#149 - Leadership Through Open Book Management with Ellen Rohr

Summary

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

• 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:

1. Financial Transparency: Open Book Management demystifies financials, fostering a culture of accountability and informed decision-making among team members.

2. Accurate Pricing: Understanding and calculating the true cost of services ensures sustainable profitability and business growth.

3. Effective Delegation: Empowering team members through delegation and clear goal-setting promotes ownership and drives the business forward.

4. Technology Integration: Leveraging the right software and tools can streamline operations, reduce errors, and enhance customer engagement.

5. 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.

Transcript

[Ellen Rohr]

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? The simpler you make everything, the further you can take your business. I fight fancy all day long. Negligence, it's downright criminal. Sometimes it's day to day decision making that's gonna affect sales and cost of goods sold.

[John]

We had a couple major pain points earlier this year and those pain points were, how do we contact our unsold estimates more frequently? How do we book our membership appointments faster? How do we stay in contact with customers and let them know that we have promotions? And how do we run a speed to lead process for Angie's leads? When looking around for solutions, we saw a couple great softwares on the market, but our favorite one was Hatch. So when we started using Hatch, we had just switched over from another vendor. And Hatch's user interface was so easy, it directly tied into Service Titan. It automated the work workflow of five or six employees a day. We're now in contact with hundreds of additional customers. We're selling a ton of our unsold estimates and it's easier than ever to book our membership follow up appointments. So Hatch has been a really big win for us. In order to book a demo with Hatch, click the link below. Welcome back to Owned and Operated. Today on the show we have Ellen Rohr. Welcome to the show.

[Ellen Rohr]

Hi. Thanks for having me.

[John]

Yeah, we're excited to have you. I've been a longtime admirer. I feel like you've really been a spokesperson for the trades. Obviously did a lot of amazing work with Zoom Drain. Before we start diving into what we're going to talk about today, could you give your perspective on how you entered the trades and what your work's been looking like?

[Ellen Rohr]

Once upon a time, I married a plumber. I met a guy. His name was Hot Rod. I did not grow up in the trades. My dad wasn't handy. We called people I didn't know anything about what happened? I thought you flushed the toilet. It's a mirror. All of it was new to me, but it was so interesting to me. I'm hanging out with Hot Rod and his cool friends, electricians and contractors, and I'm seeing like this work being done and understanding like drains and vents and the whole. It like absolutely blew my mind. And I fell in love with the trades for all the reasons I love my husband. They're capable people in the trades and I'm really not. If I were on Survivor, I would die. I'D just die, you know, nothing left. So I really, I really got a taste for it. But then my husband's partner died at age 33. It was absolutely horrible. And I did something really dumb. I said, well, listen, I've had a million jobs. I have a degree in business administration. I'm going to quit my real job, come work for you, turn wrenches, I'll count the money. It'll be easy. And it was none of that. It was absolutely horrible. And I sometimes forget to say this. I'm still married 40 years later, but it's because we don't work together. I mean, this journey that I'm about to describe was so traumatic, right? I figured out a lot of things and it still makes me emotional because I had the help of great mentors. And back in the day, I started reading trade magazines and I wrote a letter to Frank Blau. You may have heard of him. He's an old og. Do you know Frank or of Frank? He's like, he's almost 100 years old and he's still bossing everybody around. But he's, you know, he wrote a column, he called me up and he told me I had my head up my. You know what? Like, he just, like, he just was the first one to kind of say, you're an uncle head. You know, we were talking right before we got on the air. You're a knucklehead. You don't know what you're doing. You think you do. You gotta charge more than it costs, and you don't even know what it costs. So why don't you shut it down? Those are the first words he said to me when I was reaching out for some help because we weren't making any money and we were fighting all the time. So just to cut to the chase, I've had these great mentors, and once upon a time, you met them just in the trade magazines. But now we have podcasts and so many resources and seminars that were just not available. You know, going back 40 years, it's so exciting. But I feel honor bound to share. You know, how I figured some of these things out, because so many people were, were generous with me. But 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. Add up your cost of doing business, your desired costs, like with a real salary for you, and nice benefits and nice trucks and all the stuff. Add all those costs up, divide by your hoped for number of billable hours and charge more than that to your desired amount of profit. And that works. That 100% works. Now, back in the day, everybody charged time and material. And Frank and George Brazile were really the pioneers of flat rate back in the day. Converting the flat rate was the biggest, scariest thing you were going to do as a contractor. And now, thanks to them, it's not even a conversation anymore, right? You're going to charge with a menu. You're going to have enough in those selling prices that you can make a lot of money and make a lot of mistakes. So. But that's. That goes back to the beginning. But it was scary, you know, back in the day. But as we were doing this, okay, we're charging like $35 an hour, and my competitors are charging 40 because, you know, I want to get the job. I do every stupid thing. Every stupid thing. And so now we're going to raise our prices to like 150. And I call this the sphincter tightening over $100 an hour moment. For me, it was scary, but I didn't know how to get my team. We had four trucks, okay? I didn't know how to get them to understand what we were doing unless I showed them the math. And I had like a green columnar pad, piece of paper with a pencil, tears on it. So emotional about the whole thing. But I was just showing them, we have to do this. We're losing money. We're not paying you enough. I'm not getting paid anything. Hot Rod's not making very much money as a master plumber. Like, this has got to change. I showed them the numbers and the sky didn't fall. It was what they needed to go, okay, we can do that. That plus sales training. That plus improving our operating systems. Before we raised our prices and raised our standards, our guys wore anything to work. One of my guys wore a T shirt that said, kill them all. Let God sort them out to work.

[John]

Wow.

[Ellen Rohr]

So what did we do? We got new shirts, like, so you don't have to raise your standards by much. You're already probably doing a really good job by your customers. But as you raise your prices, you raise your standards, and it goes on like that. Another really influential person in this journey was Jack Stack, who wrote the book. I think he wrote it with Bo Burlingham, the Great Game of Business. And that put a name to what I was doing, which is open book management. So Jack Stack, John Case. There were a couple of these pioneers who were like, you should really show your team the score, because they're in charge of things and their decisions make the difference. You know, it was. It seemed. It seemed obvious. But this put a name and a construct on it. And Jack Stack has become a friend. I heartily recommend that book. I think it was written, like, 35 years ago. It's just. It's classic and fantastic and they do seminars. Great Game of Business is a really great resource for people. That's when I started thinking, oh, this is kind of a thing, and just stuck with it. And then, like, you guys, it was like Emperor's New Clothes. Am I the only one who's just figuring this out? Is everybody else a knucklehead like me? So I started talking to friends and saying, well, let's talk about, like, we should charge more. And I'll tell you that I talked to a lot of people who. Yeah, yeah, you're right. We need to raise prices. And then behind my back, called me a gouger, called me a ripoff artist. Like, I was not embraced in the spirit with which I was giving this information. I was not received in a powerful, positive way. So that along the line, I started thinking, I'm going to magnetize, not terrorize the people in my life. You know, there's going to be people who want to follow this path with me, and I'm going to find them. And that's really been the journey. So we turned our company around. But here's another really important thing. It was Hot Rod's business. It was Hot Rod's business. I came into his business as I started to, like, get the fever of, like, oh, my God, now we're making money. We went into debt so deep, and we got out of it within a year. And we're stockpiling money just by raising our prices. Like, I was like, oh, my God, that's so great. So this is when I said to Hot Rod, and this is the conversation for you two and any owners, right? I said to him, okay, now we have options. Money buys options. What do you want? Why are we doing this? And Hot Rod said, I like working all by myself. And a lot of that is his personality. But also, it was so traumatic working together. And, you know, there can only be one person at the top at the end of the day, even with a partnership, Even with a 50, 50 partnership, you have to agree that somebody's going to be the guy. And it was his business, not mine. Like, he started it, I came into it, and it was very emotional. But now it was the best thing because we had different ideas of what we wanted to do. And I bring this up because as you make money, what will happen is probably happening to you is you finally have time to ask yourself big questions like, why am I doing this? What is it worth? How much money do I need? What do I want to do with my time? What's my gift that I have to share? Hotrod is happy and the most actualized guy I know. He ended up working. He had bought and sold a couple other companies, ended up working for this manufacturer of these beautiful components. He works for Khaleffi, and they make hydronic and solar heating components. In Hot Rod's world, I'm Hot Rod's wife. Like, he's a thing. But it all came from us allowing each other to do what we wanted to do. Does this make sense? I know, like, money plays a part because until you have enough money, you can't even ask those questions. All right, so I ended up starting Benjamin Franklin, the punctual plumber. I did a lot of consulting. I worked with Jim Abrams and that group now called, it was called Clockworks. And now it's part of Authority Brands. And that was a big win. And then I started Zoom Drain with my best friends Jim Crinidi and Al Levy. And we have great venture capital partners over there, MPK Equity. And now I work at Service Titan. So, like, I just, I just keep finding more and more fun ways to play. But almost all of it is focused on how do you make money and how do you get your team in on the game. So I'm glad we're having this combo. So end of my story. Not the end of my story.

[John]

Well, that was. That was great. I think, I think it was kind of funny because, you know, the reason we started this in the new generation of owners, I am old, which is kind of funny. I'm a young human being, but I've been in the industry my whole life. We started this show a couple years ago because of exactly what you described. 40 years ago or 30 years ago, they're like, hey, the resources didn't exist. They're still newer. But even 10 years ago when I started, the resources weren't there.

[Ellen Rohr]

Yeah.

[John]

And if they were, they, they were out of reach.

[Jack]

That's the big one. Yeah. The resources are tiered towards really the high grossing companies already. And so there was Nothing for the 1 to $5 million range that was really affordable and out there to really help out the people like me. I've grown from 800,000 to almost 5 million in two years. And there's. There's a giant void. A giant void. Whereas if I didn't have a wonderful Twitter community, John, Some friends, I mean, I would be. I don't know where I'd be today. I'd be very. I'd be a very sad human being.

[John]

I'm sure there's more resources than there were, and we wanted to be able to sort of stick our voice in there, because I wish. Same as you wrote a book, I wish that I would have had my podcast a decade ago. Yeah, it would have shortened a lot of time.

[Ellen Rohr]

When I was, like, first figuring this out, I crossed the country to find a $5 million shop. A $5 million shop was iconic. A $5 million shop is $100 million.

[John]

People don't understand what it used to. So, yeah, they just don't understand. When I started, the idea that a company could be over $10 million was unfathomable. No one had a tech stack. No one had software yet. It was all like, we had a whiteboard. I also remember moving over $100 for flat rate. That was a really big moment in my career.

[Ellen Rohr]

Sphincter type.

[John]

I also had to do that. I also had to do that. So when I first started, this was only 10 or 12 years ago, but, you know, when I first started, everyone was a million to $3 million. And now that's just not the case.

[Ellen Rohr]

Now that's a Tuesday for some companies. It's just amazing with what's happening and how much. How much opportunity. I mean, what a golden age of home services. It makes me so happy and really proud to have been in it for so long now, too. How did you guys get a clue? Like, the reason why I started to reach out is because I would say to my husband, we don't have any money. And he would hear, I'm not good enough. I'm not working hard enough. Like, we just. It was so emotionally charged. There's an expression that when the pain of the current condition becomes greater than the fear of change, you'll change. And so I was willing to do anything. I'm certainly willing to walk away from this business. I thought, fine, it doesn't work. I don't get it. I'll go get another job. It's what made me reach out and write that letter to Frank Blau. He wrote an article in 1989 called How Much Should a Contractor Charge? Where he went through this simple, you know, math. And I'm like, that makes sense. So I wrote him a letter that said he was full of, you Know what? And my customers wouldn't pay it, my guys wouldn't do it, blah, blah. And that's why he called and gave me a hard time. But what was the. That was like the moment where everything started to shift for me. How did you figure out your asset from your elbow? Did you know how to read a balance sheet? And a profit loss growing up is because I didn't and I went to college for it.

[John]

I'm sure Jack has his story to share, and mine is relatively straightforward. So I graduated. It's a third generation family business. I joined the company full time at 18, but I had worked in IT since I was 10 throughout the summers and really learned the trade itself. So at 18, I was already a competent plumber, which was kind of fun. In my early 20s, I felt like I wasn't using my brain the way I would have liked. I like puzzles, I like being challenged. I like to figure stuff out. So I went to school at night for accounting at a local community college. It was like $100 a credit hour and I spent $6,000 over the course of two years and I getting basically a 101 on how accounting worked.

[Ellen Rohr]

Nice.

[John]

Maybe 23 when I exited that program. And that gave me enough information to feel like I understood what was happening inside the business. Understanding what happened is different than understanding how to change what can happen. So that was the next decade of my life. Was figuring that part out. But yeah, that community college really put it together.

[Ellen Rohr]

So were they generous right from the get go?

[John]

Yeah. My dad and I have a very large age difference. It's in mid 40 years apart. And so as I was entering my adulthood in my early 20s, my dad was looking for an exit for his business, which is obviously very unusual. And even more unusual, he was willing to sell it to me at 23. So through a few years of negotiations, I ended up buying it at 25. But I started running the business at 23 with this associate. Not even associates, you know, a few years of classes. So I had open access because I was at that time I was running the business.

[Ellen Rohr]

I'm kind of embarrassed after all the preaching I'm doing and magnetizing most of the time, when I look at some of these books, they're a mess. They're still a mess. Even big, nice companies, there's so much like the back of the truck, it just gets messy and nobody bothers to clean it up or knows how. And, you know, we just kind of live with it.

[John]

It's challenging now. Like ours are not perfectly clean. I can point to all the reasons why. Yeah, most of them are. It's challenging. And when, you know, no one comes out of. I'm picking on your point earlier. Did you know how to do this growing up? And the answer is no. And I definitely didn't know how to build an accounting department. You know, I just described how as a plumber that happened to go to community college, I don't know how to build an accounting department for a, you know, going on $30 million organization. And I learn new stuff every day in my, in my process of attempting to build that department. So it's a real, I think it's a real challenge and I think understanding who are the key players, like who are the peoples that, that need to be involved. Like, what's a staff accountant and when do you have one? What's a senior accountant? Do you need a controller or do you need a cfo? Like, those are all different things that people just don't know. And I'm still learning. Right. Like we're still actively figuring it out. We're still working process here. So I think a lot of that is just a part of the journey. So I think we still have messes that we're cleaning up.

[Ellen Rohr]

Yeah. And I'm still. Same thing. Like, Ben's humbled so many times, so many days. You know, I worked with the company, went through the whole thing with a recruiter, found this like top drawer CFO who was going to come in and really. And then one day I finally said to him, show me that you can get into the accounting program. Like just, I'm going to sit right here and I want you to get into it. And he couldn't do it. He'd never been in. And I'm like, how did, how did we not know? Like, there's just a lot of bamboozling and neglect. Yeah, it just negligence. It's downright criminal. Sometimes the accounting professionals, like you might have to kiss a few frogs to find some folks. And I don't know anyone who doesn't have a story like yours as they've grown their business, John, that it works for a while and then you upgrade and then you downgrade and then you upgrade and you're so grateful and you're just trying different things out. But it is a team. I'll tell you one thing that I would give as a piece of advice. I was talking to a really big company. Payroll is usually a sticky wicket when you're trying to clean up your financials and get them right. I call this Known financial position, or kfp. That means the balance sheet, profit and loss are right. They're current, and you understand them. The first standard is at the end of the month to tighten up the month. But then the better standard is once a week to be able to look at those reports. They might be a little down and dirty because they're not closed yet, but you have access to the balance sheet and the profit and loss on a weekly basis. That's a good standard. But what makes it difficult is often payroll, because the owners come up with these harebrained contests and spiffs and bonuses, and if you're out of town, we do. Oh, and profit sharing. Sure. And they're making all these promises that now the accounting team team is going hold up. We have to go figure that out now. And that, like, if you could, before you create a way to pay, talk to your accounting team and tell. Tell me how complicated this would be. To keep track of what apps could we use that put the onus on the team members to give you good information. You know, that kind of thing could save y'all from small to big, a lot of hassle. So that goes. That goes to you, Jack, because you're. You're not so big yet that this is going to become a big, hairy mess.

[Jack]

Actually, that's. That's the exact reason my knucklehead moment is what you're talking about right now. So we were going through our employment line items on the P and L, and we started digging into it. And so when it's two or three employees, it's not that big of a deal. It's very easy to watch. Hey, where's this spiff going? And did they get paid and why and where? And we finally, now that we have maybe 10 employees or so, we're not able to track it as we were before, at least at that very high level. So we simplified all of our payroll, the structures, everything behind it, and then we started digging into, wait, why is this going to this line in the P and L above when it should be going below? How do we split up the time of people who run both sides, you know, leads or managers who run out in the field. And so we started having these questions around, how does this work? And what is our actual gross profit now? Because our gross profit might have been a little bit inflated due to the fact that we didn't have employees inside Topline. And so we think we're making money, but are we making as much money as we think we are, which we're Making huge, huge decisions on company wide. And so we. Right before this call, I was late because I was getting off the phone with a potential accountant, a new accountant, because our old accountant was kind of a third party. And so we're finally bringing somebody in house to help us out with this bookkeeping and accounting. But very, very.

[Ellen Rohr]

Okay, so let me, let me share this because we were talking before and you just had a guest on that was talking about gross margin. And I have not listened to the episode. I don't think it's posted yet.

[John]

I don't think it's aired yet. Yeah.

[Ellen Rohr]

What it triggered for me was that anywhere I go, go to all the conventions and everybody's talking about margin and there's almost this minds bigger than yours feel about these conversations. In my head, I'm knowing you guys are not talking apples to oranges gross margin when you're just meeting at the bar or at the back of the room or it isn't. It is a ridiculous conversation to have for what you just said, Jack. And there are some choices. It's not necessarily wrong to split up a service tax pay, for instance, where we would put the field wages up top and then maybe training or something else below the line. That's a choice. But I don't do it that way. I put all of their gross wages in cost of goods sold. Why? Because it's easier. Because it's easier. But see, unless you and I are doing it the same way and neither of us is wrong, we're not going to have the same parameters for that gross margin conversation. And so that's where it can get a little. Just, you know, be aware. Be aware as you're talking to other guys. And I've got strong opinions about this just from being on the accountant's side so many times. So like we all make these knuckleheaded decisions and then I sit down with the accountant who tells me, I wish you hadn't done that. Because for us to figure out that spiffy requires like six additional, you know, we've got service titan and then we get the report and then we massage the report and then we have to put it into paylocity and now we got to get that back over. These are real challenges for everybody. I don't know a company that isn't struggling in some way with this. And if they're not.

[John]

Yeah.

[Ellen Rohr]

They don't know about the mess. Not just scare you.

[Jack]

That's where we were though, you know.

[Ellen Rohr]

Yeah.

[Jack]

Six months ago. Is we. We didn't. We don't know what we don't know. And to answer your question of why people don't do this is a, you don't know what you don't know. I'm have an engineering degree. I have a business minor still. Like, I understand a P L, but to the depth of, hey, this is industry wide. You should be doing this and this best practices. It's really, it's really on the owner to A, go out and learn that and then B, if they want to find somebody who's going to come in, like you said, find somebody who's good and who understands that work. But one of the great things that we've, we've been working on is the ability for global talent who understands that this kind of information is absolutely growing. So we're able to go to other places and we're, we don't have to pay a CFO, you know, $200,000 a year or some, some ridiculous amount to be able to learn this. We can get that help here with our bookkeeper who can then, you know, get information from other locations which has.

[Ellen Rohr]

Been absolutely, I'll tell you, I'm, I'm loathe to hire a cfo. I would be really cautious about it unless you're pretty big because I don't know what they do all day.

[John]

I don't think, I don't think there's room for it.

[Ellen Rohr]

This is for the listeners, like, yeah, oh, we need, you need a great cfo. Well, maybe, or maybe you could get a fractional one or maybe you could share one with one of your business building buddies, you know, someone who has a clue and then you and the friend that you're talking to on the regular, if you have the same CFO that could, you could start to create some patterns that are consistent between your, you know, your cadre, the people you hang out with and you're growing businesses together and that, you know, I can tell by the guys you've had on your podcast, like there are groups, people that are at the same level or just above where you are that you want to hang out with and talk to and talk real with and you probably don't compete with because you're in different areas or you don't care and bring it. But you know, to have that kind of pattern. Now a couple of just guiding principles and this will lead into like how much should you share with your team too? But overall, the balance sheet is very particular. Assets, liabilities and equity and assets can all be verified by a third party source. Like your Cash, there's going to be a bank statement. And the bank statement's probably right and you're probably wrong. So use theirs and adjust it, debits and credits, you know, to clean up once upon, you know, do that once like the back of the truck, you just go line by line. Accounts receivable. In any shop, there's probably a stack of papers that have invoices. People owe you that money. That stack should match, you know, or service Titans AR should match QuickBooks or Intact's AR. Like there's, there's verifiable sources and it's a bit of, it's a bit of work to go through and do it. And if you have like a. Someone who likes Sudoku and puzzles on your team as a call taker, that person could be a cracker jack bookkeeper. And bookkeeping skills are very, very valuable because at some point somebody just has to actually take highlighters and go through and fig. This one's right, this one's right. That's wrong. We gotta fix that one. It's a cleanup. So as you go through and you verify your assets, liabilities, and then the difference is equity. And you do need an accountant or someone who understands tax law to help you properly allocate equity. Like you can't do that on your own. You're going to need some help right there. The balance sheet does not have a lot of room for creativity. I always vote for simple. I like one line that says vehicles and then another spreadsheet or something inside the accounting program that details the vehicles. We don't need every vehicle listed on the balance sheet. Are you with me? The balance sheet and the profit and loss are your main reports. Details can be found elsewhere. So the simpler you make your financials, this I learned from Jim Abrams. The simpler you make everything, the further you can take your business. I fight fancy all day long. Do we need it? Does anybody look at this? Who cares about that? Well, that's change the value of the enterprise. Is that going to help make a decision? It's like, why do payroll taxes go in gross margin? Well, technically they are. Or up in the cost of goods sold section. Technically they are, but there's no decision to be made. Get them out of the way and put them down in operating expenses and lump them all together. So I'm like, that's kind of my mentality from having done this for so long. Like the details, like clean them up and then you can go find the information elsewhere. Just one little thing. This is not for everybody, but have you guys heard of touchless journal entry integration at ServiceTitan?

[John]

No?

[Ellen Rohr]

Okay, I'm just going to say this is for your benefit or dear listener, if you're using Servicetitan, ask about this and talk to your accountant. Because what it does is it assumes that Servicetitan and your accounting program are just one big program. And instead of sending all of the transactions over to QuickBooks, just the numbers come over through a JE so it's cleaner. How many of you have export errors? A lot of them.

[John]

We asked Service Titan about this a few months ago because the bigger the company gets, the more complicated that Daily Sync gets. And they said that nothing existed. So we had to make our own. Yeah, we had to switch from syncing to daily summary journal entries because the entries, there were thousands of lines a day. So complicated and it would take us six hours a day to fix it. It was almost a full time person's job just to fix Service Titan Sync.

[Ellen Rohr]

There are people and apps that will help you do what you did. But now Service Titan does have that capacity. What can happen though? And this is something to talk to your prospect accountant, Jack, Are they willing to go to Service Titan? Like, will they just learn it, learn it well enough? Learn the connection points. Not everything is going to be coming from ServiceTitan to QuickBooks anyway. You know, sales ar, sales tax, maybe if you use POS and you're doing some kind of inventory connections, there's not that many touch points. They should be able to go to ServiceTitan and not say, well, that's, that's, you know, everything has to come to the accounting program and then I'll fix it there. That's not how these programs work. So that would be a good test of their willingness. And they don't have to know it now, but they should be able to learn it. And anyone who's listening, if as a maybe you're not an owner, as a team member, if you're willing to learn accounting and Service Titan, you have such a bright career, you have a limitless career right now. Are you with me?

[Jack]

Yeah, I am.

[Ellen Rohr]

If you're interested at all, impose yourself on your boss and say, I'm going to learn it. I'm going to get this center of excellence about Service Titan here. I'm going to understand the accounting program. That skill set is just going to have opportunities forever. Just saying. So anyway, getting back to the cleanup, then over on the profit and loss, I like to see certain patterns. So I like to see department clear to the gross profit level and we're going to use business units in service Titan who and they speak to the classes or departments over in your accounting program. But this is the pattern that I, it works. You don't have to do this, but I'm the guest today so I want to share this if you haven't. I like to see the pattern sales and cost of goods sold by trade, by small job, little job and then potentially by location. And if you're, if you do all that, then residential versus commercial. But let's leave that aside because that's a lot of work to get it down to that level. But if you do by trade. So if we do plumbing in H Vac, what do you do, John, at your company?

[John]

Plumbing, H vac, electric. And then we split those trades up, up a little bit deeper because the teams are large. So we need to know, hey, what's plumbing service? First install HVC service, tune up. They all have different payroll, so we basically just follow the payroll. For going on two years, I've partnered with service scalers to do our Google Ads, PPC and SEO and the results have been huge. It's been really exciting to watch as our website consistently jumps up rank as we're using more technology and we're moving faster than our peers who are all using legacy home service marketing companies. We use service scalers for ppc, our local SEO, our on page website SEO and our lsa. So give them a call if you're looking for leads.

[Ellen Rohr]

Okay, that, that's my next point. What we want to be able to do is align that pattern with your org chart. So if you have a department, so let's say it's Zoom Drain, we have three departments because each of those departments are different vehicles, different skill sets. And then you know, different people are going to be. There's a different operating basis in those departments, otherwise I wouldn't do it. But if there is, you know, like so at Zoom, we have drain cleaning service, drain cleaning install, small job, big job. Then we have pumping. And pumping is neither. Pumping is, it's got a different truck, it's got a different setup. So when the org chart changes, you know, that's the conversation, do we need another department? But for instance, and this is going to sound like sacrilege, I don't bother classifying the maintenance department separate from the service. Oh my God, why not? Because the maintenance should turn into something more like maintenance in and of itself. If a guy just went and did a maintenance job, it's a loser. We know it's a loser. I Don't need any more data. And if I just wanted to see how many maintenance agreements I had, there's another report for that. I could even see the sales of maintenance separate from the sales of service. But I would flow both of those into H Vac service for the sake of the department. And I think also the maintenance departments could be so much better if they were thought of like that. Sometimes we take a junior guy to do maintenance and I'm thinking we should send a senior guy to do a maintenance. Okay, you're with me on that. Like let's go fix that system. Not just put new filters in or you know, whatever. So. So some of those things. But again, this is style. And on the profit and loss, you have the freedom to reflect your departments. My encouragement for you, John, for you, Jack, and for you, dear listener, is to keep it really simple so that you can get clear information. So that you could say to the H Vac service manager, here's your sales, that's offense. And then here's defense, labor, materials and subs. And one more thing and I'll stop talking for a minute. On the labor side, the reason I put all gross wages, vacation, training, shop time, all of it and you know, turning wrenches time I put it in one bucket is the service manager should manage that, should manage that and still have that line item come in at the dollar and percentage that we're budgeting. Because if it goes below the responsibility dilutes and we're only looking. You see where I'm going. Again, you don't have to do it that way, but that's why I do it that way. So now the service manager is in charge of the labor material and the subs. That's really all I care about in the gross in that cost of goods sold section. Because on the daily, that's what the service manager is managing. Sales, offense, defense, labor, materials and subs. And now he's got a scorecard for the whole. And that's where we go with open book management. I know a lot of big companies who are sales dogs. Offense, bam, huge numbers. But there isn't any real responsibility or game being played on defense, which is going to be your cost of goods sold section. Labor, material, subs, how often are you.

[John]

Able to deliver the score? This has been something that we. I'm going to go back to your comment a second ago. These guys are sales dogs, but their defense is bad. My quick take is I've been there and it's because sales is very easy to measure and it Takes almost no work to measure sales. But you have to really put in energy to measure anything else the same way that we can measure sales. It takes a ton of work to get daily payroll. Like kind of a wild amount of work. It takes a crazy amount of work and tech stack to get your daily material costs like timely and in there every day.

[Jack]

And that's with John with VMI and that.

[John]

Yeah, that's with me with every advantage, all like all the resources and the tech stack to do it. And it still takes work. So we started producing what we call the daily gross margin tracker which is a daily updated Excel with like by department. Here's the gross margin, here's your revenue, here's your labor. But I mean that takes a full time person has to do daily payroll every day to deliver that report.

[Ellen Rohr]

Once a week is a great standard. Daily is a lot, a lot to get it all the way down to that level. Except for if you're doing it.

[John]

I like it.

[Ellen Rohr]

I think once a week. I'll give you a chance. But here's a couple of reasons why it's so hard. One, we talked about payroll. I like paying guys by the hour at Zoom Drain and with a lot of my clients we've done this. Again, not the only way to do it. There's some really good ways to pay out there, but I like paying them by the hour and then in exchange for their minimum acceptable level of sales. And then if they go beyond that, we share generously. Sales above goal. So the house wins first. That's kind of how I do it. And it's still some work to do that. Here's another thing. Only have three spiffs or contests going at any one time and maybe make them a level one, level two and level three spiffs and leave the dollar amount. Maybe one's a turnover. Turnover is $100. Selling Bio Clean or we use Zoom Drain bio. We have some kind of cool stuff you put in the drains. Maybe that's 50 bucks and then maybe there's a $20. See then accounting doesn't have to do the percentages in that don't share sales. I don't, I only I believe one person makes a sale. You get two people in it. Customers confused, they're not going to buy. One person makes the sale. The junior guy who there's helping, he gets the next at bat. But only don't split sales. Like we make it so complicated. And then we've got these managers bonuses based on this. Don't base anything on net because it's too. You have too much baloney going on right here. You know, keep it, keep it high level. So just really work with your accounting team. But if you change the way you pay, caution. You better take six months to do it with a lot of transparency. This is how we pay now. We're considering going here. Here's how you make as much as more with the new program. Maybe even you grandfather your old guys in and don't change them and we just get the new team going. Like there's. You could lose your whole team. I once consulted with the team that was paying way way. They were paying 45% of sales to their frontline team. And it was painful. And I said, you can't do it. Nine guys quit that day. We could have done it better. You know what I mean? So, like be really cautious about how you do it, but work that out and try and simplify it. But that's why payroll gets behind. And then materials. Now, I like drain cleaning because we have like 2% materials.

[John]

Yeah. It's beautiful.

[Ellen Rohr]

It is very useful. Okay. But if you do, if you do remodeling, if you do just general plumbing, I mean there's just a lot. Even if you do real time inventory where you're buying it and you're barcoding it, and then as you create an invoice, it changes from inventory to cost of goods sold. I've never personally never seen that number. Right. For all the time and energy that goes into it.

[John]

So also ours is Right. So I might have to show you ours.

[Ellen Rohr]

Okay, maybe, maybe.

[John]

But overall. But it's because we don't inventory. We have. We have vmi. So we cheat.

[Ellen Rohr]

Half of the cheat happens. That's a win.

[John]

No.

[Ellen Rohr]

So your vendor manages it.

[John]

Yeah. So it's. Yeah. Managing daily cost of goods sold. This was one of the inspirations for it is it is so much easier if you don't have to actually manage the inventory 100%. So an invoice crosses the desk. We're good to go.

[Ellen Rohr]

Because you're just expensing everything that comes across your desk. You're not trying to maintain that inventory number on the balance sheet. That's what I'm talking about. I love that. Have your vendor do it. Have them compete to do it. Especially as you get bigger, you get a little more power. That's a delicious thing. I heartily recommend that. So, yes, that's the best way to do it. And otherwise I would just expense it. But here's the. Here's the ticket. I mean, the biggest control you've got is to close the gate.

[John]

Yeah.

[Ellen Rohr]

So, like, you know, once upon a time, Al, Evie and I went to visit Tommy Mellow. And at the time, he won't mind me sharing this, at the time he was like 20 million, which is like a big milestone and a lot of people would love to be that big, but losing millions a year. So it's that offense. He was playing offense, man. He wasn't playing defense. And Al's comment as we toured his location was, I could use your forklift, Tommy, to load up my truck and rip off all your inventory. You could just walk in the yard, get in his forklift and load your truck from Tommy's. From Tommy's inventory. So, you know, just the old school stuff is really important. Like, even with the app stack, lock the gate, you know, a whiteboard. Now let's talk about open book management and how. So once we got to clean up our own financials, we got to create some meaningful patterns. Right. You're going to put a budget in place. And now we have where we are compared to where we want to be. We have a game, and now we have games for different managers at the organization. This is getting pretty sexy. Right? So where are you in your journeys with sharing information with your team members?

[John]

We have always. When I say always, I mean six or seven years we've been sharing down to gross margin. The where we have struggled a lot is what is the target? Because, and this is a known gap. So if I refer back to earlier in this conversation, I didn't come out of the womb knowing how to build an accounting department, and I sure as heck didn't know how to build a budget. So that's still an active project for us. Even now we're running budget light until the end of this month. We're really excited. We're going to a budgeting class and we're going to get into it.

[Ellen Rohr]

Where are you going? To the budgeting class.

[John]

We're going to. It's through Nextar. It's called Business Planning Workshop.

[Ellen Rohr]

Excellent.

[John]

Yep. So we're gonna exit with a budget for 25. First time we've ever had a real budget. The rest of it's us just putting it together. So really knowing the goal has been a challenge. And even as I say that, it's kind of shocking because I think every owner thinks that they communicate the goal. I know I think I communicate the goal. And despite the amount of times I think I communicated the goal, everyone else does not think I communicate the goal. So budgeting, I think solves that. You know, Brandon, my president went to a training held by nexstar maybe a month ago and one of it was a leadership development training. And he came back with a lot of really great tools. Most of them were how do you train people to read the financials? How do they understand the impact that their daily decisions have on our gross margin?

[Ellen Rohr]

Great.

[John]

Where does the money come from if we miss on materials? What comes from net profit? Because we're not going to do layoffs in the call center, center. So sort of figuring out how to explain that to our frontline leaders and our senior leaders, but most of them understand it at this point has been really big for us. And one of the big challenges that he came back with was are you showing them the whole picture, which we have never shown down to net? I think when you're a much smaller business, it might be challenging because you're fighting some, maybe you do take a large portion of the earnings. Whereas for a business our size, like no one has the expectation that I'm walking off with a large portion of our earnings. They see the hundred trucks, they see the building. I think, I think it's a little bit more self explanatory. So just over the last month, Brandon's challenge after coming to that training was, hey, I think we need to show down the net to our entire leadership team. They really need to know the score. And I let that sit for a second and the passing weeks I got more and more into it because as I think about it, I am paying these human beings to deliver these results. And me hiding what they've done for me doesn't help me or them because the only reason that they have jobs is to do this, is to provide these results for the business and they have to know what we're doing. So today was our very first, like, hey, down the net, here's what happens in September, or let's explain, let's walk through it, let's like. And then we did the trainings that Brandon came back with of, okay, we missed on materials in this department. Here's what that impacted and it seemed to really start clicking for people for the first time. So it was really exciting.

[Ellen Rohr]

100% of what you say about that. Just again, just to prove my, like how long I've lived, I went to the first super meeting of Contractors 2000, which then became Nexstar. I used to sell for them, I sold memberships and I was one of the trainers and started with the stuff that's you know, here's your asset, here's your elbow kind of stuff. And nextar has always had that as a core value that understanding your financials and open book management is. You can count on them to teach you the right thing there.

[John]

I think it's accountability. Like I think that's what ultimately we're all wanting. Right. Like we're wanting, we want our team members to take ownership of their portion of the business that we're entrusting to them.

[Ellen Rohr]

Yeah.

[John]

And. And they can't take ownership if they don't know the score. I'm just going back to, and I'm trying to say this in at least asshole ish way as possible, but like that literally is their jobs is to, is to deliver the results that we expect and they have to know if they did it.

[Ellen Rohr]

Yeah. Like you said that they may not be clear on what the game is. Did you ever see the very best management film ever, Office Space with Jennifer Aniston and Ron Livingston? Did you see this movie?

[Jack]

Of course.

[Ellen Rohr]

Yeah. Okay. And Jennifer Aniston is saying, how much flair do you want me to wear? I was that guy. Like, what is good enough for you people? When do we get a win? Why is it always more, more, more? Like it just is exhausting unless you know, like what's good enough? And that's what they're asking. Is this number good enough? Can I get a win here? And if I do, above and beyond, do I get extra for it? You know, those are reasonable questions. Let me share this too. What you did, it's going to take a minute. Some guys aren't interested, some guys aren't interested are interested. But it's going to be some repetition. Do this every month, do it every week. See, I think once a week looking at that dashboard, get it on one page, you know, on the overhead line, once a month I would do every line. Once a week I do overhead. Maybe overhead broken down into marketing and vehicles or some, you know, a couple other big rocks. But you don't have to go every line every week. Does that make sense? Do the big, the big numbers, the main KPIs once a week and then once a month drill down on every line. But here's that, here's something to keep in mind. It's day to day decision making that's going to affect sales and cost of goods sold. It's procedure. Below the gross profit, gross margin line. Are they using the gas cars right now? Marketing is separate. Let's take marketing into its own weird world. Okay. Marketing is making Decisions with weirdo data and always will be. Right. But marketing, overall, they have a percentage or a dollar amount and dollar amount that they get to play with for X number of calls, etc. But marketing is a little more complicated. But all the other things, insurance, is there an insurance policy that people follow uniforms or just can people Willy nail. It's all about procedure below the line with the exception of marketing, which is its own crazy game to play. And only, only the brave can play that one know that too. So sometimes like I don't put things up in gross profit or I keep saying that up in the cost of goods sold section that they can't control. Like you know, the vehicles, like if you use the cards, your vehicle cards, you're going to fill the truck when you're out of fuel. There's no decisions to be made. Just follow process, use the card, don't let your family fill their cars on the card or you're in danger of getting fired. Like that's procedure all the way down the line. And those become mini games. So as you, this is going to get so good. I'm so excited. I'm leaning in now. As you and your team.

[John]

Let's go, let's do it.

[Ellen Rohr]

As you and your team look at this, what happens is what will change the numbers? So suppose you're behind on budget, which by the way, be very candid with them, you made it up, you had some good input from next door guys and they're smart. But it's all a guess. We don't know if the storm's going to hit, if a pandemic's going to come. This may change. But this is the game. Are you in? This is what we're, we're going to do. Okay, you pinky swear? Yes. We'll play then for each of these. Like if we're behind, then the question goes, well, how do we make up the gap? So for sales, it could be sales training, increase in prices. You're going to ask them. You don't have to figure this out anymore. They know more than you let them do it. And then for cost of goods sold, well, you know, we could close the warehouse gate. Great idea. Okay, maybe we need a procedure for how you restock your trucks. That's tighter than the one we have. So what happens is you create a laundry list of projects, of projects. And as you do this, if somebody comes up with a wine like I was 50 or you know, 50 miles away from the shop and I didn't have the pump, that was Supposed to be. That's a real thing. So listen to the wine and then let's turn that into a project. We need a better restock system. Yeah, okay. Put it on the list. Are you with me? So now you're going to get a list of projects. We need a better gas card. We need a better uniform policy. You know, these things are going to come up in the meetings and listen to them and write it down. Then they're not whining all the time. Whining is repeating yourself and Satan the obvious because you think no one's listening. So jot it down and then pick five top projects and use EOS or use a whiteboard. This is Alivi 101. Alivi still recommends whiteboards because they are easy and they're going to get done. Do you guys use eos? Entrepreneurial Operating Systems. This is traction. Gino Wickman.

[John]

Yeah.

[Ellen Rohr]

Okay. It's great. That's where the projects those rocks come from are from. Looking at the financials and going, we could move that if we did better. And that's going to be a project. Start, change, stop. New procedure, updated procedure. Are you connecting the dots? Is this just terrific?

[John]

Let's assume that we're working with. Okay, coach me. Ellen, right? I just presented my team down to net profit, our September results. I'm concerned as the owner that, hey, I had buy in for an hour from 9:30 to 10:30 this morning. We deep dove, we did a training, we saw light bulbs, right? And I get the project thing. I hear that. I get the presenting results. What do you think the next 90 days of my life looks like as the owner so that I can help continue to drive understanding and results out of open book management.

[Ellen Rohr]

One, I believe in the ride along. If there's somebody like this, if there's the meeting you're not invited to outside after the meeting. You know, they happen. Like, who are the opinion leaders? Who are your missionaries within your group? Ride along with them. How's this landing? Is this making any sense to you? Do you think this is a waste of time? What were your thoughts about it? You know, what would you do if I were. If you were me? You know, here's my intention, here's what I'm trying to get across. Here's the game I'm trying to play. Is this, am I on target? Am I way off? And listen to them. So ride alongs that winch. Don't look at your phone, don't meet them on the job. Get in the shotgun seat and spend some time or Sit elbow to elbow with the accounting team, the dispatchers, the CSRs. Am I missing the mark? Like, you are a very vulnerable, humble guy. John and Jack too. The way you guys have shared today. A lot of guys would not. They would pretend everything is just fine. And I can tell already that you're okay.

[John]

Everything's totally fine here.

[Ellen Rohr]

You can take it. In other words, if someone had a criticism or someone had some advice. Keith Mercurio, I love his line. What advice do you have for me? Not like feedback, not like criticism. What advice would you give me? It's such a great question. So ask team members and try and find those guys who are influencers within your team. Keep doing it. Do it. This is a great expression. Do it. Shitty at first because then you'll get better at it. But it's the discipline of doing it. It's like playing golf. It's like going for a run. It's like, it's just the consistency that adds up. So some meetings are going to go well, some won't. I would do the weekly meeting with the field supervisors or like your junior managers, those guys in charge of a crew, the main managers, H Vac, install H Vac service. Those guys, the accounting team, the dispatchers at Zoom Drain. We have like 13 people and we have a random guy. Does he want to come to the FQC meeting this week? Okay. So that he can go to the meeting outside after the meeting and tell them what they talked about. Like just to rotate in anybody from the. Who's interested in going the fqc. I'll go and just bring them in and let them.

[John]

What's fqc?

[Ellen Rohr]

Oh, it stands for Financial Quick check. So that's a one page dashboard report that has month to date compared to the budget, compared to year to date compared to the budget for where we should be by the end of the month this year. And then sales, cost of goods sold to the gross profit, gross margin, line, dollars and percentages. And then one bucket for overhead on the weekly. Just like is that overall number and percentage? Maybe have another bucket for marketing. Or even better, have another dashboard for marketing. Do a separate marketing meeting with the same basic idea. You're laughing, Jack. I mean, marketing intimidates me.

[Jack]

Yeah, I was getting the feeling you don't like marketing all that much. Just island them.

[Ellen Rohr]

I know how to go make a sale. Like there's some old school things that I can do. I could make. If it was me and one guy left on the planet would be selling each other something like I get that. But there's a lot to do with marketing anymore and I am not the expert on it. I am tipping my hat to people who are brave enough to deal with what we're dealing with these days. It's a lot and it's exciting. Just, it's not my strength at all. So anyway, then once a month you could go line by line and maybe once a quarter bring the whole team in to do the full deep dive. Right. So not everybody has to know every number every week. You can just give them the numbers that are relevant for their position. So for the call takers, what are the number of leads that come in? What are their close rates? Like each. And some of those you can get from service titan or your CRM. Like that's what those dashboards are for. Create dashboards per position. The tech dashboard's terrific. Customize it to work for you. So those guys should see that information every day, all day long. Right? I'm sure you guys are playing the game there. So it's going to take, it is going to take consistency. I think the ride alongs, the side by sides, the being willing to, you know, get some, some feedback or advice from your team as you roll this out is going to steer you in the right direction. Your team will fix everything for you if you let them in on the game.

[John]

That's what I'm consistently finding is. And that's why we, that's why ultimately what led to the decision of like, well, let's just open it up. Because we started, we started delegating, I would say real problems. And we ch. We did a reorg so that we could do that. But then we started like, hey, this is now like this section of the business. You have 50 people in your vertical. Like, this is your problem. And I'm going to go, I'm going to just go drink coffee over here and like talk to people. That's been really good and really successful. And for the first time I feel like we have this momentum of ownership and accountability in our senior leaders, which we just haven't had before, which is really exciting.

[Ellen Rohr]

And let me add this, I'm not seeing this as advice for you, John, but just in this topic in general. Sometimes that kind of delegation turns into abdication and that's why a formal project management system is important. Like once a week, if it's a top five project, okay, the others are molding on the list. They're on the list, we'll get to them. But we got to get one of these done to make Room for a new one. Right. You can't do it all at once. So you have your top five, and let's say one of your top five is to update the truck restock. That's a biggie. That can solve a lot of problems for a lot of companies. So to do a better restock system, so you now have a meeting on the calendar that you hold to and you go through the steps of delegation. What are we doing? Why are we doing it so we're not 50 miles away and don't have what we. Okay, and then who's going to be in charge? Who's going to help? How much time, energy and money do we need to get this done? How will we know it's done? What's the reward or consequence? That's really Alivy 101. And it always works. EOS is the same thing. But if you don't have those meetings and if you don't really meet between the meetings to work on the projects, on work time, like, they're not going to do it on Saturday. You would have done it on Saturday, but they shouldn't do it on Saturday. They have lives. So you're going to give them time during the week so that when they show up at the meeting, there's a report. Here's what you got. And in eos, there's a moment like you hit a rock or not a rock, a rock is. You hit a sticky point and then you ideate, like, what could we do to help this guy, get him off the dime? But unless you have some formal project management cadence at your company, you're just going to abdicate, be disappointed, and end up taking it back again. Have you ever done that? I have. Okay. So.

[John]

Oh, yeah. I think there's moments and I, I've seen it and I saw it a lot. Whatever. There's a step change, right. So I'm in the middle of a step change and I've just gone through enough of them now that I know what I'm in. But, but I've, you know, the first couple step changes that I went through, and I see this a lot with other owners too, is they go, they hire that manager and then suddenly they think that all their time is freed up. There's a problem that only I can focus on because no one else else is thinking about this problem. And that's. That is now my role inside the organization. And I have to slowly move my way into that and make that a part of my rhythm. And. But it can really easily turn into abdication. But it always happens at these step changes. Right? Like hey, the business, you know, now we have just a really, really competent senior leadership team which has freed me up more, which is good. That's what they were supposed to do. And if I was irresponsible, I would show up to work less. I don't. It's just now like there are a list of things that, okay, no one's thinking about this yet and here's where I have to live.

[Ellen Rohr]

That was so well said. I think another reason that happens one is they finally have a little bit of money. The only finer. It's like you stop hitting your hand with a hammer, it feels a little bit better. But also I think at that point you're so burnt out that you just, you just need a minute and that's. It can snowball though. And then you remove yourself too much from the business and it will collapse. Things are either growing or shrinking. There's no staying. There's no staying the same here. So I think that was really nicely said, John, before we wrap up because we're going. So like, what's your, what's your dream now? Like as you have some time. And I want you to answer this question too, Jack. So like if you could snap your fingers and look maybe three years in the future, what would that look like for you? What's the next. Because it sounds like you're both growing. So then your goals change and your, your mission can evolve.

[John]

Yeah.

[Ellen Rohr]

What's. What's next for you?

[Jack]

We're shooting for 20 million by 2030. So that's our big. That's our big goal. Hit the 20 million mark and then.

[Ellen Rohr]

Maybe to have an EBITDA goal as well. Offense, defense. Right. Because 20 million losing 2 million a year is a possible scenario. And this is where too. I love how simply you said that. I bet you're team knows that goal.

[Jack]

They do. It's a very well talked about thing not to circle back, but we, we open up our P L monthly to the management, our service managers and our ops managers just because, you know, I've followed a lot of what John does. And so I get a sneak peek into what the next thing is, which is wonderful. I love it. And I actively copy.

[Ellen Rohr]

Tommy calls it rip off and duplicate.

[John]

R and D. R&D department.

[Ellen Rohr]

Yeah, I see you doing it. How about you, John?

[John]

Our goal isn't much more complicated. We want to be 100 million by 2030. There's obviously a few steps in between here and there, but we believe most of it's going to be in one market that, you know, 60, 70 million in one market. And then we'll start green fielding other branches. So there's a well trod path before us from other people much smarter than me. So I'm just, just robbing and duplicating.

[Ellen Rohr]

Yep. There you go. I love it. 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. Service tightness to the trades. And I love the trade so much and I feel like my life has come full circle that my number one responsibility is just to show off cool guys like you. So thanks for having me on the show and I will share and I gave you a couple resources if you want to share them with listeners, too. So love so much. Thank you.

[Jack]

Yeah, this was really fun. Thank you, Ellen.

[John]

Yeah. Thanks for coming on today, Ellen. This was a master class.

[Jack]

This really was.

[John]

And I appreciated everything.

[Ellen Rohr]

I had a ball. So if anybody cancels last minute, call me. I'll jump on.

[John]

All right. Sweet.

[Ellen Rohr]

Okay. Thanks, man.

[John]

Thanks for checking out owned and operated. If you like what you heard, check out owned and operated dot com.