big part of that.
Jack Carr: So I think it's a great business. Like I said, I'm, you're a sucker. You're a sucker for it. Yeah, I was from the beginning. And, but I was a sucker for it as a standalone luxury item. So I am a bit weary of the everyday as a standalone but definitely as a package unit. I think that's a great as part of a portfolio that you already have this electrical in place.
Jack Carr: You already have this plumbing in place. You have the ability to run those extra calls and have that volume available for your customers.
John: Yeah we're trying to. That's a, I, that's a longer description. I was about to dive into like our theories. So the only I didn't dive too far into installation.
John: So installation is like one, someone's calling you up Hey, I need this installed, can you guys do it? That's certainly a component of it. The other is you get contracts from local hardware stores and you just install all day long, you just run those things down. And I think it's the same opportunity where.
John: They're not allowed to touch a gas line. I don't think they're not allowed to touch electric. They're not allowed to touch a bunch of stuff when they drop off appliances. So being able to have a bunch of verticals ready to go where you can easily cross sell, I think is I think it's huge.
Jack Carr: What do you view this company what do you view it running in your portfolio as how big can this get?
John: I don't think it's huge. I think it's say 10%. When one of the things we're trying to do, I ended up on it anyways. One of the things we're trying to do is figure out how to profitably generate leads.
Yeah,
John: so leads like you're used to paying for leads. Everyone's used to paying for leads. Is there a way that you can Get people into a funnel into some other funnel that turns into a profitable job That then gets them into this funnel.
John: So Duck cleaning is a great example. You've already got somebody in your club. You're already doing a tune up. You're already doing whatever Hey, let's put you onto this 70 gross margin service Drain jetting is similar. Water remediation is like the easiest example right now. Like we already have the capabilities.
John: We have the customers, we have all this stuff and we can put now profitably generate leads because we already own these leads, like they exist. This lead essentially cost us nothing because we already profited from that same lead inside plumbing. So we're double dipping on one lead. So we're trying to figure out how to do that.
John: leads get more expensive and as the market gets more competitive, we're trying to not just use Google or whatever as our lead gen. We're trying to buy lead gen in the form of other companies.
Jack Carr: Yeah, I've seen that before with another good one that we see in this area is there's a company that does this with gas fireplaces, right?
Jack Carr: Yeah. So it's not an HVAC specific item, but it's close enough that they cross over enough. Yeah. And the company owns a HVAC company and then they own a fireplace repair installation, everything company. And those, he was saying they get leads all the time back and forth. I think
John: that, that probably comes closer than you think because the amount of times you have to drop a vent for a new piece of equipment or the amount of times you're pulling out event and you find a bad chimney.
John: That's like a few times a week.
Jack Carr: Yeah, exactly. The
John: new chimneys are like 30 grand. So that makes a ton of sense. We actually tried to do that a couple of years ago. We tried to buy a a company that did that. There's only a few of them. So we ended up pulling off it cause we didn't think the TAM was big enough and we thought labor would be a real issue.
John: But like inside our remediation company, our net margin is above 50 percent because we're not buying leads. Like that leads already been double dipped. So it's a sweet scenario. So we're trying to figure out how to do more of that and control our lead flow tighter in a way that we can scale.
John: So if we can get an appliance repair company, if we can get a duck cleaning company, if we can do all these other things how do we let them cross sell to the point where they can scale on their own and our lead gen increases without just spending money on Google?
Jack Carr: I love it. And what. With the back to the appliance company, what do you view?
Jack Carr: What did he mention? What the average truck produces? I'm very curious. Cause it's a volume game, not a, yeah,
John: they do six to eight calls a day at an average ticket of 300.
Jack Carr: Wow. That is a lot of calls per day. A lot of calls. That's a logistical nightmare in itself. In terms of just not,
John: I was amazed when I was straight up amazed
Jack Carr: drive time killing you.
Jack Carr: If you're doing 16, you got a route, like crazy, you got a route yeah. Talk about back to what Rich was saying with that rather than doing time slots to just, have an open day where you can call on the way and reroute as necessary would be incredibly important.
Yeah,
Jack Carr: Yeah, 8 calls times 30 minutes.
Jack Carr: You're at 4 hours. Yeah. Oh, That sounds like a nightmare. Sweet. What, what do you view this business for the average user or the average?
John: I feel like it's generally easy to start. I don't know how easy they are to buy. That doesn't seem to be a ton of them, but I don't know. We had a plumber once 10 years ago.
John: He started his own at night and he hit 300 grand in sales in his first year. So I think it's generally easy to start the tough part. I just like anything else. It's a trade and it's a very specialized trade. So I think finding staff is tough. We are blessed to be in Cleveland, which is home of Fred's Appliance Academy, which is like the largest appliance Academy in the U S so everybody sends their guys to Fred's. So we have we have a nice talent pool to choose from here, but obviously most markets don't enjoy that.
Jack Carr: Yeah. And I wonder, like when you look at all HVAC equipment, it's all essentially the same, right? A furnace works like a furnace. They all have the same startup sequence for the most part.
Jack Carr: But when you're going from, different stovetops or different. Refrigeration. So I guess refrigerators probably work the same, but different style washers and dryers. There's so many appliances out there. I have to imagine that hiring for this would be extremely difficult. You really need someone who's technically advanced who can just be able to troubleshoot on the fly to some instance.
Jack Carr: Yeah. I think as an owner operator, I probably put this right in the middle. I think it's an easy one to, like you said, get up to about 300, 000, 500, 000. But the minute that you start trying to grow this to that 3 million mark is really where you run into some issues. It's heavy labor, especially if you're running, eight calls a day, multiple people, heavy labor, and then the only ones who own bigger companies like that you're going against, like in our area, Lee companies the big, owned by our governor they do appliance repair as well.
Jack Carr: I think it's the same as you mentioned. That's what you're looking into. And so you've run into this scenario where there's some really small guys and then there's the really big guys. And yeah. There's no one in between. So I think getting to that either sale point exit location or just running it as a owner operator, two or three guy crew, great lifestyle business.
Jack Carr: But I think it's about a five in terms of the beginning to middle. And then to get really big, I put it up there as a seven or eight. I think it's really hard.
John: Yeah. I don't think they ever get, I don't know.
Jack Carr: I've never seen a $10 million appliance repair only company, is what I'm saying.
John: Yeah. I don't think so either.
John: But the companies that make it a part of their platform, it's $10 million in there.
Jack Carr: Yeah, I agree. I think that the flipping it, if you were to build it to a million dollars or $2 million and then exit, send it off to a bigger company, I think that's a perfect strategy. Or trying to run it low, but trying to get it bigger than that lifestyle brand.
Jack Carr: Being like a four or 500, 000 company is just not going to happen. It's really difficult.
John: Yeah.
Jack Carr: Okay, sweet. What do you think? Where were you at on it?
John: I think I want to do it. So we're starting to place these, we're starting to place these like small bets, like I said, inside, Hey, what is something that's going to cross sell into the, to the other platforms that we can also scale and gain profit from?
John: How do we make advertising and lead gen a profit center instead of a cost center? Like we're trying to do this across every, like our call center. Can we make our call center a profit center? Yes. They can sell memberships. They can sell duck cleanings. They can up, they can sell other things.
John: Okay. How do we make advertising? Into a profit center instead of a cost center. That's what we're basically trying to do here. Yeah, I think I want to do it. I'm interested
Jack Carr: Okay, i'll definitely ask for an update on this because i'm really interested and invested
John: Yeah All right. What'd you bring for us today?
Jack Carr: Okay, so I can't name the business either because they asked for some anonymity But it is a towing company out of colorado very excited about this mostly because it's just It's a niche towing industry. It's not something you hear about a lot, but the numbers are really cool. So this guy, he started about four or five years ago and he's, he worked at a towing company said, Hey, that the typical tech thing, I can do this better, I'm going to do it myself.
Jack Carr: Went out there and started a B2B towing company. So there's essentially two, two types of towing companies, B2C and B2B. The B to C is your roadside assistance. Your car breaks down, you're on the side of the road, the towing company comes, grabs you, picks you up, takes you off. Great, you're, you're the hero, but typically very low margin on that.
Jack Carr: Compared to what he said, he noticed is there's a higher margin on B2B contracts. And so what he does is he goes to malls, RV parks, apartment complexes and says, Hey, you don't have to pay me anything. There's a contract for 0, but whenever you have somebody who's parked illegally, just give us a call 24 7.
Jack Carr: We'll come out and pick up the car. So. It's a great business. They they have 200 cars.
John: He's the guy we all dread. Exactly. He's the guy that if you park wrong, your ass will get towed and then you have to pay for it, get your car back.
Jack Carr: And so I was going to talk about that a little later. There's some downsides to the company, obviously.
Jack Carr: Before I get into the numbers and why they're so juicy the downsides is. Everybody dislikes seeing you the parking lot owner because it means that you're towing their car and it sucks. It's also 24 seven, right? 365. You are the ultimate service. Like you make your money in the middle of the night when you get that call to go
John: to the middle of the night, middle of a blizzard.
Jack Carr: That's you. At least it's not, the danger side, you're not on the side of the road or anything like that with semis flying by trying to load up a car, but still. You have to have I imagine this business, even though this guy, he's probably one 40, the nicest guy you've ever met.
Jack Carr: I, but I imagine the average tow truck driver, doing this as the neck tattoos and is the only, scary guy. Any who, so the numbers for the pricing breakdown are, so the average cost of a tow in their area is 250. So if someone gets towed, it costs about 250 to 500 for an average ticket for it to be picked up, depending on how far they had to tow it, where it came from and realistically it would be more, and it could be more depending on the state and where the towing company is working.
Jack Carr: So in Colorado specifically, they have maxes on what can be towed or assuming the price that you can pay, charge someone for towing them versus other states that don't have maxes or. They're different tiers and levels. And so with that average 250 tow he has four employees. Each employee does about 220, 000 to 250, 000 a truck per year.
Jack Carr: So not as good as, an HVAC truck or service plumbing truck, but still not terrible. And he specifically in five years has built just under a million dollar company. It does about seven to 800, 000. 200 contracts, 300 K net. So almost 30 percent margin on that net margin.
Yeah.
Jack Carr: But if it's like your other heavy expense asset business, right? So your septic, your water truck, the expensive part of this is the vehicle itself. And then the rest is labor. There's no parks. There's no, you're not paying for, there's no cogs on this. It's just, Gas to get out there and as long as you build it in a major city or buy it in a major city you, you can be running really close geographical location on those 200 contracts.
John: So when you're dealing with like most of your work is coming through agreements to keep people's parking lots empty. Is that's the general thing here?
Jack Carr: Correct. So you have like he gave the example. You have a Walmart, right? Walmart doesn't technically work because they allow for 24 7 parking, but a lot of supermarkets don't.
Jack Carr: And so someone goes there, they drop off their car for whatever reason. They park it overnight. That's not allowed. This service comes in, they'll grab that car this nighttime security guard will notice it in the back of the mall parking lot
John: and
Jack Carr: say, Hey, this isn't supposed to be here.
Jack Carr: Everybody's closed. Come pick it up.
John: That is interesting. I guess I never even knew how that worked. Okay. So it's contracts. So how much do they get paid per contract?
Jack Carr: So they don't get paid anything on the contractual base. They get only paid By the consumer or not the consumer, the tow we,
yeah.
Yeah. So
Jack Carr: now you want your car back, you parked it there, you went to TGI Fridays, you had one too many margaritas. You and you took an Uber home. Your car got towed and now you have to, and you're hungover. Stu, go down to the law and pick up your car and pay them 250 bucks for the very expensive night.
John: Oh my goodness.
Jack Carr: Does that make sense?
John: Yeah that's like wild though. I've never thought about that business ever.
Jack Carr: And so it's like this niche trucking business that I really, I love it in the sense that as an owner operator, I think it's an amazing business. You can go out, you can buy a truck for under a hundred thousand dollars, and then you just cold call all these new development businesses.
Jack Carr: New development apartment complexes, any kind of contractor, GC contractors on these kinds of places for commercial buildings. And you just build this kind of, it's the ultimate snowball in a sense that I would imagine it's extremely sticky as long as you. Yeah, you just put up the,
John: You just put up those signs.
John: That's in every parking lot around here. Hey, if your car got towed, go to this, you'll be towed here. That is fascinating.
Jack Carr: And then he said that there's some other items, right? So they also work with police pretty closely because of the accident and
John: stuff. Sure.
Jack Carr: Yeah.
Jack Carr: They'll do that on the side and then they also sell cars on the backend. So they'll wholesale off any cars that are picked up after a certain timeframe. So they make some good money on that too.
John: Like how long until they own your car?
Jack Carr: I don't know how long it was in Colorado, but I think there was some timeframe that they keep it in a lot.
Jack Carr: And then if you don't come and pick it up, which a lot of times what ends up happening is these people's car breakdown and it's not worth it. It's a 2, 000 car. And the person just said, I'm not going to deal with it. Left it, towed it. That's
John: crazy.
Jack Carr: And then yeah, they sell it off for scrap.
John: All right.
John: I'm on commercial truck trader.
Jack Carr: Cause you
John: were like, oh, it's a hundred under a hundred grand. I was like, bull bullshit. It is that's crazy. There's no, I
Jack Carr: looked up one. It literally
John: is. Here's one for $78,000.
Jack Carr: That's what I said. I thought, oh, this has to be like $150,000 truck, $200,000 truck.
Jack Carr: No, I was finding like 2000 seventeens with
Yeah.
Jack Carr: A hundred thousand miles on 'em for it. It's a doable business for an owner operator. Yeah. This isn't
John: even like a CDL. Cause that's what I thought at first, I guess I'm probably thinking of the big commercial stuff where, you've got to have a CDL, you're hauling vans, but these are not bad.
John: Okay. So you can just go get a car loan and you can just yank this thing around. This is awesome. Okay. I'm sold. This is a good one.
Jack Carr: Yeah, so I mean if you don't have
John: kids or you don't want to sleep with your spouse get one of these because you'll be towing at night
Jack Carr: Or when your kids are young and you're up anyway, you feed them a bottle you go out, feed them a
John: bottle, go take a couple tows
Jack Carr: Yeah, so I was talking to the guy said realistically it because he's an owner operator So it was him and a few hires.
Jack Carr: He hired a dispatcher, two dispatchers You one for night, one for day and yeah it was him, his brother. And then they hired a third truck driver. And once they learned how to use the equipment, it's really easy. No CDL, unless you're trying to pick up. Big stuff, big trucks and, yeah.
Jack Carr: Or RVs or things like that. But that's really, he said is all roadside assistance. Absolute and roadside assistance work. He said he cuts you to about a hundred k per truck per year, which I don't know if that, how true that is. I can't imagine that, but, maybe,
John: It's just volume. It's the same as appliance repair, right?
,
John: The goal should be 2,500 to five grand a day. So do you have 10 tows a day per truck?
Jack Carr: Yeah. My wonder is if going up against people like AAA who offer free towing and going up against that is really the hindrance on roadside assistance is so many insurance companies and so many kind of companies already offer some sort of free roadside assistance that it actually hinders owning a business in this industry.
John: Yeah. There's a, we just dealt with a tow situation. So one of our septic trucks, I don't know how it happened. It's an insurable loss, fortunately, but it had an equipment malfunction and it fell off the road and it's a septic truck. So a septic truck falling off the road is a very big deal. I think Brandon told me that they had 12 vehicles involved in getting this vehicle.
John: They had 12 tow trucks to get one vehicle back on and it was a 25, 000 tow.
Jack Carr: Yeah. So we talked about that as well. There's another industry he said to look into, which were the large size commercial tows and so that those ones, your average ticket is somewhere in that 12 to 15,
John: 000. Yeah. Yeah so this is a buddy of Brandon's and he, they do all the highway recovery.
John: So if a semi tips over, these guys are the one picking it up. Cause they're literally the only one with the vehicle that can pick up a semi or a septic truck apparently. So they have to dispatch this thing. They shut down a portion of the highway. They lift it up with a crane. It's crazy, but yeah, it's always got to do it.
John: I guess it's
Jack Carr: definitely a niche and I can't imagine there's too many people in there, but starting something like that. Yeah. I like the
John: crane truck is 1. 3 million, not to
Jack Carr: mention like crate being able to have that, licensing on a crane CDL, like just, Cruise of guys to stop and redirect road traffic.
Jack Carr: So all of that is just a logistical nightmare that they deserve every penny. They get, that's what I'm saying. Yeah.
John: Yeah. I just can't believe, like I wasn't there in purpose in person, but I got pictures of the septic truck off and I'm like, where did you even put 12? Vehicles. Like I don't even understand how that happened.
John: Did you have three cranes, but at first they couldn't even do it because the septic truck was full. So we had to have another septic truck come in and pick up the, like the sepage out of the tank. 'cause that added like an insane amount of late. Yeah, it was. Yeah. It's wild business.
Jack Carr: At least.
Jack Carr: Yeah. It wasn't a hazmat situation. He didn't have a. What was that? It's just poop. Yep. Just poop.
John: Everybody
Jack Carr: does. That's your backyard. It's definitely hazmat. Yeah. Yeah. Awesome, man. Where do you put that one? Like I said, I put that one, I think it's a great business for, like you said, single owner operator, young guys who want to hustle, build something, decent size.
Jack Carr: I think it's probably like a three. I think you could get into it pretty easily from if you're in a big city, from a,
John: I think as a side hustle, it's easy. I think as a business, it sounds hard, but
Jack Carr: yeah,
John: this is something you can just go buy a truck and start doing. And I think it's I would compare it to landscaping a little bit.
John: We're like land, landscaping also has a really low barrier to entry, but landscaping, I think has way more competition. Whereas, Tow trucks, and it's about the same, like for me to go whole hog on landscaping and get a truck, a trailer, mowers, all that stuff, I'm probably spending 40 to 50 grand. You can spend 60 to 80 grand here and you get a tow truck.
John: So i'm into it The inconvenience at night would be tough.
Jack Carr: But yeah, the only part exactly But now with technology too, you could hire overseas dispatchers one in the morning one at night So now yeah,
John: because customer service doesn't matter Like it's just, it's a pure dispatch pick up, go pick up and go can I get four done in a night?
John: This is like the ultimate uber Like uber driver should be thinking about doing this
Jack Carr: during the day Yeah, just start
John: doing this like you're already driving yeah
Jack Carr: How many miles is that 250 call on an uber versus 20 minutes on your truck? Otherwise, so you're already driving. I would do it. It
John: makes total sense to me.
Jack Carr: The only other thing I was wondering is I've never heard of a rollup for any kind of these, but that would be interesting to see is just someone going around and picking up all of these installing. Had imagined there's some efficiency in scaling, able to get trucks, cheaper, larger contracts with large art REITs or something of the nature, large chains where you go in, work with someone owns malls and say, Hey, There's
John: not a lot of rollups of any of this heavy asset stuff.
John: There's one big rollup of septic it's wind river. They're like the only, and any P just doesn't like heavy asset stuff. We're talking about 200, 000 for these big trucks to, yeah. To really get it going.
Jack Carr: Okay. So we're almost at time or we're over time actually, but I definitely wanted to share, this is not a terrible business of the week.
Jack Carr: I think it was, you're trying to bring terrible business of the week, but this is just a really cool business of the week that I think someone that we know should buy a hundred percent. Okay. Very exciting. Can you see this? Here we go. There we go.
Jack Carr: Can you see it now? Oh
John: God. Yeah.
Jack Carr: In flight food service, private jet catering. Private J catering, you partner with some high end restaurants in, in, in whatever area you're in. This is Knoxville, right? So that's why I came onto my plate. But realistically, alcohol, snacks, beverages, food, whatever, hot, cold meals for everyone.
Jack Carr: You partner with a few companies to make boxes. We used to do this at the winery all the time for groups. They would do box lunches and just really nice box lunches from the local businesses. You partner with them. And man, 50 percent SDE on total sales.
John: That is crazy.
Jack Carr: And there's nothing right.
Jack Carr: Zero inventory, almost no fixtures. And so all you're
John: doing is driving, like you're not making food. You're getting someone's food at a famous steakhouse locally or something, and you're bringing it to a plane. Yeah, I just think it's
Jack Carr: a delivery business. I think the clientele would be super fun.
Jack Carr: To make 200, 000 240, 000 in SDE on such a yeah driving food
John: like it. Yeah, this is like a glorified doordash
Jack Carr: Now we have the upgrade uber. This is the upgrade Currently drawing doordash just do this instead just
John: do this. This is way better.
Jack Carr: This is way better I think that'd be fun. Just, you get, like I said, you get to meet a bunch of clients who are flying private jets.
Jack Carr: You're working in that industry. It's gotta be a good time.
John: Yeah. Sounding good time. I like it. I'm into it. That's hilarious. All so we talked about I talked about appliance repair and my current distraction, and we talked about towing and we talked about an upgraded version of DoorDash.
John: This was a good episode. I liked these businesses a lot. These were fun, both relatively easy to start as side hustles, both challenging to scale probably, there's an easy way to flip it to a big guy trying to consolidate. I'm into it.
Jack Carr: Yeah. And if we want to bring on someone who does that let us know if you guys want us to bring on somebody who, who owns a, or owned a large appliance repair company.
Jack Carr: Cause like I said, that old owner and I from the appliance repair company got along really well and he, him and I still talk quite a bit. We could bring them on and talk to him too if everyone's interested, see what that looks like.
John: Yeah. Yeah. That'd be sweet.
Jack Carr: Cool. All right, man. I'll talk to you next week.
Jack Carr: Thanks
John: everybody. Stay tuned for next week.
Jack Carr: Adios.
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