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Owned and Operated continues its new LEGENDS series, focusing on the stories of the home service industry’s most successful entrepreneurs. John Wilson is joined by special guest Matt Ballard of Sunrise Mechanical, a $55M HVAC and plumbing company that works in small residential, commercial, and new construction. Matt discusses the balance between working in the two worlds of new construction and residential home services and how it led to being in over 6,000 homes in one year while also spending big dollars on equipment on the construction side. The two also discuss Matt’s plans for future vertical expansions and his formula for making the plumbing side of things explode.
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Episode Hosts: 🎤
John Wilson: https://x.com/WilsonCompanies
Jack Carr: https://x.com/thehvacjack
Episode Guest:
Matt Ballard: https://x.com/mballard83
Sunrise Mechanical: https://www.sunrisehvac.com
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Owned and Operated LEGENDS Matt Ballard Transcript
Matt Ballard: First six months has been crazy. So we're actually pacing to do right around 6, 000 homes this year. Oh, wow.
Matt Ballard: I was always taught from the time I was probably about 12 years old that you just never get into construction.
John: We had the same dad then.
Matt Ballard: Now this company, it's a beast. I think it was right between 50 and 55 million revenue. My ad spend right now is less than 6, 000 a month on the service business.
Matt Ballard: May we did 1. 5 million.
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John: Welcome back! To owned and operated. Today I've got my good friend Matt Ballard on with me. Welcome to the show, Matt. Hey, it's a pleasure to be here, Jon. Thanks for having me. This is gonna be fun. We actually, we just had a Facebook. I'm doing these things where we do like a Facebook live, which is, if you've never done one, it's very weird.
John: It's what I would imagine like Twitch streaming would be like, where you're basically just talking into the void. There are people there, but it, there's no face on the other side. And you came up in it. And this was like an hour ago. Because someone said they give like people preload questions, right?
John: So they send these questions in and it's Hey, and it can be like, how are you getting leads or how are you handling inventory or, whatever. So one of them was, can HVAC new construction ever work? And I was like, obviously, yes. Like it can work. I just have a bias against it, but obviously yes.
John: And I'm talking to my friend, Matt. Who does a lot of it? So I, it was just funny timing cause this was all of an hour ago. So I'd love it if you just warmed up the audience with. What you're doing out in Vegas.
Matt Ballard: Yeah. In December of last year, a business partner of mine, a guy named David Brown, accountant by trade but has a lot of operational experience in different construction and service related businesses.
Matt Ballard: We put together a deal to buy one of the largest residential new construction HVAC contractors in Southern Nevada, a company called Sunrise Mechanical. And so we actually closed that sale on December 29th 15 minutes before the fed closed, all the wires got sent out, stressful time, but we got the deal done and so we took over operational control on January 2nd.
Matt Ballard: Now this company, it's it's a beast. But David and I had both in the private equity world. Worked with new construction and residential before and had gotten a really good grasp on what we could do to make those businesses a little bit better. I was raised in heating and air.
Matt Ballard: My dad's an AC contractor. I was always taught from the time I was probably about 12 years old that you just never get into construction. Yeah. I had to eventually get over that. We had the same dad. Oh yeah. It was new constructions, garbage business. It's low margin. The builders string you along, they don't pay you properly.
Matt Ballard: And when they do pay you, it's 180 days past and they hold on to retention and it was just on in construction defect lawsuits and like everything else that I'd heard my entire life. And Eventually in that private equity space realized that like now that you can actually do some great things with new construction businesses.
Matt Ballard: It's not really what everybody portrays it to be. And so when we found this deal, we looked at it and said, this is a fantastic residential new construction business. It's profitable, it's systematized albeit antiquated systems, but very much Everything has a process. All the controls are in place and it's a very profitable business.
Matt Ballard: And so we were able to partner with a, an investment bank that helped fund some of the deal. We were able to, put that deal in place with two excellent operators. They were business partners. Hahn was more of the operational side and his partner, Bonnie Hiltz was on the finance side.
Matt Ballard: And they've got a really cool story to Bonnie started off as a CSR years and years ago, and Dave started off as a field foreman and they worked in the business for, I think it was almost 20 something years. And we're able to put a deal in place to buy out the founders of the company. And they worked at all sunrise.
Matt Ballard: Yeah. So sunrise technically is on its third ownership group right now. And yeah they worked as employees for a long time. We're able to put together a favorable deal, acquired the company themselves, and then make their exit. December of last year. And so we're super excited for them. They get to lift their moving forward in terms of retirement.
Matt Ballard: They worked really hard and they've done very well for themselves. And so it's like a pleasure for us that like that baton was passed on to us and it's our time to take it to the next level. And so we just saw a tremendous amount of opportunity with the business. And so we decided to go for it.
John: Could you give us a sense of scale? Of the business and like the departments.
Matt Ballard: Yeah. When we did the acquisition, technically we bought two separate legal entities, two businesses, Sunrise Mechanical, which is the new construction. And then we also bought Sunrise Service, which was a small residential HVAC, like commercial HVAC and plumbing business.
Matt Ballard: Now, when we acquired the companies Mechanical was doing. I think last year they did around 5, 200 new homes. And so revenue sitting right around like little over 50 million, I think it was right between 50 and 55 million revenue. And when we acquired the service business that they did about six and a half million in revenue last year.
Matt Ballard: Yeah. So both of them were. Good size operations. Obviously the construction side is pretty massive, but even the saver's business at 6 million revenue is a lot larger than most out there. And so it wasn't like we're, starting from nothing here.
John: I have more questions on that, but like, how's the first six months gone?
John: Like what's it looking like?
Matt Ballard: First six months has been crazy. We have we had a plan going into this thing of what we wanted to do and what we're going to be the priorities and everything. And like the number one priority was like, don't break anything. That's like working really well. As tempting as that is, because like you walk into a business where, we're still using, paper processes from geez, the early two thousands.
Matt Ballard: And the first thing that we're thinking is, technology and automation. But at the exact same time, we're like, we have something that's functioning so well. Yeah. It's really hard to go in there and provide the disruption there. And so on the mechanical business, it was don't screw anything up. And in the first six months we haven't screwed anything up and we're growing like crazy.
Matt Ballard: So we're actually pacing to do right around 6, 000 homes this year. The other focus on the new construction side has been on the the purchasing side. So I spent almost four years in the wholesale HVAC space. And worked as a product manager with manufacturers all over the country for a West Coast wholesaler had over 30 locations at the time.
Matt Ballard: And so I built a lot of relationships with these manufacturers, and I also built a lot of programs. For contractors and in specific, a few of them were larger residential new construction contractors. And so a lot of my focus on the mechanical side, when we first coming in was we just need to buy better.
Matt Ballard: And so we're able to go and renegotiate a lot of deals that we had in place with vendors that have significantly improved the bottom line, just, nothing else other than let's just spend less money and keep our pricing exactly the same. A lot of it too, has just been working with really great partners and having them see the vision that we're working toward.
Matt Ballard: And letting them know the type of growth rate that we're that we're achieving right now and just, finding those people that want to be a partner with them. And manufacturers like Carrier through Sigler, the wholesaler has been absolutely fantastic. I know you guys don't have AC Pro out where you are, but they're a wholesaler that we've expanded some business with.
Matt Ballard: Geary Pacific Supply has come in. In terms of wholesale vendors like residio has been fantastic with us in terms of like controls and zoning. A lot of really great improvements on the purchasing side has been the big lift on the construction business service. My partner, David basically told me, he's yeah, go crazy on service.
Matt Ballard: We can break anything that we need to. And so we've we've gone full throttle on service. And last year they did, a little over 6 million. We're pacing probably about 11 and a half to 12 this year. And so we've gone pretty hard on implementing change on the service business.
John: From a percentage of growth, is that faster than. I guess it is because that's a double. What was the low hanging or not low hanging, but what were the changes made in purchasing?
Matt Ballard: A lot of it is just knowing this probably sounds bad, but like having spent years in wholesale, like I know the programs that are out there.
Matt Ballard: Like I've seen the back end of what the big contractors are buying at. And so it's there was a lot of things that we were not being treated like a big contractor with. And so it was reaching out and saying, Hey, I know better, like I know that you have better programs out there on thermostats and zoning with other contractors that are doing significantly less volume than me.
Matt Ballard: So let's go ahead and get that in place. Another one too, is that I should disclose this is that I have a younger brother who's five years younger than me. His name's Nick Ballard. He's at Gary Pacific supply and he knows what we're doing here. And it's been just ridiculously hungry to try to earn.
Matt Ballard: Every ounce of business that he can. So he's outworked everybody else. And so it's I don't give him any special treatment. I don't give him any, information that he shouldn't have, but he comes in and hustles. And so it's like he, he pulled all of our duct board business. That's truckloads every single month, at 30, 000 to 40, 000 a load.
Matt Ballard: Oftentimes. And so it's he's pulled that business and he's pulled some duck sealant business and he's just picking apart the stuff that he knows that he can do really well with. And so having that relationship has been very good. He used to work for me in wholesale. And so we, we understand each other and I understand the goals he's trying to achieve and he understands what I'm trying to achieve.
Matt Ballard: And so there's a lot of a lot of benefit that comes from having that type of relationship. And so I don't want to short change him. I will say though, that Sometimes he's pretty mean to me. I know he's got information that he's not sharing, but obviously, he's got to do for his company too.
Matt Ballard: And so it's just kinda, it's funny. Some of the conversations I feel like you're not telling me anything. And he's shut up and just do what we need to do here. And it's we'll get it done. So he's been fantastic, other relationships to guys that I've known for a long time, cause I grew up in Vegas working this industry.
Matt Ballard: It'd been a long time since I've actually done anything contractor related here, but all those relationships are still there. And, I try as hard as I can to never burn a bridge with anybody, whatever possible, it's been great to get back in the mix and in Vegas as a contractor and get to see a lot of friends too, that I worked with a long time ago.
Matt Ballard: It's good to know people in the right places.
John: I think as you get larger, and I definitely didn't understand this when we were three or so, I don't know, just smaller in general vendors were fairly interchangeable. And you find out that's not the case once you get to a certain size and scale, because there has to be a trust because they're giving you so much money.
John: You have to customize the program. And they have to believe in what you're doing and it is a different adventure. Yeah. We and we've been really blessed with some vendors that have worked with me through that discovery of, Oh, this is more important than I thought. Oh yeah. Thanks for your patience, guys.
Matt Ballard: I'll give you an example of just one of those little things that sticks out in terms of what a real vendor relationship looks like one of my wholesalers Gary Pacific They've got a location. It's not too far from us. They missed the delivery date a time frame They were supposed to drop off a couple loads of duct board around like 1 30 in the afternoon and they messed up and they called and they were like, oh It's four o'clock now and they're like, Oh, we didn't make the delivery.
Matt Ballard: And I'm like, Oh yeah everybody's gone for the day. I don't have anybody to receive this at this point. They're like, can you drive a forklift? I'm like, my safety director knew that I was out there driving a forklift. You probably wouldn't be happy with me guys. We're stuck. The response was, give me a couple minutes.
Matt Ballard: I get a phone call back that says, Hey, I've got a forklift operator from one of our locations. We're going to have them drive over and take care of this for you.And we're going to receive, you're going to be able to receive that order today. It's we needed that stuff to start at, 5 a.m. the next morning, and they just came and took care of it for us. And so it's a lot of like little things like that. When you. Number one, have a vendor that's willing to acknowledge and apologize for the mistakes that they make and really do what it takes to make it right. And so it's it's a lot of little things like that we look for because, for the most part, we don't have big problems with vendors.
Matt Ballard: It's little hiccups and it's okay, yeah, sometimes a little hiccups can be painful. And so just happy that we have vendors like that are willing to come and do everything that they can to make it right.
John: Yeah. The buying process gets wild. I think, especially in HVAC, we were we're competing against a group now that they're just, it's a nationwide P firm or not even nationwide, but regional there, the rebate is wild.
John: The way they buy is wild. And the way that impacts their direct to consumer pricing is wild gives you a big competitive advantage. So I can, and especially in new construction, I can see. That'd be an important thing to tackle.
Matt Ballard: Absolutely. When we look at how much money we're spending on equipment every year, it's an astronomical number.
Matt Ballard: And so making sure that like we have the right programs in place are really important. Yeah, we've got great vendor partners that are, that have just got great programs for us. And they work with us as to figure out what our goals are, and then they help build programs around those things for us.
John: You've seen inside of a lot of new construction companies plumbing, HVAC. And obviously Sunrise is different if nothing else from a scale perspective. What size do you think these things start getting good? Or is it a size problem? Or what is the differentiating factor that makes the, that makes Sunrise good?
Matt Ballard: There's a couple of things that stand out. So scale all obviously helps, like smaller new construction businesses, they run on significantly tighter margins than we do. How dialed in your processes are. That's one thing that was extremely attractive with Sunrise is just how processized everything was so that we can plug people in and move them to different areas and different tasks, different job responsibilities, and the business still function and flows.
Matt Ballard: Relationship is another one. Having a good relationship with the builders, we're working with some nationwide builders like. Lennar and D. R. Horton K. B. and try point and all of these pretty large builders. And so having a good relationship and having a reputation is very valuable in the space because ultimately you look at the position that they're in.
Matt Ballard: Is they're trying to deliver a finished product to a customer as fast as they possibly can and still maintain the highest level of of standard that they can in terms of what that product looks like, there's other guys that we compete with that are significantly smaller than us that are significantly cheaper than us.
Matt Ballard: Yet we still hold a huge chunk of that market share. And a lot of that is related to the scale of the business, being able to handle the production. And two, having the reputation that, like the product that we're going to produce is the type of product that they're comfortable passing on to a consumer.
Matt Ballard: Construction businesses on a smaller scale are a little bit harder. You don't have as much buying power. Which is a big component to it. If I can buy 20 percent better than my competitor, who's half my size, that's a significant advantage. So that side, in terms of what we can do in the warehouse compared to what has to be done in the field, we have prefabrication processes on duct work and stuff like that.
Matt Ballard: And so we get to build a lot of stuff in a controlled environment, which significantly cuts down on the amount of time spent on site, throwing a bunch of guys up in the. Framed attic in the Las Vegas summer. That's brutal work. There's no real ventilation that's going on in there.
Matt Ballard: It's tough. And so prefabricating duct systems beforehand to where, instead of making 40 different duct connections in an attic, they're going to make eight or 10 something like that. That's a big component too, of how good we are at what we do and being able to maintain the type of margins that we do.
John: And obviously some of this is like a qualitative. Yeah. Yeah. Hey, we're process driven. That's quality. What size do you think It's, you are able to implement some of that
Matt Ballard: prior to this deal. Worked with a residential, new construction company in the south and they were sitting right around like that 15 to $20 million revenue mark in terms of new construction.
Matt Ballard: And it was right around there where. Stuff started making making a lot more sense financially smaller than that, it gets difficult, but when we start hitting that 15 to 20 million in revenue, you have the office support that you need you've got your field labor in place that's, being compensated fairly for the work that they're doing, producing a good product, you've got the buying power that you need to start playing around with some of the bigger guys.
Matt Ballard: If you're. If that happens to be small in your market, but like you start scaling properly. And again there's a lot of great backend benefits when you start hitting around that scale. And then, there's enough profit too, there to reinvest in the business, which is, I think another big thing on it.
Matt Ballard: It's because when you are playing on tighter margins, when you do get that little bit of profit at the end of the year, it's like, what are you going to do with it? You're going to go buy your lake house, or are you going to reinvest back into the operation and scale faster, and we have the ability here to reinvest back into the business considerably, which just makes us even more competitive moving forward.
John: I want to dive into what you've done over the past six months in service. You broke it, dude. You got to take the gloves off. What'd you guys get into?
Matt Ballard: We got into a service business that was, and no disrespect by this, but it was an afterthought here because, Oh yeah. It's 10 percent of the, yeah, like that.
Matt Ballard: It was like a necessary evil, I think to a certain extent, because you do so many homes. You have to do the war. You've got to take care of warranty. But then the other thing too, is like when we're doing new home construction and we've got tens, if not a hundred plus thousand thermostats sitting in homes in Las Vegas with our name and phone number on them, just from the homes that we have.
Matt Ballard: So it automatically starts generating service calls, with zero real marketing dollars going out. And so the business kind of just developed itself. And got to where it was on the back of one or two people. Like I've got an operations manager on the service side that is absolutely incredible.
Matt Ballard: One of the best that I've ever seen. And he was just here holding it all together by himself. For the most part of course he's not completely alone. He's got all that support, but he was the main driving factor in it. And so to come in and see a guy like that, it's I love working with with people that have that high talent and that high drive, just talking with him and saying, okay, so these are some of the things that we want to do.
Matt Ballard: What have you always wanted to do? He's been here like 15 years, realizing that we have good alignment on what we want to achieve. And this was a business with. On the service side with no formal sales training, no formal customer service training for the technicians, how to engage with customers, no call taking training no dispatching for profitability.
Matt Ballard: It was a hundred percent dispatching for convenience based on the geography or the location of the calls, no real. Compensation plan outside of hourly with like low commission on certain things like that. No real marketing presence. I think the funny thing that I still go back and laugh about is like when we were in due diligence and we realized that the ad spend was like 0.
Matt Ballard: 1. 2 percent of revenue or like, how's that even like, how's that even possible? So like virtually no advertising presence, websites that were ridiculously outdated and frankly owned by somebody else. And so we walked into this thing with a bunch of really great people that didn't have a whole lot of direction or a lot of skin in the game.
Matt Ballard: And so it was it was time to get started, like from day one, we came in and. And really got to work.
John: Obviously you're six months into changes. When you think of the big needle moving changes, what? What were they?
Matt Ballard: A lot of it was a compensation, just making sure that everybody knew that, Hey, we actually, we want you to make more money than you've ever made in your entire life before.
Matt Ballard: And we know that when we take care of our people, that they're going to turn around and take care of our customers. And so they needed to see that we weren't just like a couple of guys that showed up and bought this thing. And we're going to, suck it, drive cash and, slash and burn everywhere that we could.
Matt Ballard: And it's no, we've taken the exact opposite approach. As we've come in and said, okay, so what is, what does top compensation in our market, what does that look like for a service tech or for a selling tech or for install, and we wanted to make sure that we could get our people to that place. And so we changed the compensation structure.
Matt Ballard: There's a lot of people that I know might be critical of how we do that, but this, everybody was hourly based pay and we've kept that. And we've grown it and we've added commission on top of that. So all of our technicians, they get a healthy hourly base pay. And on top of that, they have bonus based on tasks that they're performing to in terms of like specific repairs, little spiffs that they're getting, and we're paying an aggressive commission.
Matt Ballard: On replacement systems. We're playing even more aggressively on a duck system, change outs and indoor air quality as well. I have no problem saying this, like we'll pay the technicians 15 percent on indoor air quality and duck system sales on top of their hourly that they get paid. It's pretty aggressive.
John: Yeah. But gross margin on what's gross margin on indoor air quality. In service 60, 60, 70. Yeah. Yeah. Cute.
Matt Ballard: Yeah. It's coming from like the plumber where it looks like, you guys make 60 plus 70 percent all the time, right?
John: Yeah. Yeah. It depends on the department, right? So like with and I am going to ask this of like dog when we had in plumbing, but there are sections of plumbing where that's a thing, right?
John: So Like pipelining underground really big ticket, maybe seven, 8, 000 average ticket and 70, 75 percent gross margin. But the risk of something bad going wrong with the pipelining is there's a big risk. You could destroy a sewer and you have to dig it up and it's a whole thing.
John: But yeah, besides that plumbing, usually like 55, 60%. Yeah. We seem to be pretty consistent around 55. So you're spending a ton of money on marketing and you don't know if it's working. So my friends over at Service Scalers, they're dropping this special promo for a 99 digital marketing audit. So that's going to cover your PPC, your SEO, your LSA.
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Matt Ballard: Compensation, getting our installers on piece rate pay was huge because we have fantastic installers on the HVAC side.
Matt Ballard: And and these guys do excellent work and they do it quickly. And so by getting more aggressive on the piece rate pay, our installers are making more money than they've ever made before. And so they're happy. We got install crews that are begging for, two installs a day. They want to work Saturdays and Sundays because, they, they've just got that hustle and the compensation's right for them.
John: Do the new construction teams ever touch the replacements for service?
Matt Ballard: In terms of like on a normal basis? No, our new construction guys, they're so busy with new construction that even if I wanted to I couldn't even pull anybody from there because they're that busy. We have been successful.
Matt Ballard: Cause we do a fair amount of like custom home projects as well. And so we've got a couple of different crews that do nothing but custom projects. And, those ones kind of wax and wane a little bit more than like the production type housing. And so there's been crunches like in May this year.
Matt Ballard: We were so busy, like we were out two and a half weeks on installs doing three to four installs a day. And so we had to actually pull some of our custom guys that weren't working consistently. And so I was able to pull four or five of them from there and just knock jobs out as fast as we could to try to get caught back up until we could hire properly in order to Take care of all the install demand that we had on the service business.
Matt Ballard: And so that's been like the one time where we've been in a crunch that we've been able to do that. And it was just like, it worked out perfectly because they were slow. They're custom guys, which means they're used to a little bit more of the retrofit type of stuff that they're doing. They're used to higher efficiency equipment, but they were a good fit to come in and bail us out in May.
Matt Ballard: Super blessed to have that flexibility. Other than that we do not pull back and forth, but the occasional service call, that's really about it though.
John: I also think with like how process driven you are, it would just make a mess.
Matt Ballard: Yeah. And it
John: would just make a total mess. Like they're like steps one through a hundred or whatever.
John: It would just. It would go bad when you're thinking about piece rate. I don't think we said this, but piece rate is like for the listener piece rate is a flat dollar amount for the task being installed. So if you have a Hey, this task. In my flat rate book is a thousand dollars to a customer.
John: Then maybe the flat rate compensation to the installer or technician is, a hundred bucks or 200 bucks, whatever it is, that's piece rate. So it's like flat rate, dollar pay normally not percentage. But when you're thinking about that for install HVAC, this has been a project that we've been working on.
John: Our HVAC is tripling this year, which I don't think I've talked to you yet this year, but. Dude, we're yeah, I know. I bothered Matt a lot trying to figure out HVAC. I don't think we're fully there yet, but we're farther than we were. And so we'll do 12 in HVAC this year. That's awesome. Which is crazy.
John: Cause we did four last year. Yeah that's
Matt Ballard: a hefty growth right there.
John: What we're finding in HVAC, like every move has so much leverage because the average ticket is so high. So like in plumbing and electric, Like our average ticket's very high, like close to best in class. But if I make a move, it's, it doesn't have as much leverage.
John: If I make, if I bring on like one more comfort advisor in HVAC and add more leads, like that's a 5 million change. Yeah. That's a big deal. As we've figured that out more it's it's really been interesting. As you started to unpack like piece rate, how did the implementation go?
John: Like How did you think about percentages? What did that look like?
Matt Ballard: So they were on a version of piece rate when we acquired it. And all we did was look through and evaluate and figure out that Hey, we're not paying top dollar for piece rate in this town. Install in Las Vegas is interesting because we're competing with some absolute.
Matt Ballard: Behemoths of HVAC. Gettles headquarters is
John: Vegas, right?
Matt Ballard: Yeah, Gettles here they're doing more installs than any, anybody. You got, yes, air conditioning and plumbing, which is a massive, fetch attack was a huge player. One of our biggest competitors in new construction has also got a beast of a service company, Sierra air conditioning, like they're great at what they do and they're bigger than us.
Matt Ballard: And so when we look and said, if we want the best installers, like we've got to, Create the environment where they want to be here. So we've got to pay them really well, and we've got to provide consistent work for them too, because Most of the good installers, what I've found, like these guys work harder than anybody that I've ever seen, like they're in the worst conditions ever.
Matt Ballard: And I got guys that are begging for two a days, give us two, two attic split systems a day. And it's Guys, you're rolling around in attics. They're 120, 130 plus degrees for six to eight hours sometimes. And you want to get out and go do another one. And there's yeah, give me one on Saturday and Sunday too.
Matt Ballard: And it's I haven't even talked to them. I'm like, do you guys like just hate your families? Because you want to do is install, but they also know. Or they've been conditioned a lot that, in Vegas, it's like you go hard in the summertime. And a lot of companies can't sustain that level of production.
Matt Ballard: They die off completely in September, October. And then those guys don't work, but maybe two days a week for a couple months. And so I love the attitude of that. They're just pushing. My only concern is that if we continue on this rate, like we're going to burn up because we're just going to be, it's, we're Yeah.
Matt Ballard: We're going to be busy through the the shoulder season as well.
John: What percentage of install gets paid out and what goes to lead versus apprentice? How are you guys thinking about that?
Matt Ballard: We don't do it based on a percentage. We do it based on the job type. So like a split say like a split gas electric system.
Matt Ballard: So condenser coil furnace horizontal in an attic, whether we sell a 15, a 17, 18 C like any of that stuff that all pays the same because it's the X it's the exact same work. The extra that it takes in terms of install. But when you get some of those really high efficiencies, the inverters with different controls and stuff like that, then obviously that takes a little bit more.
Matt Ballard: And so the incentive is a little bit higher. Yeah. The split most of the time is like a 60 40 split between lead and helper. Some of those are different though. It's like we have one install crew right now where we've got two lead guys. They want to work together. They don't want to helper. And they go 50, 50 on it and they do better work faster than anybody else.
Matt Ballard: And so they want multiple installs a day. They want the Saturdays, the Sunday installs, they want everything. And so like those guys have just been a massive blessing for us because they just want to go work and get stuff done and they don't seem to get tired, which is… Yeah.
John: What percentage of installs get finished in an eight hour time?
Matt Ballard: We're probably sitting at 80 plus percent of our installs are done within that time window. Very rarely do we have something that goes outside of like that normal time allowance that we see. And if we do, Yeah. We've usually added more to the job in terms of, additional dollars, because we know that it's either going to, we've got a real tight attic or, we've got other obstacles that we're going to have to overcome.
Matt Ballard: And so our guys are pretty good on that side of things to make sure that, on those really difficult jobs that, we've got enough revenue in there. And oftentimes we'll turn around and look at those things and. Pay those guys just a little bit more than their normal split too.
John: Do you think you're going to add in plumbing, electric? Do you think there's a future for this year?
Matt Ballard: So we have plumbing. It's a small plumbing department. I think they did about a million in revenue last year. It's, I think we're, they were sitting at about four guys, four plumbers. And so plumbing, we still don't know exactly like why Sunrise started doing plumbing.
Matt Ballard: Kind of the joke was, is like one of the owners needed some plumbing work done in his house. And so he's Hey, I've got better stuff. No, but the reality was, is that there was enough consistent demand for plumbing. With just like the service side of the business customers asking, Hey, do you do plumbing too, that they're like, yeah, let's just go ahead and open up a plumbing department.
Matt Ballard: So we do have plumbing. If our plumbers are listening to this, that they've heard this a million times is guys we love you. You are seen, but you are not the priority right now. So it's we got to get these big profit centers taken care of first. And, plumbing is doing well enough by itself.
Matt Ballard: We have a plumbing manager, a guy named Casey that does a great job. And it's just he just keeps going day over, day in, day out and making sure that the work gets done. But as soon as we finish up with a lot of the change that we've been focusing on the HVAC side, then plumbing is going to get the attention that it needs.
Matt Ballard: We know that, when we do it right. That plumbing is going to take off some fierce, just with the amount of customers that we have, because of the new construction side in particular, we've got tens of thousands of active customers that a lot of them have no idea that we even do plumbing.
Matt Ballard: And so as soon as they find out that we do plumbing and we can start doing some direct marketing to that's plumbing related, like we fully expect that plumbing is going to take off just like HVAC and service.
John: What do you think? Growth looks like when you're looking out five years, what do you see the levers?
John: I just have no concept of the levers on a new construction company. For me, it's more marketing, more texts, right?
Matt Ballard: Yeah. So new construction is really interesting because it's, Market driven, as much as I would like to go out and say, I'm going to grow new construction by 30 percent this year.
Matt Ballard: I can't force these builders to go buy land and build homes. We look at it as our growth is going to be whatever the market is at is growing at, and we'll probably hold a really tight percentage on that. But at the exact same time, we just want to be able to claw away little bits of business from some of the builders that we may not do any work with.
Matt Ballard: Or, claw some percentage back that we do where they're splitting it between us or two or three other HVAC businesses. And so part of that is just going in with the builders and expanding those relationships and letting them know that, Hey, we have the capabilities of taking on X amount of more projects that you guys are going to throw at us.
Matt Ballard: You guys know the work that we do, that we complete jobs on time, like you need us to. No, we're not the ones that are like slamming you with change orders constantly. And so they recognize that. And so we've been able to grow with a few of our builders, just taking a little bit of business from some of our competitors in the space.
Matt Ballard: And so that's how we look at the growth on the new construction side with the exception of customs, like custom homes is a huge market in Las Vegas, and we turn away so much custom homework as it is right now that, we've been talking about, okay that is actually something that we can go in.
Matt Ballard: And control a little bit more and grow that business. It's you know, it's obviously higher margin as well to just got to make sure that you're working with the right custom home builders. You can perform whatever they want you to on the schedule that they need you to make sure that you've got good back end office support that you don't.
Matt Ballard: Fall prey to lazy accounting and collecting on those jobs and billing properly. It's like, when we do that, like custom projects are fantastic for us. We don't see this, the same problems that, my dad would talk about or that other people in the space that would talk about in terms of having builders trying to screw you on the retention.
Matt Ballard: It's like we it's a non factor for us.
John: So in five years what do you, like, how do you envision? How do you envision Sunrise looking?
Matt Ballard: The easiest way to look at Sunrise in five years is very much a service growth. Like I said, new construction is going to grow with the market.
Matt Ballard: We know that we can continue to grab market share. We know that Vegas is not going to stop building homes for the foreseeable future. It's crazy. Like when we talk with builders, where they're talking about. Building it's nobody would want to live there. And it's it's a 45 minute commute.
Matt Ballard: And they're like people in Southern California compute or commute an hour and a half. And so this is this is nothing for them, you know? Yeah, so that's how we look at the growth on the mechanical side. The service side though, for us is just incredible. Realistically we could be doing 30 million in HVAC within the next four years.
Matt Ballard: Based off the rate that we're going at right now, the market is it's there. We can come take it. Yeah. It's going to keep growing. So it's just being super deliberate with what we're budgeting for and holding tight to that and making sure that we're hitting all our metrics month over month.
Matt Ballard: Making the course corrections as needed. But yeah we're pacing to be doing north of 30 million within the next four years. When do you think you cross a hundred? Realistically, we could cross a hundred within probably two and a half to three years, potentially with both business units combined there.
John: How much of an effect, do you think the custom homes has?
Matt Ballard: It can be huge because it's high ticket items. Custom homes, like these are expensive projects that we're doing. We're not doing 2000 square foot customs homes. We're doing 30, 000 square foot custom homes. And those are expensive projects.
Matt Ballard: And so we know that we can grow through that space on the construction side considerably. The biggest problem that we have there right now is just finding the right. Job format and the right install crews for them. And yeah, that's been probably the hardest positions to hire for is guys that can come in and do the custom work
John: That seems much more complicated than like the machine of Yeah.
John: Cause it's yeah, you really, you have to be a lot more deliberate. Whereas like in a machine process, you can send out 87 screws cause that's how many screws that job's going to take.
Matt Ballard: Yeah. We're not quite not quite there in terms of like level of granularity. Yeah.
John: But it is a totally different game on custom.
Matt Ballard: Honestly, like our biggest growth potentials in service, this thing is like a powder keg. Just waiting to explode here. We're lighting the fire and it's we're seeing some amazing things. May we did 1. 4 million in sales the may before they did. It was like right around like 600 K, the profit dollars that we're producing is very healthy.
Matt Ballard: Obviously on both sides of the business, but service is is very healthy. We know that we have the customer base to market to. My ad spend right now is less than 6, 000 a month on the service business. And most of it's just experimenting with different channels to see what we can do and to see what type of return we're getting.
Matt Ballard: And when we went into this thing, we were budgeting, five times the ad spend. Then what we're actually doing, and we're far exceeding what we budgeted for on the service side of the business. And so we're growing like crazy, we're having tons of success. I've got a lot of great people that are, I would say we're really happy with us up until Thursday of last week when some.
Matt Ballard: Moron decided it was a good idea to go live with ServiceTitan at the end of June in Las Vegas.
Matt Ballard: Oh so yeah, that, that was that was the fun of last week is we went live with ServiceTitan. We switched over from SuccessWare. It's pretty antiquated system. I was using it back in 2004 and not much used with it since then. And so that was a big priority is like we got, we had to get service tightened in place for these guys.
Matt Ballard: And we're feeling the pains that come along with that transition. Obviously timing wasn't the greatest. And I think once we get through it, they're all going to be super happy with with their user experience. And we have a lot of success that's already happening with it, but yeah, that was a big big pain point just recently
John: Is there and maybe this is already on the radar, but cause you have a super hack for it that I don't have, part of why HVAC has grown so aggressively for us is our membership base is growing like crazy and that's growing like crazy.
John: Cause plumbing and electric, we're growing. But now HVAC's growth is outpacing everybody because they get to double benefit at least in the Midwest. So are you able to give away a membership for the 6, 000 homes you're going to build this year?
Matt Ballard: Yeah we can do that. We offer like a free, Tune up, like safety check kind of thing with every new home.
Matt Ballard: And we've never historically tracked converting those into like true, what we call discount club. So it is something that we're going to be doing. One of the things I've set up for our mechanical side of the business, though. Within service Titan is just a lead form that, as they're engaging with consumers that, Hey, we've got this whole list of all this great stuff that we do train them on how to talk about it so that they can communicate effectively.
Matt Ballard: And then, Hey, if the customer is interested in something as simple as like a smart thermostat or air purification or water filtration or whatever that happens to be, Hey, here's your form that you fill out. We'll split the commission with you. And so we're incentivizing the guys on the construction side of the business that are doing the startups to really start engaging with consumers as well.
Matt Ballard: So that we can start really pushing that channel of what I look at as a marketing channel for us, all these cuts. Oh, a hundred percent. Yeah.
John: Yeah.
John: So, you have 6, 000 potential members. A year. Exactly. And if nothing else that could turn into plumbing or electric or that's such a ridiculous hack.
Matt Ballard: So we're doing that we have thousands of memberships as it is right now. It's just. Getting better with that. The other thing that I've been working on too is we just started a different membership that we hadn't offered before. And it's just an HVAC and plumbing combined membership.
Matt Ballard: The idea there was is that my plumbing department is so small in comparison to everything else. Yeah. Like I'm just going to use my HVAC customers to build my plumbing business. And so now, I added like 30 bucks to our discount club. I think is what it was 30 or 40, 40 bucks to the discount club.
Matt Ballard: Now every single HVAC discount club that we have, they also get a water flushing inspection as part of that service. I'm doing everything that I can to not have to put money into a lot of the traditional marketing channels. The. AdWords and LSA and all that type of stuff. Working our existing customer base and our mechanical customer base as our primary source of marketing right now, it's paying off really well.
John: Yeah, I would imagine. So that makes, that seems like the play. This was awesome, man. I appreciate you coming in and. Diving into this. I'm excited to come out and see this factory new construction, just pumping it out. It's impressive. It really is. I've never seen an operation that large. We have somebody in a new peer group I just joined and they have, I think that their parent company is like 600 million and I was like, what the heck that is that thing's probably a machine, but it's all, it's like commercial new construction.
John: So I think a totally different ballgame, but yeah. Really interesting. If people want to connect with you and hear more about it, where can they find you?
Matt Ballard: So like the easy answer is just email, Matt. Yeah. Sunrise HVAC. com. That's the easiest way. If I was really cool, like John, though, I'd say find me on X where I'm got like a whopping 200 followers or something like that too.
Matt Ballard: But I think I'm one of those two. I know. Yeah on X, I don't even know what my handle is or anything like that. But yeah, I will link it. I enjoy watching a lot of the fun stuff, the conversations there. I get a lot of DMS. I rarely post much, but yeah, X is also a great place to connect there as well.
John: Thanks for coming on today. This was awesome.
Matt Ballard: I appreciate you, John. Thank you.
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