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Join John Wilson on this special episode of 'Owned and Operated' as he dives into the world of home service businesses, focusing on plumbing, HVAC, and electric growth. It’s the end of the month and that means it’s time for John’s first Live Q&A with questions from the OaO private Facebook group! He answers pre-submitted questions about building business blueprints, recruiting for small operations, pricing during slow periods, and integrating new brands after acquisitions. Want to be there live for the next Q&A? Click here to join the Facebook group!
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John Wilson: @WilsonCompanies on Twitter
Jack Carr: @TheHVACJack on Twitter
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Owned and Operated Episode #127 Transcript
John: I'm John Wilson. Welcome to owned and operated twice a week. We talk about home service businesses, and if you're a home service entrepreneur, then this is going to be the show for you. We talk about our own business in residential plumbing, HVAC and electric. And we also talk about business models that we just find interesting.
John: Let's get into it.
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John: Okay welcome to My first live stream, this is kind of weird but we're gonna have a good time. I've got a list of questions that people sent in list, and I'm going to be reading through them. If you have any other questions as we sort of go through this feel free to throw it in comments and I'm going to try to answer them.
John: These were questions that were sort of pre populated by people over the past few weeks through the Facebook group or emails. So again, if you've got any others, throw them in and we will get them done. Okay. First question that we had, which was kind of interesting I would have loved to know who submitted some of these just cause I feel like I've either watched comments come through the Facebook group or or just know a lot of the people, but when you're sub 1 million, And everything is a priority.
John: How do you build a blueprint for the year to execute and grow appropriately? That's a good one. I was just talking with Tanner from Phoenix and Tanner just opened up a zoom franchise and he's in his first like couple of months of running his franchise. And he was, he was working on like average ticket and lead flow.
John: And one of the things that I love about home service in general is that almost all of your problems are going to come down to average ticket and lead flow. So Tanner, five, six months in, that was what he was, you know, that's what he was needing to focus on. And I remember last year, the business had grown a lot.
John: Our business has grown a lot. And we were like recruiting salespeople. We were hiring and we were trying to find like the right human beings to bring on board. And I remember talking to these, talking to a few people and it was like one was an HVAC sales. I think one was plumbing and we kept finding that the problem was still leaving flow and sales like consistently.
John: So I think most of the, like the blueprint, the thing to always focus on is, What's lead flow and what sales and how do you continually improve those things? And how do you make the vast majority of your efforts focused on lead flow and sales? And that's something that doesn't seem to go away. You know, I've talked to, I've talked to people smaller than us.
John: I've talked to people five times my size and Everything consistently comes back to those two, those two things. Like in, I'll give one more comment on this one, which was, I talked to a, I'm in this like group chat with a bunch of other CEOs and somebody asked the question like a month ago and it was like, what's the real business that you're in?
John: Whereas if you, if this part of your business didn't work your business would fail. And like the reality is for me is I'm in the sales and marketing business. Like that is what we do. And it just further pushes that point. So I don't think up to a billion dollars, I don't think it becomes anything other than sales and lead flow.
John: So that's the blueprint. We did have a few more people join. Thanks for joining. If you have any other questions, I'm just going through some of the pre-submitted ones, just. Toss them in the comments or any feedback on stuff as we answer. Otherwise, I'm just going through the pre-submitted and then we'll, you know, go from there.
John: Okay. What competitive advantages does a small operation under a million have over an established operation for recruiting? Another version of the question that they put in is why would a tech choose to work for Jack, my podcast co-host over Hiller, which is one of Jack's competitors. This is a tough one.
John: I think most of, so two things come to mind here. I want to first speak to the mentality of the question. So, I think a lot of people, myself included, believe that smaller operators are at a disadvantage. This does not mean that they're at a permanent disadvantage, it's just that they literally are at a disadvantage.
John: And we have to embrace that. Just like I'm at a disadvantage if I was competing against a hundred million dollar shop, someone else smaller than me is at a disadvantage compared to me. My pay is better. My benefits are better. Makes sense. Just like, you know Chris Hoffman's pay and benefits is better than mine.
John: So that's a problem that never goes away and there's no, there's no scaling out of that issue. And I'm saying that because I don't want, I don't want people to think that there's an excuse here. Because the issue can never be scaled out of, you have to figure it out. I find things that like, when a problem is never going to go away, I actually kind of like that because then there's, there's just no excuse.
John: Like you just have to do it. So as far as competitive advantages the big things that we hear from candidates when they're looking for smaller is one of two things. So the first one is I want to make an impact and that actually, that comes up more than you'd think. People want to be, The big fish in the pond, like they do, and they want to be the winner.
John: They want to be the big dog. We had somebody leave our company about a year ago. For that reason, he went from a top performer to a middle performer, and he didn't like that. Like, so he ended up going to a smaller shop, worse pay, and worse benefits for kind of like ego. I mean, you know, people want to be winners so they want to make an impact and to potentially the more obvious is less structured.
John: That's a good way of putting it a bad way of putting it is less accountability. So in a bigger company, like your, my, your, your micromanaged, like everything is measured. It takes a real adjustment for people from a smaller shop coming here because we have to explain like, Hey, we're a big company.
John: And the reason that we're big is because we care about everything. Like we care about every conversation with that homeowner. We care about your average ticket. We care about your number of options. We care about all the things we measure all the things. So sometimes that just rubs people the wrong way.
John: Like they're just not a good fit for it. So it's usually one of those two things that people end up at a smaller shop so they can make a bigger impact or they can be the big fish in the pond. And a bigger impact could be good. You know, I'm talking with a manager right now who would be coming from a larger shop, which is uncommon for us.
John: And he wants to make a bigger impact, which in this case is really good. Like we want him to make a bigger impact. So that's a, that's a win.
John: Next pre-submitted question. Again, if you've got any others, toss them in the chat.
John: If every day were a code red, aka just starting out. So code red, I'm going to clarify that. I believe this person must have been at the workshop that we had. So code red is schedules empty, basically. So, hey, there's nothing on the board for our service team, our install team. And for us, that means that we enact a series of decisions.
John: So maybe that's discounts, or maybe that's outbound calling or emails. There are a lot of different things that happen if we're in code red. So if every day we're a code red, Also known as just starting out. Would you allow it to impact your pricing? Assume you are also taking steps to resolve the underlying lead flow opportunity issue at the same time.
John: Basically 100%. So pricing is and should be dynamic. Obviously, we have a target price. We have a dollar that we can't go below. But basically what they're asking is like, can you use discounts to fill the schedule and like 100 percent with caution? So. Yes, we use discounts a lot and we call them we call them dollar days is one way to think about it.
John: So as long as we covered our overhead and we got 1 of gross, gross profit dollars, then that could be okay. So, you know, we usually will see dollar days in February or March, you know, when we're otherwise pretty slow. The phrase we use internally is a zero. A zero-dollar profit day is better than a zero-revenue day because you still need to pay rent.
John: You still need to pay, you know, payroll. You still have to cover things. So yeah, you can use pricing as a dynamic tool to drive demand. One of our standard, uh, annual decisions basically is we change service fee a lot. We go up and down with service fee and we deal with. Promo's very differently. So service fee the, the wrong way to think about a service fee is it's static.
John: Like, Hey, my service fee is a hundred dollars all the time, no matter what. And service fee should be dynamic based on demand because service fees, the purpose of a service fee isn't to get a hundred dollars. The purpose of a service fee is to reduce demand so that you get only buyers with intent.
John: Like that is the way to think about a service fee. So if you have no potential buyers on your schedule, then you reduce your service fee to get more potential buyers on your schedule. Your closing rates are going to go down because they are buyers with less intent. But your schedule will be full. So we use that one like crazy.
John: Another one that we do is promos. So we'll outbound call to our customers or we'll outbound SMS or email or whatever tool that we're going to use. What's up, Brad? Just saw you on there. And we'll change the pricing for promos as we like the more we slow down. Sometimes as low as free, like, Hey, we'll do a free water quality assessment.
John: Now the big thing that you need to cover when you're doing pricing, this is the with caution is one. It can't stay that way forever. Like if you dynamically went down, you have to dynamically go back up. And two, what happens when you get the lead? I was talking with someone the other day and they had reduced their pricing.
John: They've reduced their pricing to be competitive according to them. And the problem is if that's like your every day, then you have to change your cost structure too, because you can't, you can't run it 40 or 50 percent off resale forever. And if you don't have a good sales what's up rich.
John: If you don't have a good sales follow up. And you're driving like cheap promos or no service fee calls, but you don't have a really good sales training or sales process to turn that into a sale, then it's going to flop. So yes, you can use code red to impact pricing with caution. If you like what we talk about on our social media, on Twitter, on this podcast, then you should be signed up for our newsletter.
John: Go to owned and operated dot com where every Friday. We break down our business. We break down insights, things we're learning, things we're working on, and it's good stuff. Check it out. Owned and operated. com. Okay. I've got a question from Dennis. What's up, Dennis? Thanks for your question. Okay. Dennis is closing on an acquisition and it has seven trucks.
John: Dennis, I feel bad for you, dog. The newest one is 2006. Okay. Yeah. Talk about deferred CapEx. How should I think about replacing this small fleet? And in quotes, probably too small for enterprises to talk to me. Okay. Really good question. I found myself in the exact situation in 2018. We bought a company.
John: It had seven, eight. I don't remember vehicles. And that was ultimately the catalyst for us to move to enterprise. So, I think the sum of this question is like, how do we think about cycling vehicles? So that's probably how I'm going to answer this. So my, my first take is like, that sounds like a nightmare and you should replace them all as fast as you can.
John: Like a down truck is more than just the expense of the repair. A down truck is an opportunity cost. So in, in 2019,, or 2018, when we had all these Vehicles that we bought that were super old we kept having to swap trucks. That was like the daily thing is like, Oh, who's whose truck's going to be down.
John: And, you know, Terry, you take this truck and Randy, you take this truck and Jeff, you're in this one and we're going to swap and it ended up wasting Dozens of hours a week from like vehicle drop off and whatever. So the cost of an old truck is, is much more than just maintenance or downtime. It's the lost sales and lost opportunity that you have because it's always down.
John: So the way we think about cycling trucks now is 5 years or 100, 000 miles and we try to follow that pattern. Pretty religiously obviously can change a little bit by diesel or you know, gas and some of it changes with brand a little bit, but we still really like 5 years or 100, 000 miles. What we seem to consistently find is at 101, 000 miles.
John: I've got a transmission or an engine. And it's just a massive waste of seven grand. So, Dennis, the way you should be thinking about this is to replace it as fast as you can. You can start talking to a fleet manager like Enterprise or there are E fleets. There are a few others out there. It's not just enterprise.
John: You can start talking to them now. Typically they have a minimum of 20, but if you have a good story like we started working with enterprise at I think nine or 10 total vehicles, maybe a little bit more, but and their minimum was 20, but we told a good story and we also lived up to it, you know, five years later, we have a hundred.
John: So that helped. Good question. Okay
John: Brad, I'm going to tag in here and then we're going to move on to the next one. Brad asks, brand of trucks, Ford, Ram? We have a mix right now, which is a byproduct of COVID. Vehicles were just harder, so we have Chevys, Rams, Fords, and Toyotas.
John: Okay, I have a question here on Leadflow. Okay, question. How to assess if paid ads will increase sales profitably while deciding to acquire an old retail-oriented carpet and rug business? The seller hasn't done paid ads but gets organic leads from the website and social media, so only SEO and content marketing are focused.
John: This is a good one. At the beginning of the show, the question was, which I think is relevant. So I'm going to repeat it when you're sub 1 million and everything is a priority. How do you build a blueprint for the year to execute and grow appropriately? And my answer to that was everything from 0 revenue to a billion dollars of revenue in-home service should be focused on sales and marketing.
John: You need leads, you need to sell them. And a big way to measure that is what's your average ticket. So, the way to think about CAC, like customer acquisition cost, is what's your average ticket, and how much can I afford to spend to acquire that customer? He who can spend the most wins the most customers.
John: Doesn't mean you have to spend the most, but if you can spend the most then you're at a big advantage. So, I'm going to give an advantage in my own life. Our plumbing service ticket, Average ticket is in the mid to high 2000s. That's very high. I don't know if that's best in class, but it's high.
John: And if I'm running a conventional 10 percent of revenue target, then I could spend up to 250 to 290 to acquire that lead. If you compare that to an industry standard average ticket of like 500 and they can only spend 50 to acquire that lead, I'm going to win. I can buy more leads. I can do it profitably just because I have more money to spend to do it profitably.
John: So I really think repeating back that first part of the question, how do you assess if paid ads will increase sales profitably? You figure out the upside of your business first. So the question wasn't really about this, but I feel like it's relevant. It's like three things that you have to care about in a home service business.
John: And I'm going to put them in order of how I, of how you should probably think about it. Like one, what are your sales? Like, will the technician sell when they get out to the house? Two, will the call taker book the call? And three, how many leads are you going to get? And those are the three things that you should be thinking about.
John: And most people think about it the other way, where they're like, leads, call center, tech. But the problem is, if you think about it that way by the time that lead gets to that tech, he won't know what to do with it. He's not going to sell it. He's not going to turn it into whatever it could have been.
John: So. You have to work on the opposite of your business first, where you perfect your sales process or get a good, maybe not perfect, but like, if I give your tech a hundred leads, what will happen with a hundred leads? And if your average ticket is 2, 500, then like, yeah, spend a million dollars marketing, like you will be able to acquire customers profitably.
John: Okay.
John: Austin had a question. Thanks, Austin for the question. Do you ever get customer pushback when their friend one time paid less for the same service or is that overthinking it and we shouldn't care? Yeah, yeah, we've gotten that pushback. So, I would honestly say that that pushback has been a lot easier since COVID because material inflation and material prices were going so ridiculously fast that most people, it was sort of easy to explain.
John: And it was also just true. Like, Hey. Yeah, that water heater doubled in price in the last six months. So that's a lot of where the conversation goes. And now we use that same. That same thing that you just described as pushback, we think it becomes a tool to close. So yeah, your friend probably did pay less than one time.
John: Costs have increased a lot since COVID, you know, that we all see in the grocery store. And today, as I'm talking to you, this will likely be the best pricing that you're going to get in the next year as well. So we use that as a way to create urgency because everyone knows that inflation is real. And everyone knows that two years ago, things were cheaper, right?
John: So you can just use that same. Thing that everyone is aware of and use it as a tool to create urgency to close more sales today. So that's how I would encourage you to think about it Turn it around and turn it into a way to close an objection 100 percent Your friend did pay less if you wait a year like you will pay more than you will today.
John: That's a good one Thanks to Austin for the question. Okay, question from my pre-loaded list How do you go about folding a new brand into your existing one? Any tips and tricks for retaining their customers? I'm worried they wouldn't stay past a name change slash location move. Yeah, that is something that we have put a ridiculous amount of thought and energy into.
John: And I'll just tell you what we've done. And then we can sort of dive into, like, what worked, what didn't. So we've acquired nine businesses over the past six years, seven years, and we have name-changed all of them and location-changed all of them. And I would say that there hasn't been much of a connection of success between holding that brand for two or three years versus holding that brand for 30 days.
John: The fastest we've ever shut down a brand is like a week. And the slowest is Like two and a half years. It honestly is, is not much of a, we have not noticed a big disconnect for customers. I will say, I think the question is probably I think the way to think about this is the middle part, which is any tips or tricks for retaining their customers.
John: That's probably where all of this answer should be focused. The way to think about this is like, if I go And Rich, who I think is in here, he commented a few times, but like rich is who gave me sort of this thought. So like, if, if I gave you a customer list of, 10, 000 people tomorrow in your market of a competitor.
John: What, what would, or what could you do with it? And that is the way to think about it. Because if you are getting 10, 000 people, if you have nothing that you can do with that customer list then like, yeah, you're probably going to struggle to retain their customers. So how are you thinking about re-engagement?
John: How are you thinking about converting your customers and even internally, like, can you. Can you even retain your own customers, which I say that and you probably are thinking like, obviously, yes, we can do that. And I would bet that you probably can. So if you like, are you re-activating your customers?
John: Yeah. Zach just said with SMS or text a hundred percent. Are you doing it with email? Are you outbound calling? Are you sending postcards? Are you sending letters? Are you engaging your existing customers in any way? And if you have a good system around that, then you will probably do well with a prospect.
John: I do think that it. You will find more value unless you just started off in the last year, you will find more value in figuring out how to reactivate your existing customers or past customers than you would with a customer list. We only got good at like integrating in acquisitions customer list in the last 12 months.
John: And I've done nine of these. I would, Like this just became a skill set that we gained and a lot of that skill set was gained by learning how to reactivate my customers. And then it's just the same thing. You just change the words and you tell them that, you know, Hey, they were acquired.
John: Okay. I have a couple more questions. Thanks for adding them in. This is my first live event. This is very interesting to attempt to navigate here. All right. Lincoln just asked, have you had many employees leave after acquisition? Was that correlated to the timing of rebranding or other major changes?
John: So I'd say yes. No, it's dependent on the acquisition that we've done. The biggest struggle that we've had is when we bought culturally non-aligned businesses, so to give an example We bought our most extreme version which is about a 50 to 60 percent turnover which is a lot for us.
John: Of that acquisition was a new construction-based business, which like that is just not our culture. You know, we're a sales and marketing organization. So we struggled to bring those folks in and like be the place that they wanted to be. So we struggled with that and the major change in that example was we stopped doing new construction and they didn't like that.
John: And we did change management and we were able obviously to retain some great folks and some of those people are now our top performers, which is awesome. But we did have a lot of people leave from there. Most of our acquisitions have had a very low turnover rate. And typically we can just offer better pay and better benefits.
John: And that's only gotten better with time as we've had as we've created best in class operations. That was a good question. Thanks, Lincoln. Brad asked a question about our outbound strategy, which we just talked about a few seconds ago with retaining your existing customers. Yeah. So our outbound strategy, we do a few different things with outbounds.
John: And I will say that this is something that I feel like we are a five out of 10 app. And we're making a lot of efforts to become 10 out of 10. So we're, we're really excited about our outbound strategy. The big. I would say the initial unlock was literally just calling people, which doesn't sound that complicated.
John: And in some ways, it's not, in some ways it is. So last year we just created, a call out structure and that was it. Like, yeah, there's some emails, a little bit of SMS. We weren't even really doing that at the time. The big focus was how do we just touch our entire customer list every quarter? Okay.
John: And that became the focus again. I got that idea from rich who's who's on here. So I, I thank rich for helping with that. So what we did is we hired folks called SDRs and all that they do all day is outbound. They outbound about 100 to 120 people a day. They leave voicemails and they book appointments and Right now there are three and then our call takers will flip to outbound if there's not enough inbounds.
John: But obviously what this takes is a large existing customer base because we are calling our existing customer base and offering them promos. So that's the sort of how we did it. What we do when we get out them on the phone is we offer them promos. And it's typically driven by what is the slow department that day or week.
John: So if electric slow, then, Hey, we're going to offer like a, it's a Bogo. So, buy two out, let's get one. If plumbing is slow, then it's a water heater flush. And if HVAC is slow, it's a discount tune up. We have tried a ton of different promos, but those are just the ones that have worked the best for us. Consistently.
John: Like, other ones have worked, but those ones we consistently are able to drive results from. Okay, I'm gonna do one more, and then I think we are at time. Okay,
John: I've got a topical one. I run a pool service business out in LA. I'm wondering if it's a good industry. I, I'm not sure that I'm the right person to answer that first part. As the ticket size is on the lower end. Okay, maybe I can answer that. But has a recurring part to it. Have you seen any large pool businesses?
John: Pool service businesses, 10 million plus not personally. I have seen there's a 7 million in my market, which is kind of interesting. I think the thing to touch here, and this is back to like average ticket. This is the right way to be thinking about. Potential target is what is the average ticket and what's the TAM and like, who is the biggest in your space?
John: That's the way we like to think about opportunities. Or if we're like, if we're thinking about a new market or a new service line. It's sort of the same of like, who are we competing against and what's the average ticket? So we were looking at appliance repair a few, like a year ago. And average ticket was really low but it could be lead gen for our existing business lines and there's no real competitors.
John: So that makes it attractive ish. The the average tickets kind of low. So that's, it's the same thing as pool. Really? We're like, it's a large ticket and everybody's small. Yeah. So I think a lot of this is determined by where you are. I'm back to his pool business. A lot of this is determined by where you are.
John: I definitely think it's the right way to be thinking about it. What's your average ticket? How big can companies get? That's one of the many reasons I love plumbing HVAC and electric is because you Average tickets big and you can get a business to sort of whatever you want. There's plenty of examples of companies now above 100 million in our industry, which we think is awesome.
John: This I think wraps up our time today. I appreciate everybody's engagement. This was an interesting first round of all live. I had fun and we'll announce when the next one is. And if you didn't get your questions just send them over and I can't wait to sort of do the next one. This was fun.
John: Thanks everybody. Thanks for tuning in to owned and operated the podcast for home service entrepreneurs. If you enjoyed today's episode, please hit the like button and subscribe to the podcast. If you have any questions or topics you'd like us to cover, feel free to reach out. You can find me on Twitter at at Wilson companies.
John: I'll see you next time.
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