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It’s June Q&A time, as John tackles strategies for increasing revenue per plumber and HVAC technician, tracking key performance indicators (KPIs), and tips for managing warehouse inventory and consignment. He’ll also get into hiring team leads, implementing incentive-based compensation plans, rebranding strategies after acquisitions, and navigating successful business models like new construction. Want to make sure you’re live for the next livestream?
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John Wilson: @WilsonCompanies on Twitter
Jack Carr: @TheHVACJack on Twitter
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John Wilson, CEO of Wilson Companies
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Owned and Operated Episode 132 Transcript
John: First question, what is the fastest way to increase the revenue generated by each plumber? There's a lot to unpack here. What are the top KPIs I need to track daily? That's how we think about it. Consignment anyone can do. Like my quick take is if I bought a 10 million dollar shop, we would probably keep the brand for a year or two.
John: We are going to get started
John: recently. We've been buying off supply house. com and we've been able to get plumbing, HVAC and electrical stuff off there. And my biggest concern was timeliness. Hey, if I need this thing pretty quick, can I get it? And you for sure can. So that was awesome. So deliveries are fast. They ship coast to coast, and you can call them and you can get expert support with real people, which is awesome.
John: So check out supplyhouse.com for buying the stuff you need.
John: For those just joining we're about to start us off. The way these work is I just roll through a list of pre submitted questions. Today, I've got a decent sized list that's been prepared, so this should be fun. And I'm just going to go through them. If you have any questions live, you to just add a comment.
John: And then last time we were able to get to most of them. So I think we should be able to do the same thing here today. So we are going to get started. Before we get going, I just want to do a quick plug and I'll talk about it again later on, but we do have our next breaking 5 million workshop September 10th to the 12th here at our shop in Stowe, Ohio.
John: So we'd love to have you check out the website owned and operated. com. For more details there. Good afternoon, Brandon and Jeff. Okay first question. What is the fastest way to increase the revenue generated by each plumber? Right now, it seems each one generates around 200, 000 a year. Yeah Revenue per truck.
John: There's a lot to unpack here and I would, I always caution everybody when they're talking about revenue per truck to understand the operations of the business that they're talking about. So I'm going to give an example. So I can say that our service plumbers do a million dollars of revenue each.
John: And I can also say that in plumbing, our trucks do about a half a million dollars each of revenue production. And both of those things would be true, which obviously those are contrasting numbers. So I just really want to be on the same page here. So like when you've got a service when you're measuring output, the things that matter are you selling and performing the work or are you just selling Or just performing the work.
John: And those are two different models to focus on. Regardless, 200, 000 is not great either way. So a couple of different things to look at on raising revenue per truck, biggest ones, average ticket. That's always going to be the biggest way to make a move inside plumbing, electric, HVAC, really all of it.
John: It's all going to be based on average ticket. So if your average ticket is You know, 300, then you'll probably generate 200, 000 a year per truck. If your average ticket is 2, 000, you'll probably average a million dollars. So the fastest way would be increasing average ticket. And the way to increase average ticket is number of options, quality of those options and a lot of service and sales training.
John: So this came up maybe a month ago. I was talking with someone Sean Horn he's in the Facebook group and his average ticket was a little bit lower than he wanted. And They just started focusing on options. So Hey, what are your options? You guys are cleaning drains. What are you offering when you're cleaning those drains?
John: Is there a camera? Is there an upsell? Are you talking about, big replacements, but in order to get a high average ticket, you have to be quoting expensive things. That would be the fastest way, but I also want to make sure, we're talking about the same things. So as the options and quoting big things is the biggest way to.
John: Increase revenue generated. Next question is what are the top KPIs I need to track daily for technicians and installers in HVAC? So obviously two different roles, but we'll dive into them. We'll dive into each of them. So for technicians the things that we're going to care about, they're similar to the answer to the first one.
John: So what's our average ticket? What's our number of options? So we want three options on everything we want. I think it's 500 average ticket. We measure it in sold hours and close rate. So those are the big things that we measure in any service department. Really for install, what we're measuring is on time.
John: So did you get the job done in the time that we expected it to get done the time that we sold it for and rate of callback we also measure just gross dollars produced, and I think that this gross dollars produced is a missed one. And I think this happens later.
John: So the, as the business grows, like the fundamental parts of your business, you get better and better at it, which means the results of those departments are more predictable. Hey, I know that marketing is going to drive 500 calls a day or a hundred calls a day or, whatever your reality is.
John: And I know that our book rate on average is 80 percent or 90 percent or whatever that's going to be. Um, a lot of people, when they think about measuring install, they don't think about measuring revenue because in their mind, that's a sales problem. Oh, we would install more if we sold more, which is correct.
John: But as you get better at service and sales, you will sell more. That will become a self fulfilling prophecy and the results of your service and sales are going to be fairly predictable. You're going to sell a hundred thousand dollars a day or 10, 000 a day, or again, whatever your reality is.
John: Installed revenue in amount completed is important. Because it shows a level of productivity out of that team. So that one's I, that's one I see missed a lot because people give an excuse for it because they haven't dialed in their sales process yet.
John: Next question. How do you hire a team lead? Is it just a skillset? What kind of questions do you ask in an interview and where do you find them? So team leads, I'm going to define that really quick. So team leads Are typically hands on the tools producers still but they are technical experts and they're if the manager's here, the team lead is here, and then the rest of the team is here.
John: The team will call those team leads for technical questions or, we use them in different capacities in each department. Yeah, so that's team leads. So for the most part, what we're looking for in team leads is going to be skill set experience and demeanor. Like we want to be thinking of team leads as future leaders and future managers in our organization.
John: And. Our best team leads have become that they've become a manager of some type and they, they get identified to be that that candidate because they are coachable or they, sorry, they like to coach, like they have a coaching mindset. They'll take the time to teach an apprentice something they'll make sure that whoever they're working with really understands what they're doing.
John: And. I think that is probably the most important trait. We do want them to be experienced, but like we've had team leads anywhere from five years of experience to 25, really just depending on demeanor. And are they willing to coach? Because that's the position in our mind is you have to be willing to coach because we see that as our future leadership bench and we want to be able to raise them up into a a leader.
John: And in order for them to be a leader. Like their job is coaching. So that's probably the big one. Besides that, they should obviously know the trade. They are a technical expert, still hands on the tools. Now we do run a team lead or super in it. A lot of our teams and those teams could be field or it could be administrative.
John: So there are call center leads. We've just created a dispatcher lead position. We'll have a install coordination lead position and then they report up to a manager above them. And I'm just saying that because that lead concept you can run across most departments in your company.
John: Okay. How do you pay your tax? Hourly salary performance pay. I've heard a lot about performance pay from Tommy Mello and wondered what dollar value you assigned to each task for install team versus service tech. So
John: compensation is complicated. I think there's a lot, I think there's a lot to unpack here. I think it, it is hard to. The only way to go wrong in compensation, in my mind, is not having any incentive at all. If you have, if there's no incentive for someone to perform then you are doing it wrong. And I know that we all maybe want to think that That everyone's just going to go do their thing without a carrot.
John: But this is to me, this is about creating win wins. So I'm going to give my quick philosophy on comp and then I'll give this answer. But the business, one of the first changes that we made in 2016, when we were a eight person shop doing a million dollars of revenue was adding incentive compensation.
John: And I see that change as one of the most important things that I've ever done in my career was just adding an incentive to our compensation. And by doing that, it be, it turned into no longer just me being the one growing the business, which was awesome, right? Because now everyone wants revenue to increase.
John: And. Before that, we were a fairly like closed book shop. So we weren't really talking about revenue. We weren't talking about goals. We weren't talking about anything and being able to talk openly about that really changed the game for us, obviously small business at the time, but it did make a huge impact.
John: So the way we pay is we have a few different pay models. We have hourly. There's very few people just hourly. We do have that in install. But everyone is on some type of incentive basically. So it's going to be an hourly plus structure, which is usually a base comp that is dependent on their years of tenure in the trade, plus a percentage of commission on what they sell.
John: So that's going to balance anywhere from three and a half to seven percent, depending on what it is they sell and the volume that they've given that month. So it increases the more that you sell. Maybe we can share that will in the next newsletter. We also have straight performance pay, which is a percentage of performance.
John: And we had people on this in sales and in install the install guys love it. One of the challenges that you end up having later on in your business is once you add incentive pay, the easiest place to add incentive pay is on sales because they're selling stuff. So that's simple, right? The complicated one is on install.
John: And what we had and still have a little bit, but we've really worked to improve it a lot is is there's a, it's a culture problem where suddenly the service guys are making all of the money, right? Because they're making the, their full commission or their commission plus their hourly base and the installers are just installing.
John: And it's just hourly at least how we used to do it. We've been introducing more performance pay. Into install, and this is back to my comment earlier of why measuring revenue for installers is important. You have to, you got to pay on something. So we do have installers that are on full percentage and they make a lot of money and it's really great.
John: So we're excited about that because quality installers are hard to find. The back half of that question is how do you assign dollars to each task? It's really percentage based on whatever gross margin you're aiming for. So most of what we look for is we want 10 percent to go to the install, 10 percent to go to the sale.
John: That's how we think about it. We want 20 percent loaded labor across our P and L. Sometimes that goes up, sometimes that goes down depending on the trade or that product or whatever is, whatever it is that we're installing. That said other companies obviously can have different gross margin profiles than we do.
John: But that's what we want ours to look like. So if you wanted your labor to be 30%, maybe the sale is 12 percent and the install is 18. You just have to figure it out based on what you're looking for. You can assign straight dollars, that's just percentage, but you just assign straight dollars off of the percentage.
John: Okay,
John: what was the name of the company that John used to subscribe to that had policies and procedures, etc. For service companies of various sizes. I think this is asking about a certain path. I think he's asking about certain path. I'll give a longer answer here. I, the plumbing, HVAC, and electrical have a really unique Offering in best practices groups that I don't think exists in every industry.
John: And I know that I really forget that and forget how fortunate we are, we have next star and we have certain path and there's praxis and I think blue collar success group, there's a number of them that are really great. And. Certain path was really effective for us growing from that, like 3 million mark on and next hour has been hugely impactful for us going from 20 million on we see next stars, the solution to get to a hundred and I don't know what happens after that, but so that certain path was the name of it.
John: And I do recommend that everyone get in a best practices group of some type. It is very impactful. Okay, next one. How did you find your call center talent? Any particular recruiting firm or resources you recommend? I would love to know who asked that because I'm curious who used a recruiting firm for call center.
John: Yeah, so call center call center. There's a lot of moving parts in call center. And typically what we've experienced is call center has a higher percentage of turnover than the rest of the organization. That's not something we want. That's not something we like. That is just something that we've experienced.
John: Um, all that to say you get a lot of reps in for hiring call center because you have to you have to figure it out and you have to figure out more often than you do any other position in your company really. We think of call center in a couple different ways. We have call center in office and we have call center remote call center in office is what it sounds like.
John: We're in office 7 days a week from, I think, 6 in the morning to 8 or 9 at night. And then we also have offshore talent that pick up phones overflow and overnight 7 days a week. We find call center talent. It's really basic. We go through indeed. We interview a lot and hire the folks that we think.
John: I think a better version of this question would be like, what do you look for in call center talent? That's something that we're trying to hone in a lot right now. For the, and I'll answer that, but for the remote So for in person, we just use Indeed if they're overseas talent, then we will use Upwork or we will use onlinejobs.
John: ph we have always directly recruited. We've never gone through a recruitment firm for our overseas talent. I'm not sure why we just always recruited directly since we started hiring overseas five years ago. What you look for in call center talent would be high level of urgency. Kind that's important and what we're starting to want more than we would have thought is like sales passion sales hunger.
John: We're starting to think of call center as a more of a part of our sales organization than we have before. And I would highly recommend I'm going to plug the pod, but, um, we just had Tyson on. From Avoca and he straight up blew my mind. Like I sent the, I've been sending the episode to like people on the team.
John: Because the way he described call right. CSR and the way he was describing comp plans. Like that conversation we have not had before on air and it was really good. So we're gonna, we're going to change a lot of what we're doing from interviewing Tyson last week which is fun.
John: Okay. I'm preparing to submit an LOI, which is a letter of intent to buy a company for a small, 1. 7 million of revenue, EBITDA, six full time employees, commercial HVAC business. What are a few of the top things to look for and or questions to ask during due diligence? Yeah, good question. What I would be concerned about In this type of business is going to be a customer concentration.
John: Like what is the biggest customer that they have and what's the percentage of revenue and do that for the top 10 customers. What do service agreements look like? What exposure do they have to new construction? If any, if it's not new construction, what can, what exposure do they have to bid work? Brokers know to not say construction, new construction now.
John: But like bid work might as well be the same. It's a very low gross margin and that would be the next one, which is what's gross margin. If gross margin is 50 percent and up, yeah this could be good. If gross margin is 30%, then I would not touch it. But that's just me. Like they're, it's just the type of business that I want to run.
John: So that's what I would be looking for. And obviously are they union or are they not? And are you capable of running a union shop? If they are, that would be, that'd be a really big one. Okay. Any guidance or best practice resource for converting from time and materials to flat rate pricing in HVAC?
John: Man, that's a good one. That's been a couple years. , aside from just doing it. Okay, so there's a couple different softwares out there. Out there. I haven't we haven't had to shop it in years. Okay. So the new flat rate has a program. That was 1 of the initial attractions of certain path when we got onto it 7, 8 years ago, 6 years ago, whenever that was, is they did have a flat rate book and we really struggled with that at that time.
John: So that was really helpful. And then ServiceTitan we're using ServiceTitan book now, which is fine. As far, so those are the resources. Those three besides, I, besides that, I think you can just Google it. I honestly think that was six years ago and there's probably been a lot of improvements since the last time I shopped for it.
John: As far as guidance I really do think just do it. The team's going to get used to it pretty quick. It sounds like a big deal, but it's probably not as big of a deal as you think your customers won't notice it. The team will notice it. And the, the biggest change of switching from hourly to flat rate is your billable rate.
John: Adjust normally quite a bit. So if you're going from 100 an hour time material to 200 or 300 an hour and flat rate the people that are going to notice are going to be you as an owner because revenue is going to go up a lot and the technician because they're this is a different set of numbers than what they're used to presenting which could be uncomfortable.
John: So I would ease them into it. Do two or three weeks of training, talk about what it's going to look like. And then once you onboard, you do another two to three weeks of training, just every day going through it, actively calling on them, helping through quoting. And probably the biggest thing is overemphasizing how it's going to positively impact their compensation and make that a reality as fast as you can.
John: People care a lot less when they make more money. So if you can make this a win for them, then they'll slide along with it. Pretty well.
John: What is your system or process for warehouse management in HVAC jobs, parts, supplies, equipment. I am the, probably the wrong person to ask there because we don't manage. Warehouse I can say what we do. It just might not solve this person's question. So we have a VMI that handles our parts. We're really blessed with the supplier.
John: That's been an awesome partner for us. And so they have a counter here and we have videos and pictures of it online, like you can see it. We're, our. Team walks up to the counter and they order their parts like going to a normal supply house. And it is a supply house. It's like basically a Home Depot in the back of my facility.
John: So they handle all of our parts equipment. We do consignment. So consignment is someone puts a shelf on your in your warehouse and they put the equipment that you're going to use on that shelf. And then when you take it off the shelf, you buy it. Basically, you get invoiced at that time. The reason that's helpful is it increases velocity of revenue.
John: So if I sell something today, we want to be able to install it today or tomorrow. Speed is really important. And one of the biggest barriers to that is obviously what's going on with the equipment. So it used to be like, Hey, I'd sell a furnace today and why I want it to do it tomorrow. But then we have to, send somebody to the supply house or they have to deliver.
John: Oh, they delivered an hour late. So the best way to control that is you just have it in your warehouse and even better is you don't have to pay for it. Consignment is a really like standard thing that that you can just ask whoever your key suppliers are like, Hey, do you want to consign inventory in my warehouse?
John: And they will likely do it because it's pretty normal. So that is our system and process. So I'm, I hope that was somewhat gratifying. We cheat a little bit by having VMI and we're really blessed to have a great partner vendor in that but consignment anyone can do. We were doing consignment when we were like a 2 million shop for water heaters.
John: So you can do a pretty small.
John: Can an HVAC business be successful with a different model such as new construction as a focus? Yeah, for sure. Uh, the quick answer is yes. So I personally avoid new construction for a few reasons. One, I just don't want to get smoked. And when I was entering the industry 15 years ago or whatever, it was 2009.
John: So most of the businesses around us were going bankrupt. So I have a strong aversion because the first five years of my career was like buying the tools from companies going bankrupt. And then we proceeded to buy a few of those companies that went bankrupt. So really strong aversion to it.
John: That being said. Obviously, people are successful with with models like new construction. And I just think it's a different game and I'm not personally someone that would be able to operate very effectively. And I know that because I've tried in that model but people do it every single day and they do a great job.
John: In my opinion, it's playing on hard mode. It's a lower gross margin. Cashflow constraint is real because builders tend to, allow payments to take a long time. And it's really, it's an efficiency game, which is not a game that I'm personally very good at. I'm much better at a sales and marketing game than I am at like squeezing every last penny out.
John: What new construction is in my mind, but there are absolutely companies that do it successfully and many of them multiples of times larger than I am. So yes, you can absolutely be successful. I do think that is playing on hard mode. For a new entrepreneur in the space, but there's guys that are seasoned and they've been doing new construction for 20 years.
John: And they probably business is bigger than ours and they out out earn us from an EBITDA perspective, I'm about to have Matt Ballard on the show. And Matt's amazing and a good friend of mine, and he just bought a 70 million service and new construction business in Vegas. And we're, I'm interviewing him in 20 minutes and I think the service components may be 15 or 20 million, but the rest of it's new construction and they've been, very successful at it.
John: I would be scared to touch it because I feel like I wouldn't do a good job, but they've obviously done an amazing job. I only have one more question, so I'm just going to knock it out, even though we're running a minute over. Okay, so how have you guys approached rebranding when adding meaningful acquisitions to your business?
John: I think the key word here is meaningful. And I'm going to say meaningful in terms of either revenue or headcount. Not necessarily a deal size. We've gone back and forth on this in a couple of different ways. And we've really only been buying small stuff recently. The last time we did a meaningful deal, we took our time rebranding it.
John: And taking our time was anywhere from a year to two years, depending on that deal. We did the longest we've waited is two years. And then we did a rebrand. I would like my quick take is if I bought A 10 million shop today we would probably keep the brand for a year or two. If we bought under a 10 million brand, we'd probably try to roll that brand into Wilson within 90 days.
John: I guess geographically, depending on where they are, but if they're within our home base, then we would just roll it in. And so that's about 30 percent of revenue. So if it's, under 30 percent of revenue, I'll just tuck that thing right in rebrand. If it's above 30%, that would be meaningful to me.
John: And I would keep the I would keep the brand for a little bit. Yeah I really think rebranding is a funny one. 'cause the thing that people don't seem to wanna think about, and I saw this the other day is are you the one that should be rebranding ? I saw one the other day where someone was buying a company that had a significantly better brand than their own company.
John: And they were going to rebrand the acquired company, which I think was a huge mistake. I don't know if they've done that yet or not, but quick way to measure it. Facebook groups, control F, find your way through Facebook groups. How often is it being recommended? Check out next door, see how often it's being recommended and do a a search, an SEO search to see how often the brand itself is being searched for on Google.
John: That gives you an idea of how strong that brand is. Most of our searches for Wilson that we get for people organically clicking on our website are for Wilson. So we have a strong brand thousands of searches a month just for us. That's really good. If I was buying a company that had 5, 000 organic searches a month for their brand, and we only had a thousand and I would probably be better served taking their name.
John: Than the other way around. So I would just keep an open mind about that because your brand might not be better than whoever it is that you're buying, even if they're the same size.
John: Sorry, we do have one more. So I know I'm a minute, but we're going to answer it. Then we're going to wrap this up. Okay. Recently launched a residential division alongside our long established commercial HVAC company. My marketing company has proposed creating a brand new GMB and LSA account.
John: For our new home services division, Brad, is this you? Okay. He believes that having separate accounts would improve our search keywords, relevance, and quality scores. On the other hand, I'm considering the possibility of using our existing GMB account, what are the pros and cons of my marketing specialists?
John: Suggestions, any recommendations Zach's got an opinion. Yeah, I don't know that my, I don't know that my opinion is going to be popular here. I do want to know. So like maybe whoever this is DM me after DM me your brand name. Cause now I want to look. So we'll unpack this launching a new residential services division.
John: The marketing specialist, I don't know if that's internal or external, is proposing creating a brand new GMB. Which is Google, my business, a new LSA account and a new website for our home services division. So I'm going to say maybe to some of this and no to others. So new website, probably not.
John: I do want to know what the website is but like ranking organically. Is complicated and does take a long time and there's no real point in having multiple websites. If you don't have to like websites web people have a, I'll build it. Then they'll come perspective with websites. And that's just not the case.
John: Like it takes a lot of time and energy. Like our investment in SEO is ridiculous in order to rank organically. And I would not want to do that with two websites. I think that would be, I think that'd be a waste of time. Time and money and your primary site is already potentially doing a good job.
John: But I do want to know the brand so that way I can. Take a look at it. GMB and LSA my quick take is we do leverage multiple GMBs and multiple LSAs. So some people like that. Some people don't like that. There's some general rules around. Doing it well the big one is don't let them overlap service areas.
John: There, it, it is complicated, like it does increase your complication and you have to decide if that's worth it for you, like you have to manage multiple sets of reviews you have to manage multiple LSA budgets, you have to rank in both and GMB is a lot like website. So like with website.
John: Like what I just said about organic SEO, like that takes time and you built authority and you invested into that and restarting that probably not an amazing idea. But with GMBs, like GMBs are rank organically too. So you can link to it. It's a lot like SEO, like it's local SEO. It would again, depend on your brand.
John: So if you have a, if your primary brand has a hundred reviews on its GMB, no, I would not launch a second GMB. Like you should get to a thousand and then we can talk about a second GMB. If we have one at 2, 700 maybe. And the second largest is at 800 and then a few at the four or 500 mark.
John: But that's our strategy, but if you're at a hundred, no, you just need to focus on one and get that one big L and LSA account follows the GMB. So it really depend on your I guess it depends on both That said it's not the worst it really just depends on like where are you currently at like what is the current status of your business and your GMB?
John: And that'd be more of an answer. So reach out direct and Zach's in the comments or Zachary's in the comments too. He seems to have some thoughts on it. So maybe, reach out to him too. And that was it for today. Thanks everyone for tuning in. To our second webinar. This is interesting cause you don't get to really see who you're talking to.
John: You just, you see the people are there. So I hope this was good and productive. I'm going to plug the workshop one more time. It is a September 10th to the 12th at my shop in Stowe, Ohio. It's a lot of fun. I think last time we had 20, 25 people. It was a great time. It's called the breaking 5 million workshop and check out owned and operated.
John: com for more details on that. And besides that, I appreciate everybody tuning in and staying an extra few minutes as I got through these questions. Thank you. 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.
John: 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 Wilson companies. I'll see you next time.
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