Episode #297- Leland Smith

Summary

Podcast Summary: HVAC Masters of the Hustle – Episode #297 featuring Leland Smith

Introduction

In Episode #297 of HVAC Masters of the Hustle, host JDubMoneyMaker (Jacob Moneymaker) welcomes Leland Smith, a distinguished leader in the HVAC industry. Released on January 6, 2025, this episode delves into Smith’s journey of building one of the nation’s largest HVAC companies and explores the strategies that have positioned his business in the top 1% of the industry. Listeners gain invaluable insights into daily operations, team dynamics, pricing strategies, customer relations, and sustainable growth.

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1. Emphasizing Daily Financial Accountability

Leland Smith begins by stressing the importance of daily financial monitoring. “[00:29] You got to get into the numbers on a daily basis. This is not a weekly or monthly. You've got to look at them daily.” (00:29)

Smith explains that daily engagement with financial metrics allows for immediate adjustments, preventing issues from festering over months. He advocates for daily reports accessible to all staff, enabling technicians and installers to compare their performance with peers. This transparency fosters a culture of continuous improvement and accountability.

2. Building a Collaborative and Family-Like Company Culture

A significant portion of the discussion centers around creating a supportive and collaborative work environment. “[04:20] We treat them all like family... If you make a dime, they make a dollar. My life is about you making that dollar.” (04:20)

Smith emphasizes that fostering a familial atmosphere encourages team members to support one another. He highlights the success of connecting lower-performing employees with top performers, promoting a mentorship dynamic that elevates overall team performance. This approach not only boosts individual earnings but also cultivates a strong, unified company culture.

3. Strategic Pricing and Value Over Cost-Cutting

Smith advocates for premium pricing strategies anchored in quality service. “[06:23] We were the highest priced. We grew from that because we paid our people better than any of our competitors. And number one, we had to do quality work.” (06:23)

He argues that charging higher prices is sustainable when it’s supported by exceptional service and product quality. By avoiding the race to the bottom in pricing, Smith’s company builds customer loyalty and achieves significant gross margins. This strategy ensures long-term profitability and positions the company as a leader in the market.

4. Leveraging Club Memberships for Steady Revenue

Club memberships are highlighted as a cornerstone of Smith’s business model. “[13:41] Our club members accounted for 65% of our revenues... customers want quality work and reliability over the cheapest option.” (13:41)

Smith explains that selling club memberships transforms one-time customers into long-term partners, providing a consistent revenue stream. These memberships reduce the need for extensive marketing and ensure steady work throughout the year. By offering high-margin services like ducts and insulation to club members, the company maintains profitability and fosters enduring customer relationships.

5. Operational Efficiency and Cost Management

Effective cost management is crucial for maintaining profitability. “[24:18] Equipment should never be more than 9% of your total revenue, materials around 5-6%, labor 8-9%, and admin wages no more than 10-12%.” (24:18)

Smith outlines key financial benchmarks to ensure operational efficiency. He shares a practical example where eliminating a costly dumpster service saved the company $110,000 annually. This anecdote underscores the importance of diligent financial oversight and proactive cost-cutting measures to enhance overall profitability.

6. Sustainable Growth Without Overexpansion

When discussing growth strategies, Smith advises caution to avoid overexpansion. “[28:17] Focus on sustainable growth through steady revenue streams like club memberships rather than overextending your workforce.” (28:17)

He recommends prioritizing revenue growth before scaling the team, ensuring that staffing increases are aligned with business needs. This approach prevents financial strain and reduces the risk of layoffs during slower periods, maintaining stability and employee morale.

7. Exceptional Customer Service and Problem Resolution

Smith emphasizes a customer-centric approach to service and problem resolution. “[22:14] Treat your customers like family... solve problems immediately to ensure long-term satisfaction and referrals.” (22:14)

By addressing customer complaints promptly and offering compensations, the company turns potential negatives into opportunities for strengthening loyalty. Smith’s philosophy ensures that customers feel valued and heard, fostering long-term relationships and encouraging word-of-mouth referrals.

8. Continuous Learning and Networking

Networking with industry peers is presented as a vital component for continuous improvement. “[34:15] Surround yourself with people that you can talk to and learn from. Their success can directly inform your strategies.” (34:15)

Smith shares his strategy of joining groups like Certain Path to learn from larger, more successful companies. This proactive approach allows him to adopt best practices, innovate, and stay ahead of industry trends, ensuring his business remains competitive and efficient.

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Notable Quotes

• “You got to get into the numbers on a daily basis...you have to look at them daily.” (00:29)
• “We treat them all like family... If you make a dime, they make a dollar.” (04:20)
• “We were the highest priced. We grew from that because we paid our people better than any of our competitors.” (06:23)
• “Our club members accounted for 65% of our revenues... customers want quality work and reliability over the cheapest option.” (13:41)
• “Equipment should never be more than 9% of your total revenue...” (24:18)
• “Focus on sustainable growth through steady revenue streams like club memberships rather than overextending your workforce.” (28:17)
• “Treat your customers like family... solve problems immediately to ensure long-term satisfaction and referrals.” (22:14)
• “Surround yourself with people that you can talk to and learn from. Their success can directly inform your strategies.” (34:15)

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Conclusion

Episode #297 of HVAC Masters of the Hustle with Leland Smith offers a comprehensive exploration of building a successful HVAC business through strategic financial management, fostering a collaborative company culture, prioritizing quality over cost-cutting, and maintaining exceptional customer service. Smith’s insights provide a robust framework for HVAC professionals aiming to elevate their businesses to elite status, emphasizing that sustainable growth is achieved through meticulous planning, continuous learning, and unwavering commitment to quality and customer satisfaction.

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By following Leland Smith’s proven strategies, HVAC businesses can navigate the challenges of growth, maintain operational efficiency, and cultivate a loyal customer base, ensuring long-term success and industry leadership.

Transcript

[Jacob Moneymaker]

This is H Vac Masters of the Hustle with your host, Jacob Moneymaker. Looking at the city like I already own it.

[Leland Smith]

Yeah.

[Jacob Moneymaker]

What is up? You are listening to H Vac Masters of the Hustle podcast. And here's your host, Jada Moneymaker. As we just celebrated New Year's, I wanted to start off the year with one of the godfathers, we'll say, of H Vac and this guy, when we think of H VAC accomplishments, business owners, entrepreneurs. To me, Mr. Leland Smith is on top of the mountain. So welcome to the podcast. Mr. Leland, how are you doing today?

[Leland Smith]

Doing great today. Glad to be here, man.

[Jacob Moneymaker]

So, Mr. Leland, what I really want to home in, right, is you've been so successful at growing businesses and being able to acquire also companies to just create a massive beast, we'll say, and probably the biggest beast within the nation, I'll say as well. And so I really wanted to talk about what is your recommendations for companies to understand, like, when's a good time to start going over your numbers? How often should you go over your numbers, especially going and finishing 2024 and rolling into 2025. Is it too late?

[Leland Smith]

You got to get into the numbers a daily basis. This is not a weekly or monthly. You've got to look at them daily. I think it's pretty important that you have to have reports as well for your staff and your techs in the field, that we have daily reports in the morning, they get them, and that any tech or any installer can look at what the other teams are doing to see how well you're doing compared to the best or the worst. And then we really encourage them as much as they can to create kind of a teamwork. So if you're failing at selling clubs or selling training, turning, turning leads, talk to the guy on the report who's doing the best, maybe call him and ask him for some help. Certainly when we do daily meetings, we encourage the guys who fail to talk to the guys who are winning. And that really helps them learn a lot more. So the numbers are really a daily thing. It's not every month or I've. I've had guys that look at it every two or three months and you know the damage is already done for three months. You can correct things on a daily basis if you see it, but you got to look at the numbers. You got to know the numbers, and your team has got to know who's doing the best. And who should I call maybe to get some help?

[Jacob Moneymaker]

So what we're talking about is when we're going through numbers, right, it's not a monthly thing, it's not a quarterly thing. It's something that we should really dissect daily. And when we're talking about dissecting these numbers daily, are we talking about with the management team? Because I know that one thing that you also just mentioned was let the, the guys that aren't producing also see the numbers and talk to the guys that are producing. So while doing that also two point question, what have you been able to see by the team conversating to the big dogs? Because when I go to companies, sometimes they keep everyone separate.

[Leland Smith]

Never here. We treat them all like family. We share everything. My biggest thing is to these guys is I don't make a dime unless you make a dollar. My life is about you making that dollar. So if those guys are becoming wealthy, I'm right behind them doing it. So I do anything and everything I can to make sure they get the information they need. So when they share as a team, we don't like to have the top guy want to be the top guy and nobody come up. Because when we hire these people, we let them know we're going to share everything. And you need to help the guy they're losing to help them better, to have a better life and make more money. And so many times the guys are failing. They go, oh man, I never even thought about that. And they go out and they do it and they learn and they get better. Then they pass it down to the people as we bring them on.

[Jacob Moneymaker]

Let me ask you a question, Leland. When you see your, your team, right, and they're failing and then they're going out there and they're learning and, and they're teaching each other, right? Wouldn't you say that that also creates culture or better culture within a company as well?

[Leland Smith]

Absolutely. You know, I assume it's the same with football teams and basketball teams. They all win and they all want to be a teammates and help each other. Same with these guys. They love seeing people come up and, you know, we've had two guys in the last couple years make a million dollars. Now, they didn't sell a million, they earned a million selling 6 to 7 million. And those two are always helping the other ones trying to get up there. But, but yeah, it's gotta be a team thing, it's gotta be a family thing. Everybody wins and nobody wins. And the more that we win, the bigger we grow, the more that they can get.

[Jacob Moneymaker]

And that's what I want to stop and pause about Right now is because there's listeners all over the country that listen to this podcast and what you just said is you have couple, multiple employees, right, that have made, not sold, made a million dollars. So that's what I want people to understand, what the trades could do. This isn't, you know, financial freedom. This is generational wealth that could, you know, potentially just change your whole trajectory of your life. Right? And it was able to change your life, you know, to. To be able to go where you started. And I've had you on the podcast multiple times where we talked about your story and your venture, but you just sold a substantial amount of money. And if I'm correct, you still own a portion of the company.

[Leland Smith]

Yes, I do.

[Jacob Moneymaker]

I mean, that to me, is absolutely amazing to be able to set something up like that. Which goes to my next question. For a company to see rapid growth or substantial growth, what would you say the four standard pillars that a company would need for their foundation going into 2025?

[Leland Smith]

I'd say that one of the most important things is if you're not doing it, you need to do daily meetings. I see a lot of companies don't do that. We had meetings Tuesday, Wednesday and Thursday and Friday, four days a week. I don't matter how busy we were, we were having those meetings, focusing on the daily reports. We see who's struggling, where are we missing the point? Are we not growing where we need to grow? And we pick those points out and that's what we train on. So if we're not up with the clubs, we have club meetings, the sales guys will have their meetings. So everybody kind of has their own meetings. And it's really important, I think more than anything that some of the things that we focused on were the daily training, but also you got to raise your prices. One of the things I learned early on, I mean, when I started In March of 2000, it was me in the office, one sales guy, two installers, two techs, smallest company in Orange county. And we were the highest priced. And we grew from that because we paid our people better than any of our competitors. And number one, we had to do quality work. We never cut corners. Now 100 customers, maybe one or two, might complain about the price. But if you do everything right by hiring the right people, training them right, no shortcuts, not trying to save money, we're going to do everything we can to do right. They don't complain because, you know, if they know were expensive, but they expect the right tech to walk in and the right work to be done. So that's one some of the critical stuff that we do. It's just interesting how a lot of companies out there feel like they have to be the cheapest and the cheapest by far are always the smallest companies that can never really do a lot and the more expensive ones if you do quality work. Customers want that. Yeah. Actually had a survey done several years back that you know, of the top things the customer want. Price was number seven. The number thing a customer wants more than anything is on time. And we really focus about being that tech on time in the morning.

[Jacob Moneymaker]

So I like that and I like that you were talking about raising your prices because I feel like a lot of companies like you were saying they feel like by being the cheapest they'll win price, price, the, the job or the bid or the estimate price. But really what you should do is you should create value, be on time like you said. Right. What's your customer experience like while you're in the call? As a technician, as a comfort advisor, as an install, what's the full circle? And I like that because a lot of companies when I ask that, they're scared to lift their prices up. They don't want to be the high price company around, they want to be the in the middle. Right. They always say, oh people go with the middle price company. To me I want to be able to deliver such value and such high end service that even though royalty, we're a startup right. Six months into it, I want to look like the Bell brothers. I want to look like the service champions, right. I want to look like that multimillion dollar company. I don't want to look like the cheap company because then you're going to get cheap clients.

[Leland Smith]

It's all about how you approach it. You know, it's the people that are on the phone the that they talk like they're professional, they're very nice on the phone when the guy gets out there. I think that's one of our critical things that we changed years, maybe 15 years ago was I was hiring techs from other companies and they never could get over our price. They would say I can't sell for those prices. So we started training our own techs and we started with six in a class and when I sold in 19 we had 20 in a class every 14 weeks and we had 200 maybe 300 techs and installers and 280. We trained ourselves from the beginning and they didn't know anything different. They didn't know what we were selling for 15,000, somebody was offering maybe 5 or 10,000. They were cutting corners. They weren't doing everything they needed to do. They were doing the cheapest possible so they can make some money. In our case, we were doing by far the best possible to do. And our installers were rated. If they had more than two callbacks out of 100, they would lose their bonus. It was very important to us that the quality was there. And same with our text. You know, a tune up that we would do, they would do an hour and a half tune up, never a 30 or 40 minute and get out. They never know a customer. But we did an hour and a half tune up. And they were tracked by selling clubs. And club members, I think are the key thing because 65% of our revenues come from club members. And it was really important that we knew that we wanted them. When they walked in, they weren't a club member. 50% of the time. They had to walk out with the club. And then we would track the club to make sure it stayed with us. The customer stayed with us for 12 months. A lot of times you got to watch a tech would go in and get a discount off of a repair or something and sell a club. Then they would tell me, you can cancel this next month if you want to. It's no big deal. Yeah, it was a big deal because we wanted longtime customers. These longtime customers is what made us grow. And there's one thing we've talked about when you have a couple hundred checks and you give them three calls every day for the entire year, no matter what the weather was. We weren't weather driven. We were driven by the amount of clubs we had. So when it was slow, we brought those in and we would sell ducks or insulation or UV lights with something. We would offer them.

[Jacob Moneymaker]

One thing. Talking about club memberships real quickly, Lynn, is a lot of technicians, they don't value club memberships what they're actual worth. Okay. And when I talk about that is a mindset of a technician is, hey, if they're on their last Visit and it's $199 for a resign, if they don't happily involve them for a resign, right. The technician walks out thinking that they just lost $200, that's it. But in the perspective of the business, right. It goes a lot deeper than that. And I want everyone to understand it's not that $199 we're walking away from. It's like Leland was talking about the long term customer that we have with us with Our company, but we serve them so well that we get that long term client and then we get the system right for 20,000, 30,000. But we do such a great job. They're going to tell everyone and they're going to give us another referral and then it just trickle fix. Right. So we need to look at those more of a value of 20, 30, 40, 50,000, not 200, correct?

[Leland Smith]

Yes, sir. You know, with the clubs, even if they're a one year old system, we offer ducts in the house, we look at the insulation, and even when they quote a furnace or air conditioning, we offer a water heater. If you do plumbing in the first month we started that, we learned that from a company larger than we were. We sold 47 water heaters the first month just by asking them do they want to replace it. And we weren't cheap with it. We were 44, 4000 when people were selling for 2400. But we certainly would offer the ducts, insulation and water heaters on every single call. Our duct department's huge or insulation apartment's huge. And that's where the guys, you know, entry level guys that we have that come out of our class and end up making close to 90 to 100,000 their very first year.

[Jacob Moneymaker]

I wanted to ask you a pretty important question also, Leland. This might be a little bit more off topic of what we were talking, but job costing, very important. And one thing that we got to keep an eye on at royalty even is our overhead with labor. How do you go about with having so many employees, having a massive company to make sure that you're operating efficiently and that your labor cost isn't that high?

[Leland Smith]

Well, two of them, in reference to installers we had, they got an hourly rate or task pay. So the task pay was, if it's an eight hour job, we'd pay them 10 hours on the task pay. As we found people, especially installers, are by the hour if they know there's no work tomorrow. That eight hour job would take two days to do. Yeah, so we encourage these guys to get it done right and get it done in good time. The other thing is it's really important to know that these, these techs are looking daily at their numbers to know what other people are getting. And like some of our top installers are making like $220,000 a year and they're the best and the bottom ones are about 150. So it really is important that they know what other people are doing and to do the quality. But the manager's got to be out there as well. He's got to make sure that they're doing the right job and they're not calling taking two days to do a one day job if you're hourly or the task pay, they would ask for more task pay and it wasn't legitimate. So the manager's got to get out there. So if you know that we're looking constantly and checking the quality of work constantly, that's what happens. If you don't have a manager out there checking the work, you don't always do the best work. But if they don't know if the manager is going to show up or not, that's when the best work happens all the time.

[Jacob Moneymaker]

Yeah, I agree with you on that. But that's also getting your people out in the field to double check and make sure that things are getting done up to your standards. Right. And I feel like a lot of I think that's what really makes you and your company elite. Right. Is because you all make sure that what you promise gets delivered by having managements and supervisors and your comfort advisors go out there. And I feel like that's where a lot of companies lack something. So little as that could create much massive bigger impacts. Right.

[Leland Smith]

You'll see it by the number of callbacks a tech or an installer has that they're not doing the right thing. And I'm a believer you don't have bad techs or installers, you have bad managers. So managers out there, he's going to find this out before we find it out. He's checking it and he's correcting the problem. And if he comes to me and says I got a problem with the installer, I'm asking what have you done about it? And if he says, well, I only heard, I know I've got a bad manager because they've got to be out there and early. One thing you did mention about costing of the job I had when I was the CEO over service champions. Every job we sold it on Monday and stopped it on Tuesday. By Thursday I'd have a job cost sheet on my desk. For every job we did, I would go through there and look for how much the salesperson had dropped the price to get the sale, how much we paid the installer and did he ask for more money and what our gross margin was? Because I wanted to see that gross margin at 58% each job. If it was less than that, I was trying to figure out why. Was it normal or was it something that we did wrong? If it's something we did wrong. I'd walk down the hall, we'd start correcting that so it wouldn't happen again. But it kept an owner's eyes where your margins are to make sure that you're making the money you should. And you know, we had one good, good salesperson I thought was pretty good. He sold 3 million in a year. But when I look closer, it was 6 million retail that he gave everything away and took the minimum commission. So he looked like he was doing great at 3 million, but he really wasn't. So we corrected that and helped him out with that.

[Jacob Moneymaker]

Yeah, and that's, that's one thing, right, is you got to work smarter, not harder. You can't be giving discounts, you can't just be giving systems away and things of that nature. Because I mean at the end of the day, if you start off at 15, 10% commission, 12% commission and you're averaging 4, that's a big difference, right? So I've always told people, work smarter, not hard. You don't have to discount these things. What you have to do is you got to be creative by asking open ended questions where the homeowner buys in to whatever it is or solutions that you're providing to that homeowner or that.

[Leland Smith]

Client attributed to that. You know, talked about the two guys that made a million dollars. Those guys would never give a drop and they'd always make a maximum commission. They could, but they shared that in the sales meetings. I just recently talked to a couple of our guys that I knew they were making three or four and they're telling me this year they're making eight or nine hundred thousand because they learned how not to give the drop away, they just would give it away. And they learned how to build the value and keep talking to the customer and build the value and never think about dropping the price because it was a quality work and they were going to get quality work. And the one good thing that unique about us was we have a happy money promise. It's really simple. If you're not happy, we can't make you happy, you don't have to pay. And we really encourage when a customer calls in and complains, that call center agent has asked, do not hang up until that customer is happy. You don't have to ask anybody what to do. Just think if that was your mother or father, how would you want them treated if they were in the same situation? And then do it no matter what it is, if you want to give it away or give it A half price, do it. If it's wrong, we'll help them make a better decision. They would never get wrong, never get in trouble. And the same with the tech. If he's out in the field and there's a problem, never leave. Make that customer 100 happy. You have to give it away or discount it, whatever it is. And if you can try to wow them, I know if I talk to them, they know it gets to me, it's going to be free. I'll give them 100 or $200 gift card and thank them for complaining. Because now that I know there's a problem within the company, you've helped me make sure no other customer experience what you went through. And truly we would, after we had that complaint, we would walk down the hall and find out what happened, who did it, how we're going to correct it. And we had a meeting the next morning on it. So the customers were always the number one. If you treat them that way, 98 out of 100 are never going to pay less. They're going to appreciate it. But you know, I've had customers complain on the job, ten thousand dollar job one time, she says, I think it's too much. I said, really easy pay when they get done, pay what you think would be fair. And she paid, I think around 6,000. But she was happy she got what she thought. But you don't get many of those calls. If you got the right people on the phones, you got the right people walking in. And that's another thing about training. We trained for 15 years and we never hired our competitors, techs. But what we looked for. The third meeting I would be in with a couple managers. It'll be a 15 minute meeting and I was five minutes in. I wouldn't know if we're going to hire this person or not. Basically on their personality. When he talked to me, right when he looked at me. And I would think, I've got two gorgeous daughters. If one of my daughters were home by themselves and and this man walked in, how would she feel if she was feeling comfortable? I got the right guy. Would my wife buy from this guy? How they approached themselves because we were really strict. There was no beards, no visible tattoos, your hair couldn't be over your collar. We just wanted clean cut, nice guys walking in and teach them what to say. And that's where the sales happen because people trusted the people we brought in and they want those guys back in each time. Because our competitors weren't as clean cut as we were. Some of them are pretty scary at times. So we did. We never paid attention to what the competitors were charging. We just knew we were going to charge a higher price. 58% margin is what we look for. And it really worked. If you hire the right people, train them right. They won't go anywhere because they're making more money and they go to a competitors competitor. Cause they're not paying the way we are.

[Jacob Moneymaker]

One thing that I like that you're talking just going back a little bit is there's a reason why you're an elite business owner, is the way that you take care of your clients. Not just your people, but your clients. I mean, I've talked to thousands of business owners all across the country.

[Leland Smith]

Right.

[Jacob Moneymaker]

And I've talked to them about problem issues with clients and this and that. And majority of business owners that I talk to want to run from the problems.

[Leland Smith]

Right.

[Jacob Moneymaker]

They want to disappear. Out of sight, out of mind, just cut the client out.

[Leland Smith]

Yep.

[Jacob Moneymaker]

But what you're talking about is, you know what, you could have those difficult clients, but you could still win. And even though you might have to give something away for free, not only do you give it away, you give them additional $200 or a gift card. Right. To say thank you for helping me learn like that. To me, Leland is like the definition of an amazing business owner. And I mean it speaks volumes to where you've been able to create. And I mean, me being a new business owner, I've had to do some things like that. But those mistakes also make or break you too in your startup. Right. So I mean, I commend you for that.

[Leland Smith]

Well, the key thing about it is you want all your customers happy and you got to make them happy because they're going to talk to their friends, they're going to talk to other people. And if you're charging the Most and you're making 20 plus profit on what you do and you're doing quality work and handling those concerns immediately, instead of putting them out for a week or two or not calling them or don't do anything, let them sue you. I mean, I've had customers sue us sometimes and I turn it over to the attorney and I focus on the current people I'm dealing with. And I don't think about the lawsuit. Whatever I got to pay, we got to pay. But I do go out and find out why and how to fix it. And I've never had a customer ever call and complain that we didn't do something that sparked that customer to complain. We always Want to go out and fix that so nobody has to do that again. And it's just, it's back to the family thing. How would you want your family treated if they were doing the same thing? And we encourage that constantly. And you know, we rarely have anything that goes past a day or two. And if we have to, we'll send a manager out to look at it. And like I said, we've given away things, we've discount them, whatever we have to do.

[Jacob Moneymaker]

Question talking about. We're talking about 58% margin. Okay. If we could break down how much of that should be percentages of labor costs, material cost, things of that nature. Built into the. The cost.

[Leland Smith]

There's about four numbers. Let's go back a second. One of the things I did throughout my career, I would surround myself with people smarter than me. Always hired people smarter than me. I'm not that smart, but I had a lot of people around me that were. And we had a group that we called the Family. Now I was this wanted to always be the smallest. So I was. When I sold first time, I was 50 million, but the group was 80 million, 100 million, 120 million. These larger companies. And you learn a lot about these guys and what they're doing. So we would share financials every month. We had one guy that didn't want to share his financials, so. So we got him out of the group. But we had our CFOs match up our financials. And there's four numbers that really stuck out that would show a lot was going on. One was the equipment that you're buying. It should never be more than 9% of your total revenue. We've seen people at 15 or 20 because they weren't buying right. Material should be around 5 or 6%. The labor should be around 8 or 9%. And the other big one was the admin wages. Your office staff should never be more than 10, maximum 12% of your total revenue. When I first started sharing these numbers and we start sharing, I was. Everybody was at 10 to 12, I was at 17. I had way too many people in the office. What I learned from it was you grow your revenues first and your staff is struggling a little bit. Then you add the staff. You don't add the staff, hope the revenue is going to go because you'll lose money during that time. You want the revenues to grow, then add your staff and the number. Another number was two to one. You want two people in the field, everyone in your office. You don't want to be One to one. But if you got too many in, that's your problem. And I'd recommend your audience to look up a book called double your profits. And this is one book that helped me a great deal that it talks about the beginning of take every employee you have in your office. If you let them go today, what would happen tomorrow? And ask your key staff, if they said nothing would change, you've got a bad hire. Then you go through all of your expenses, through the entire financial and try to figure out what could we cut out. You know, I've found I was called it the looker because I would look all the time. I didn't know what I was looking for when I found it. I knew what I found. And a quick example was we had a dumpster out in our back that we were paying 10,000amonth to have our equipment hauled away. 1.2 miles was where the dump site was. So I had one of our warehouse guys on a Monday go take all the sheet metal out of the dumpster, drive it up there and back and tell me how long it took him 30 minutes and cost him $20. So you think about five days a week, 100. You think about the math of it. We ended up saving. Well, I went to the warehouse manager and told him to get rid of the dumpster, I don't want it there. And he came back and said, you know, we're kind of busy right now. I don't think I can do that. The following week, I fired him. We got rid of the dumpster and we saved 110,000 off one item. Wow, this one thing, and that's the thing you've got to look for. Your managers generally aren't going to come and tell you, hey, I'm going to work harder and I'm going to save you money over here. They're not going to bring that up if the owner isn't looking, you'll see things that if you do look, you will see things that are there. If you're not looking at the financials and not looking at the numbers and just being involved in the company, you'll miss a lot of stuff.

[Jacob Moneymaker]

So I have a question for you. For royalty, we're doing pretty good. So everything's exceeded my expectations so far. So we started June. Right now I'm in growth state. Right. But like you said, you don't want to overspend, you don't want to over hire, but you want to keep the momentum going. So what would be your advice for someone that is is doing Pretty well with the rapid growth, especially for just doing this, you know, the last six months. And my goal this year is to do 2.5 million with the full calendar year. But I don't want to over hire. I don't want to overstress myself because I don't want to lay people off.

[Leland Smith]

Well, sometimes you need to. Like I said, you've got to look at your admin wages, make sure it's not more than 12% to your revenues or something's wrong with that. The growth aspect of it, are you selling clubs? Clubs to me are the most important thing. When I sold the first time I had 25,000 club members. And we figured out the best way was not the yearly. You were talking about a monthly. I got $19 a month and most people will see that $19 even if they're not don't use us, which 15 to 20% we would call and they would never call back until they had a problem. But they keep that membership going. The growth aspect of it is, it's really to me is a club membership is probably the number one thing. Every time you sell a club, that's two tune ups you don't have to market for next year and that's around 5 to $600 less in your marketing. Because our marketing was about 5% at $50 million because we had so many club memberships. So we always had work for our people. And you know, the other thing aspect of it is you've got to be asking for more than just what you're going there for. We mentioned that earlier. Yeah, offer the ducks. Get the guys in the attic to look at the ducks. If they turn a lead, they need to take seven pictures. The guy there has got to get up and show them the difference and take a picture and show them the difference of what it can be. Offer the insulation. And those are the things that really make a difference because they're high margins. Both of those are not 58. They're probably 65 to 70% gross margin. And we weren't the cheapest at it, but we did the best job of it.

[Jacob Moneymaker]

Now let me ask you a quick. Sorry to cut you off, Leland.

[Leland Smith]

Not a problem.

[Jacob Moneymaker]

Just for. I don't want to forget. So I was mentioning 199 for a club membership for the year annual.

[Leland Smith]

Okay.

[Jacob Moneymaker]

And that's how I'm running it at royalty. But you're saying roll it monthly 19. Do you mind just informing and educating me the difference on that?

[Leland Smith]

Well, through the 24 years or so of this, when we, we started day one selling clubs had to be 50% or I'd let the tech go. I didn't always let them go, but we talked about it constantly. And we've done the yearly, we've done three years, two years, one year. And we found like a three year, 350 some dollars when it's time to renew, they're less likely to write the check. But we found also if it's a monthly, even on a checking account wasn't as good. But the credit card one, if the credit card expires, most of the credit card companies will continue the monthly stuff that's on it on the new card so it doesn't cancel out. Customers don't complain about that. But we had, we had a department. Rebecca was great at this and she still is. She would take all the cancellations if somebody wanted to cancel once they saw the 19, got tired of seeing it. We were 80% renewal of 100 calls. We got 80% we've convinced to stay on the club.

[Jacob Moneymaker]

Wow.

[Leland Smith]

And to me that's where the revenue is. We made in our group of the six companies I talked about, we were one of the few, one or two of the companies that made money every single month. The guys back east who weren't focused as much on the clubs, they would make money four months out of the year when it was really hot or really cold. But they didn't have the weather, they weren't selling anything. They couldn't make any money. Where we're back in California, we don't have weather. It's always nice. So the club membership was really what got us in there. And once they saw our people and how we treated them, they wanted us there. They knew how good we were. They knew they're paying a little bit more, but they got a lot more.

[Jacob Moneymaker]

I, I, I completely love everything that you're saying. You're dropping some great knowledge and information on this podcast. Is there any speaking events coming up that you'll be speaking speaking at that maybe some of my listeners will be able to have the honor to be able to see you.

[Leland Smith]

Yeah. One thing I would recommend to your vendors. There's a group called Certain path. It was airtime 500 in 2000 when I heard that they changed the name to Certain Path. I think it's in Scottsdale in February. I'll be there and, and speaking at that event and but you know, the groups are, are important that you get involved in a group and I'll explain why. For me, when I got started, I got Into a group. I was looking for the guys. If I was 2 million or 5 million, I was looking for 5 million. I was looking for a 7, 10 and 15. And I wanted to find out these guys, how you got from 5 to 10, what, what mistakes you found. And I would create that friendship. I'd found them in the bricks. I'd find them at the lunch, I'd invite them to dinner. Then maybe a month later, I'd ask to come visit their location to see how they operated. It was never our competitor. It was always somebody back east or Midwest. I would ask that. And you learn so much by sitting there and listening to a dispatcher, listening to a call taker, how they're doing things. And I'd always come back with several ideals, but I'd pick one or two and I'd implement it. Then if I ever got up to their size and they were still there, I got out of the group. And if I was 20 million, I was looking for the 40s, 60s and 80s. And that's where, when I was 50, I was in the 80s, 90s, 100 and 120, 20. Always want the bigger guys because they were smarter than I were. They got there, but I would learn a lot from them. And sometimes they learn a little bit for me as well. But you got to surround yourself with people. Like the certain path. You need to go there. You need to at least look at what they have. They have an orientation day. I think it's great what they have and they have. I think it's every three to four months, maybe five months. They have some of that. But you got to surround yourself with people that you can talk to that will show your financials and they're not threatening you. So that's why I never talk about competitors. I don't want to be like them. I think at one point I was five times larger than the nearest competitor in Orange county, and we were the most expensive. So that proved to me, being cheap doesn't make you wealthy. It really doesn't. You don't have the money to give away to the customer. You don't have the money to give to somebody that's going to sue you. Just. I would just give it to them, make them happy because we were making enough. I can do that.

[Jacob Moneymaker]

I love it. Well, Mr. Leland, I know that your time is very valuable, and it's been an absolute pleasure to get you on the podcast for the third time and to start the year off, you know, and to be able to drop this value and information to to my listeners out there, thank you very much.

[Leland Smith]

Let me end with, you know, if any of you guys are looking to sell and want advice on it, it costs you nothing to call me and I'll connect you to the right people with the Odyssey Investment Group, which is a great group. Frank DeMarco is our CEO. He's a phenomenal. He's got a phenomenal team. I think we've got the best operating team out there. Make a call and just find out, because in my case, I got the letters that you guys were getting, and I called and this group came in, and they offered me a price that I thought I would get in three years, blew me away. I reinvested with them, became their CEO. Eighteen months later, I got the same amount again when they sold again. So now I got twice what I ever dreamed of, and I'm still involved with Odyssey. Right now. We're probably going to get three times amount I ever dreamed of, because I took the step ahead of when I thought I was ready. But you get to the right group, and this is a good group to get involved in. You're going to sell, and if you're an investor, you can get some really good money, better than the stock market out there. So be happy to give my number. They can call you for a phone number if they want, and I'll be glad to get you connected to the right people.

[Jacob Moneymaker]

Nice. So if you guys want any information, reach out to me. I'll give you Leland's information. But, I mean, anything that he's going to tell you, y'all gotta run with it. I mean, it's an absolute honor. I'm gonna be excited. I'm gonna get them on the podcast again here soon, this year in 2025. But until next time, y'all take care.

[Leland Smith]

Thank you, babe.