Owned and Operated - Episode #149: Leadership Through Open Book Management with Ellen Rohr
Release Date: October 29, 2024
Introduction
In the 149th episode of Owned and Operated - A Plumbing, Electrical, and HVAC Business Growth Podcast, hosts John Wilson and Jack Carr engage in a profound conversation with Ellen Rohr, a seasoned entrepreneur and advocate for open book management in the trades. Ellen shares her journey from novice to industry leader, offering invaluable insights into financial transparency, leadership, and business growth strategies tailored for home service businesses.
Guest Background: Ellen Rohr’s Journey into the Trades
Ellen Rohr’s foray into the trades began unexpectedly when she married a plumber, affectionately known as Hot Rod. Coming from a non-trades background, Ellen initially struggled to grasp the technical aspects of plumbing, electrical, and HVAC work. However, her fascination grew as she immersed herself in the industry alongside Hot Rod and his contractor friends.
Ellen Rohr [00:00]:
"You gotta charge more than it costs and you don't even know what it costs. Why am I doing this? What is it worth? How much money do I need?"
Ellen's commitment deepened following the untimely death of her husband’s business partner. Determined to turn the struggling business around, she took a hands-on approach, facing numerous challenges and learning the intricacies of business finance. Mentorship played a crucial role in her transformation, particularly the guidance from Frank Blau, a veteran in the trades who emphasized the importance of accurate pricing and financial management.
Open Book Management: A Cornerstone of Leadership
Open Book Management (OBM) is a central theme in Ellen’s leadership philosophy. Inspired by Jack Stack’s The Great Game of Business, Ellen adopted OBM to foster transparency and accountability within her teams.
Ellen Rohr [05:00]:
"Jack Stack has become a friend. I heartily recommend that book. I think it was written, like, 35 years ago. It's just classic and fantastic and they do seminars. Great Game of Business is a really great resource for people."
By sharing financial metrics and involving employees in the business’s financial health, Ellen empowered her team to make informed decisions, enhancing ownership and accountability. This approach not only demystifies the company's financials but also aligns team members with the business's goals and performance targets.
Financial Management: Understanding and Controlling Costs
A significant portion of the discussion revolves around the importance of accurate financial management. Ellen underscores the necessity of knowing the true cost of services to set appropriate pricing strategies.
Ellen Rohr [01:24]:
"Once upon a time, I married a plumber... I thought you flushed the toilet. It's a mirror. All of it was new to me, but it was so interesting to me."
Ellen details her transition from time-and-material billing to flat-rate pricing, a shift that, while daunting, proved essential for profitability. She emphasizes that charging above costs is fundamental to business sustainability, a lesson she learned early through mentorship and practical experience.
Ellen Rohr [04:00]:
"Frank was the first one who just taught me, you've got to charge more than it costs. And he has this simple formula which I use to this day."
Ellen's formula involves summing all business costs, including salaries, benefits, and equipment, dividing by the number of billable hours, and then adding a desired profit margin. This method ensures that all expenses are covered and profitability is achievable.
Building an Effective Accounting Department
Ellen and John delve into the complexities of establishing a robust accounting department, a critical component for scaling a business. Ellen shares her struggles with bookkeeping and payroll management, highlighting the pitfalls of inadequate financial oversight.
Ellen Rohr [16:18]:
"I have to sit right here and I want you to get into it. And he couldn't do it. He'd never been in."
The conversation underscores the importance of having skilled accountants who can navigate the technical aspects of financial management. Ellen advises leveraging technology and seeking fractional or shared CFO services to manage costs while maintaining high financial standards.
Leadership and Team Management: Delegation and Accountability
Effective leadership, according to Ellen, involves delegating responsibilities and fostering a culture of accountability. She discusses the challenges of conveying financial goals and ensuring that team members understand their impact on the business’s bottom line.
John [42:37]:
"Most of them are a part of the journey. So I think we still have messes that we're cleaning up."
Ellen advocates for regular financial reviews and involving team members in goal-setting processes. This practice not only clarifies expectations but also motivates employees to take ownership of their roles in achieving the company's financial objectives.
Ellen Rohr [45:10]:
"We want our team members to take ownership of their portion of the business that we're entrusting to them."
Technology and Tools: Enhancing Operational Efficiency
Both Ellen and John highlight the pivotal role of technology in managing and scaling home service businesses. Ellen praises Hatch for its seamless integration with Service Titan, which automates workflows and enhances customer engagement.
John [00:28]:
"Hatch’s user interface was so easy, it directly tied into Service Titan. It automated the workflow of five or six employees a day."
Additionally, Ellen discusses Service Titan’s touchless journal entry integration, which simplifies accounting processes by translating transactions into clean journal entries, thereby reducing manual errors and saving valuable time.
Ellen Rohr [27:53]:
"If you're using Service Titan, ask about this and talk to your accountant. Because what it does is it assumes that Service Titan and your accounting program are just one big program."
Growth Strategies: Setting and Achieving Financial Goals
The podcast explores strategic goal-setting as a means to drive business growth. Jack shares his ambition to reach $20 million in revenue by 2030, while John aims for $100 million, indicating a clear vision for expansion.
Jack [60:53]:
"We're shooting for 20 million by 2030."
Ellen emphasizes the importance of aligning financial goals with operational strategies, encouraging businesses to adopt systematic planning and regular performance evaluations to stay on track toward their targets.
Notable Quotes with Timestamps
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Ellen Rohr [00:00]:
"You gotta charge more than it costs and you don't even know what it costs. Why am I doing this? What is it worth? How much money do I need?" -
Ellen Rohr [04:00]:
"Frank was the first one who just taught me, you've got to charge more than it costs. And he has this simple formula which I use to this day." -
Ellen Rohr [16:18]:
"I have to sit right here and I want you to get into it. And he couldn't do it. He'd never been in." -
Ellen Rohr [45:10]:
"We want our team members to take ownership of their portion of the business that we're entrusting to them." -
Jack [60:53]:
"We're shooting for 20 million by 2030."
Insights and Conclusions
Ellen Rohr's episode offers a masterclass in blending financial acumen with effective leadership. Key takeaways include:
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Financial Transparency: Open Book Management demystifies financials, fostering a culture of accountability and informed decision-making among team members.
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Accurate Pricing: Understanding and calculating the true cost of services ensures sustainable profitability and business growth.
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Effective Delegation: Empowering team members through delegation and clear goal-setting promotes ownership and drives the business forward.
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Technology Integration: Leveraging the right software and tools can streamline operations, reduce errors, and enhance customer engagement.
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Strategic Goal-Setting: Clear, ambitious financial goals aligned with operational strategies provide a roadmap for scaling and achieving long-term success.
Final Thoughts: The Road Ahead
As the conversation wraps up, Ellen shares her ongoing commitment to supporting tradespeople through initiatives like the brand ambassador program at Service Titan, likening the brand’s role to that of Red Bull for extreme athletes. John and Jack reflect on the momentum gained from embracing open book management, noting the significant improvements in team accountability and business performance.
Ellen Rohr [60:47]:
"My next phase of my career is all about shining light on tradespeople and at Service Titan. Now with this brand ambassador program that we're just kicking off, it's, you know, think what red bull is to extreme athletes."
The episode concludes with mutual appreciation, highlighting the collaborative spirit essential for navigating the complexities of business growth in the home services sector.
Conclusion
Ellen Rohr’s insights into open book management and financial transparency provide a valuable blueprint for home service business owners aiming to scale effectively. Her experiences underscore the importance of accurate financial management, empowered leadership, and strategic use of technology in driving sustainable growth. For listeners seeking to enhance their business operations and leadership strategies, Episode #149 of Owned and Operated offers actionable advice and inspiring lessons from a true industry leader.
Resources Mentioned:
- The Great Game of Business by Jack Stack and Bo Burlingham
- Nextar’s Business Planning Workshop
- Service Scalers for Google Ads, PPC, SEO, and LSA management
- Service Titan’s touchless journal entry integration
For more insights and episodes, visit www.ownedandoperated.com.