#154 - Business Cost Management and Sustainable Home Service Growth

Summary

Owned and Operated - A Plumbing, Electrical, and HVAC Business Growth Podcast
Episode #154 - Business Cost Management and Sustainable Home Service Growth
Release Date: December 3, 2024

Hosts:

• John Wilson
• Luke Wieden (Guest from Del Jo Heating and Cooling)

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Introduction

In Episode #154 of the "Owned and Operated" podcast, host John Wilson welcomes Luke Wieden from Del Jo Heating and Cooling to discuss effective business cost management and strategies for sustainable growth within the home service industry. The episode delves into practical measures for enhancing profitability, optimizing operations, and developing leadership within HVAC and related businesses.

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Background of Del Jo Heating and Cooling

Luke Wieden provides an overview of his journey and the current state of Del Jo Heating and Cooling:

• Company Overview:

  • Location: North side of Chicago
  • History: Over 102 years in business
  • Current Workforce: Approximately 80 employees
  • Revenue Growth: From $5 million 11 years ago to a steadily growing present, focusing on consistent profitability rather than rapid expansion.

• Personal Journey:
  Luke transitioned from a career in finance to the HVAC industry during an economic downturn, leveraging his family's plumbing and heating business background to steer Del Jo towards success.

Notable Quote:
"We never had a big, huge jump in revenue year over year. It was just slow and steady trying to build as we went on."
— Luke Wieden [01:58]

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Cost Management Strategies

Luke emphasizes the importance of meticulous cost management to sustain and grow the business:

• Deep Dive into Financials:

  • Conducted a comprehensive review of the Profit and Loss statement.
  • Identified and eliminated excessive merchant and financing fees, reducing them by 3-4 percentage points.

• Revising Financing Options:

  • Shifted from offering long-term (60 months) 0% financing to requiring a 25% deposit, maintaining customer retention without losing jobs.

• Negotiating with Vendors:

  • Adopted a proactive stance in negotiating better deals with suppliers.
  • Moved from carrying significant inventory to consignment deals, optimizing equipment purchases.

Notable Quote:
"I had to inspire and trust my management team and leaders to buy into this philosophy of we have to run more lean."
— Luke Wieden [00:00]

Notable Quote:
"It's really a process over 18 months of trying to just chip away at cost expenses that are not needed."
— Luke Wieden [19:17]

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Increasing Efficiency and Profitability

Luke discusses strategies employed to enhance operational efficiency and profitability:

• Revenue Per Employee:

  • Targeting $350,000 per employee, a significant increase from the $200,000 range two years prior.
  • Emphasizes the importance of maximizing each employee's productivity.

• Field Efficiency:

  • Regularly reviews service department performance, focusing on reducing $0 tickets and diagnostic-only tickets.
  • Implements coaching and process improvements to ensure technicians are effectively billing for their services.

• Streamlining Operations:

  • Utilizes technology such as Dispatch Pro to objectively allocate calls to high-performing sales personnel.
  • Focuses on blocking and tackling—basic operational metrics like call distribution, opportunity conversion rates, and dispatch efficiency.

Notable Quote:
"We're giving the calls to the people that are performing. And, when there's a deviation from that, I get a little excited."
— Luke Wieden [26:57]

Notable Quote:
"Our revenue per head is probably down 15."
— John Wilson [End of Transcript Context]

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Leadership Development

Developing a strong leadership team is crucial for sustaining growth and managing efficiency:

• Investment in Leadership:

  • Focused on leadership development to ensure managers are equipped to handle operational challenges.
  • Overcame significant turnover by fostering a culture where team members step up to fill critical roles.

• Team Alignment:

  • Implements weekly leadership meetings to ensure alignment on cost-saving measures and operational goals.
  • Encourages a mindset of "freedom within the framework," allowing leaders to make decisions within established guidelines.

Notable Quote:
"Leadership development is important for myself. I'm immersed in it personally, and I expect my leadership team to also do that."
— Luke Wieden [31:07]

Notable Quote:
"If you're not growing, you're dying."
— Luke Wieden [32:01]

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Revenue Optimization

Optimizing revenue streams plays a vital role in business growth:

• High-Ticket Services:

  • Focuses on higher-margin services such as replacements rather than repairs to boost average ticket sizes.
  • Example: Transitioning from selling techs to comfort advisors, increasing average ticket by $10,000.

• Service Area Optimization:

  • Maintains a compact service area to reduce travel time and increase efficiency.
  • Maximizes labor utilization by minimizing "windshield time" and optimizing route planning.

• Strategic Department Management:

  • Evaluates the profitability of different service departments, shutting down or restructuring those that do not meet revenue targets.
  • Example: Considering the closure of a department with an average ticket of $250 to reallocate resources to higher-ticket services.

Notable Quote:
"Our plumbing average ticket went from like $600 to $3,000, and electric is at $3,500 average ticket."
— John Wilson [36:48]

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Technology and Tools

Leveraging technology to streamline operations and enhance efficiency:

• Dispatch Pro:

  • Facilitates objective allocation of service calls to top-performing sales personnel, ensuring higher conversion rates.

• Hatch Software:

  • Automates workflows, integrates with Service Titan, and significantly increases customer engagement and estimate conversion rates.

Notable Quote:
"Every day we're looking at zero dollar tickets... why do we have 10% of our calls were $0 tickets?"
— Luke Wieden [21:49]

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Key Takeaways and Advice

Both hosts share actionable insights for home service business owners aiming to optimize costs and drive sustainable growth:

• Adopt a "No Man" Mentality:

  • Be critical of all expenses and require a solid business case for any additional spending.
  • Example: "I'm just trying to get the whole team on board in this mindset of we have to run super lean to be profitable."
    — Luke Wieden [42:17]

• Regular Financial Reviews:

  • Conduct weekly reviews of financials to identify and eliminate unnecessary expenses.
  • "If you just have a practice where once a week you look at something on your P and L and dive into it and ask yourself, do we truly need this or can we find this cheaper, better, faster?"
    — Luke Wieden [43:02]

• Set Clear Profitability Targets:

  • Aim for gross margins above 50% and EBITDA north of 20% to ensure business sustainability.
  • "Everybody's goal should be at least 20%."
    — Luke Wieden [44:34]

• Maximize Labor Efficiency:

  • Ensure high revenue per employee by optimizing labor management and minimizing unapplied labor.
  • "Look at your unapplied labor at any given time. That's a big problem in our industry."
    — Luke Wieden [45:58]

Notable Quote:
"If you're in single-digit profit, you're just, it's a hobby."
— Luke Wieden [44:34]

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Conclusion

Episode #154 offers valuable lessons on cost management and sustainable growth for home service businesses. Through strategic financial oversight, leadership development, and operational efficiency, Luke Wieden of Del Jo Heating and Cooling exemplifies how to build a profitable and resilient business in the competitive HVAC industry. The episode underscores the significance of disciplined expense management, maximizing employee productivity, and leveraging technology to drive business success.

Contact Information:

• Luke Wieden:
  • LinkedIn: Find Luke on LinkedIn
  • Phone: [phone]

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For more insights and actionable advice, visit www.ownedandoperated.com.

Transcript

[A]

Profit is not a bad word because it's just sustainability is what it is. I had to inspire and trust my management team and leaders to buy into this philosophy of we have to run more lean. So this is not kindergarten. We're not trying to be fair. Everybody doesn't get a chocolate milk around here. We're giving the calls to the people that are performing.

[B]

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. Welcome back to Owned and Operated Today I've got my friend Luke Wieden on with me from Del Jo. Welcome to the show, Luke.

[A]

Hey John. Happy to be here. Pleasure.

[B]

Dude, I'm, I'm, I'm glad to have you on. I'm doing like the Chicago tour right now. I just had our mutual friend Brian on a couple weeks ago. His episode was great. I but. And you're running H Vac company out of Chicago. I'd love it if you sort of got the listener started a little bit with your background and what the, what Del Jo looks like and, and how you got there.

[A]

Well, let's, let's set the record straight. Brian is not from Chicago, he's from the suburbs. Yeah, clear distinction because anybody that's close to Chicago says they're in Chicago. He's, he is my good friend out in Plainfield, so good hour outside of the city. But anyways, yeah, we're Delo Heating and Cooling here, north side of Chicago. Been in business for 102 years. I personally been in the trades for the last say 16 years. Just quick background how I ended up here was working at the board of trade for options company and had been there for like a year and it was, you know, kind of my dream to get into that world finance world and the stock market crash, economy crash and I found myself looking for something to do and my wife's family owns a plumbing heating business in central Illinois and with, without any knowledge of the industry, we moved down there and work down there and learn the industry and, and spend a lot of time working with family down there and did a good job of helping them get in the direction they needed. To go before we moved back to Chicago. So, you know, it landed them on the Inc. 5000 list back in the day and sent them in the right direction. And now my brother in law to the day still runs the company. It's a great, you know, being at family dinners and all you're talking about is H vac and plumbing. It's. That's basically our world. Right. So anyways, been with Del Jo for now 11 years. Worked in sales, sales management. Worked my way up in the general manager when we partnered with Heartland Home Services in April of 22. So we've been in the private equity world for the last say two and a half years and it's been a phenomenal experience. Have learned a lot, tremendous amount and learned a lot of what we shouldn't be doing too, you know. So it's been good and bad in that respect that, you know, there's a lot of things that that environment brings to you that you just don't know as, as a business operator or owner, you know. So that's kind of the 30, 000 foot view of how we got to where we're at now. That makes sense.

[B]

Yeah. No, that's great. How, how large was the family business in middle Illinois?

[A]

So right now both.

[B]

Yeah. When. When you were there and now?

[A]

Well, when I was there, I want to say there was 20 some ISH employees and now I think they're pushing around 60 or 70.

[B]

That's a good size business.

[A]

Yeah. And it's central Illinois, so it's. Yeah, big footprint. A lot of rural communities.

[B]

Yeah.

[A]

And they do a lot of everything. Plumbing, heating, electrical, sewers, drains, wells, septics, you name it, they. They can do it.

[B]

Yeah. Yeah, that's cool. And then how, how large is Delo now?

[A]

We are roughly pushing 80 employees.

[B]

Nice. Nice.

[A]

Yeah.

[B]

And how large was it? You said 11 years. So how large was it 11 years ago?

[A]

I think we're doing about 5 million and 35ish employees at the time. You know, we've always been slow and steady, focused on growth more, just trying to stay profitable over the years. So, you know, we never had a big, huge jump in revenue year over year. It was just slow and steady trying to build as we went on.

[B]

Yeah, yeah, there's a. There's an operator locally who has taken the same perspective. He's still private. And I think I want to say they're like 15 or so million and I've honestly always admired that because I think like the way we tend to grow is we sort of unlock the next step. Yeah, so we, we go through these very step, step by step growth patterns where each step unlocks the next thing. So like the last few examples we've done is like weekends unlocked like $5 million of revenue. And that's a very like, attributable thing because we just look at the performance on the weekends and what was the other one we have? Well, like adding comfort advisors. It like did this thing and then we're working on one now that like, we think it's $5 million next year. So like growth is just this sort of like. And it's not, it's not slow and steady. So. And that's my point in saying that is like, I really admire the slow and steady because our way is chaotic.

[A]

Yeah.

[B]

Like it's, I wish it was slower instead, here. Instead it's like, hey, you want to surprise 7 million, go figure it out.

[A]

Well, and that's why, you know, you and I get along so well because you, you know, give me those growth ideas. We, I, I need to post growth. That's, that's an important piece of our puzzle too. So. Yeah, and so I think that's why we've gotten along so well is because you can help me on that front, you know.

[B]

Yeah. I think if, if there's one thing we can do, it's grow and that, that has yet to be the problem. All, all the other problems come below that, which is where, where you're world class. So, you know, when I thought about bringing you on to the show today, I was like, you know, Luke is one of my thought partners in how to run an efficient and profitable business. And you've really helped me a lot with understanding H Vac too, which I'm just super grateful for. But so you run a. And it's, it's only H Vac. I think you guys are starting to talk about plumbing.

[A]

We just hired our first plumber, so that's kind of be my growth mechanism for 2025.

[B]

Nice.

[A]

Yeah, we're. We're first plumber on board.

[B]

Nice. Nice. And when, when was the start date?

[A]

September 10th, like a couple weeks ago.

[B]

Have numbers been good?

[A]

He's already at 12,000 in revenue, so for that feels pretty good. Yeah, for like a week. Yeah, yeah, a couple week and a half. So he's doing good and we've got the support system built around him to, to grow. So yeah, I think it's going to be great. I'm hoping, don't quote me, but do a million in plumbing next year is my Goal.

[B]

Yeah, no, I think that's great. I think that's great. Okay, so we, and your, your big focus is running best in class H Vac and best in class profitability too, which is great. And I take a lot of inspiration from that. So that's really what we're going to spend some time on today is like how to sort of unlock higher profit inside. Inside a, you know, residential home service company.

[A]

Yeah, for sure. And I'll just a little background like over the last say 18 months it's been a strict focus on efficiency improvements from the top bout from the top down here at, in our organization because I realized last year, this year and I, I'm also projecting next year is going to be a difficult market for us to manage and you can't do that when you're running a fat organization. So we took about last year, tried to take very specific steps to increase efficiency, lower overhead and increase our profits. That's kind of been the focus that we've, we've taken. Just give you an example, John. And we're. You're flat on sales year over year, but our EBITDA is up 25%, you.

[B]

Know, and that's freaking insane.

[A]

Yeah, it's a pure focus on being deliberate on everything. So happy to dive in and kind of give you some kind of areas that we focused on to look at, you know.

[B]

Yeah, yeah. And I'll, I'll be the first one to, I'll be the first one to say it. You know, we've, we here have focused a lot on our top line growth and it's because that's something we've been, one, it's been something that we've been good at. But two, you have to earn the right to get faster and better financials. And we hadn't quite earned that right yet. So we couldn't even, you know, have a great conversation about improving our margin year over year. But we, we've had a few of our recent guests. Tommy Mello was a specific example where he said look up to like 50, 60 million. All I talked about was revenue and I was the dumbest guy in the room because everybody didn't, no one cared. All anybody cared about was your ebitda. And I think that that has been, I know for me and a lot of the circles that, that I'm spending time in, that's becoming the conversation is we're all at that size. We're like, hey, yes, we ran, ran fat to get here and now we have to run effectively.

[A]

Exactly. Because if we have a 2025. Like 2023 was like, you need to be able to sustain that, and you can't do that when you're running really heavy like that. So. Yeah, that makes sense.

[B]

Yeah. So, yeah, walk me through the last 18 months, 24 months of what you've guys been up to.

[A]

Well, yeah, so, like, it just started with a deep dive, P and L dive. And, you know, my partner's at Heartland, and that's really where they can point me in the right direction and say, for example, we were paying outrageous merchant fees and we were paying outrageous financing fees. So, like, I started there on those two things. We redirected some of the financing fees for consumer financing, the programs we offered.

[B]

We.

[A]

But we kind of really. I really spent a lot of time on that, and we were able to cut that by three or four points. And that was a huge number, you know, and that really isn't just saying, oh, I'm going from one provider to the other. That was really diving into the programs you're offering on your sales proposals.

[B]

Yeah.

[A]

How you're coupling that with down payments on. On offerings. We started. We rolled out like every 0% finance we offer, we cut off the high end. We don't offer 60 months anymore because they became too expensive. I started just saying, listen, we're gonna. We're gonna need a 25% deposit from the customer to do these. And without hesitation, every customer came up with that 25%. We did not lose one job. Yeah. That cut our financing down tremendously. And also the offerings based on the equipment packages change too. So.

[B]

Yeah, something that we just did where, like, as we rebuilt our sales packages, we did the same thing. And, and then we were able to.

[A]

You're.

[B]

What you're probably about to say is, like, we were able to negotiate specific dealer fees on this specific plan for this specific equipment through the manufacturer. And the difference is probably a hundred thousand dollars a year.

[A]

Yeah, it's. It's big and it's crazy. And as we were going through this process, you start tacking on those little wins and they just add up and add up and add up.

[B]

Yeah.

[A]

Really, the merchant fees and consumer financing fees, people are getting destroyed by them, and they just continue to get up, go up, and it's. It, It. It boggles my mind that these contractors just accept it.

[B]

Yeah, Well, I think people don't think about it. Like, I was talking with. I do want to know what you're paying for merchant fees now, but I was talking with a friend of mine, and I Was like, hey, when was last, you know, $20 million contractor?

[A]

Yeah.

[B]

And I was like, when was the last time you negotiated your, your immersion fees? He's like, what are you talking about? And I'm like, you're, you're processing like $14 million on plastic right now, and you don't, you're not looking at the 4% that they're charging you, like my guy. So we, we just did our merchant fee negotiation. How often are you keeping up with that?

[A]

Oh, like now I'm gonna do it every year. Yeah, listen, vendor, A vendor negotiating is my thing. I love it.

[B]

Yeah.

[A]

I love going to bat for these things. And, and I think there's a science to doing it. Like, it's not just beating up your partners. I think again, they are your partners at the end of the day. But it's got to be a win win for everybody. They can't just be friends. Fed on the hog and you're, you're taking in the pants. So that, and then like on equipment negotiation drive, we used to carry a lot of inventory. I carry zero now. Setting up consignment deals with vendors and like just going down the list, John, and there you'll be surprised if you just can tweak things by 1% here and 1% there. It adds up.

[B]

You know, we, we've been doing this. We got into the habit of this a few months ago. So we're, it was like March and we look at our cellular bill and it was $20,000.

[A]

Yeah.

[B]

And. And we didn't think much of it because we, it had been $20,000 for two years. So 20 grand a month. And, and that just like kept happening. So like, if you were budgeting, you would just continue budgeting the same thing. Anyways, we ended up opening it up and we found out, we're like, oh, this is all out of whack. Like, this is insane. And we tore it up and then I think it's down to six now. So $14,000 a month in savings, 180 grand a year of savings just to Verizon.

[A]

And that's one thing.

[B]

That's one thing. Right. So then, so what ended up happening is we started developing, we call it the fuck up list. So once a month there's a fuck up list of like, hey, here's the 10 things that we're gonna fuck up this month. So, you know, it could be H vac pricing, or it could be water heaters, or it could be vendors or software merchant fees. So our merchant fees, we cut Them in half or the, you know, the interchange part that we could affect.

[A]

That's amazing. Yeah. And I'll say take it. Taking this one step back, this wasn't just me that took this, this idea on. I had to, I had to inspire and trust my management team and leaders to buy into this philosophy of we have to run more lean. So yeah, every leadership meeting we, we have one segment where we talk about, hey, bring to the table 1 cost saving improvement. And it might have been something of a $10 a month thing all the way up to $10,000 a month. But I'm trying to get the, try to get the whole team on board in this, in this mindset of we have to run super lean to be profitable. Right. And once I got that momentum going, every month I'd have five to 10 ideas and we might not use them all. Some of them are outrageous. I said that's fine, bring all of them. And then let's talk about the two or three that we can implement every month. And we just kind of chipped away at it and chipped away at it. And a lot of that cost savings also came down to people. It's like, I think in our industry we're very quick to hire somebody to do X, Y, Z when there's another person in your building that would be doing that would be willing to take a pay raise to do another task instead of hiring a whole nother body. And I think really our headcount reduction plan and strategy that we, we rolled out worked really well. We, so we're probably, I want to say our head count is probably down 15.

[B]

Yeah.

[A]

You know, so, but again, I'd rather pay an, an all star more money to do an add on a task here and there than bring on a whole nother employee with head count related costs, insurance, that kind of stuff. Yeah. Because all that adds up. Right?

[B]

Yeah.

[A]

So that's kind of the approach too. On the, on the other end was just taking a look at our head count, what people are doing and, and, and if there were the right people in the right seats and like the organizational structure and, and how, how we're, how we're dividing the departments up and how much overhead we have in each department, how much revenue we have per head. Like all these things are factors that I'm looking at all the time.

[B]

Yeah. What is your revenue per head?

[A]

350 per employee. Yeah.

[B]

Yeah. That's amazing.

[A]

It's, it, it goes up and down here and there, but roughly that's kind of where I'm shooting for is to stay. Like if we think we need to add somebody, I take a look at the impact of adding another person to that number.

[B]

I want to, I want to walk through that a little bit deeper because I think that that's really interesting. So that's 30,000 of revenue a month per employee. So just to give the listener perspective, here are, we're, we're counting you. We're counting call takers. That's per employee or per field employee?

[A]

Per employee.

[B]

Okay. All right. So in order to achieve that, you have to be producing a half a million of revenue per field employee. Does that sound right to you?

[A]

Yeah, something roughly. Yeah.

[B]

Yeah. So that's a lot. Right. So you know, the other side of this is like how do we, how do you, how do you manage that effectively? And where was it two years ago? Were you in the 250s? Were you in the 200?

[A]

I want to say it was in the like 200 range.

[B]

Okay.

[A]

Yeah, it was.

[B]

That's an insane improvement.

[A]

Yeah. And again, this has been a process over 18 months of trying to just chip away at caught expenses that are not needed. I think when you get to our size, John, there, there are so many hidden costs in there that.

[B]

Yeah.

[A]

Float through that you don't even know you're spending it on.

[B]

Yeah.

[A]

So you know, I think leveraging technology has had a lot to do with that as well. And leveraging people's talents too. You know. So like I said back to. Instead of having two people doing two separate tasks.

[B]

Yeah.

[A]

I tried to get one person to do two tasks exceptionally well and pay them well.

[B]

Yeah. So when you're looking at like that some of us had. I, I think I, I think I get some of this. But even a half a million per field employee is likely achieving higher than many of our listeners.

[A]

Yeah.

[B]

So how are you driving infield performance to be able to maintain that?

[A]

That's a great question. So that's like another strategy that we're focusing on is just field efficiency. Right. Like, so let's take the service department for example. Like every day we're looking at zero dollar tickets. Dive. Our service team is diving into those. And why do we have 10% of our calls were $0 tickets. And I need answers on why those are. And there's going to be some exceptions, but a lot of the times it's, let's identify what the why this is happening, look for trends. Maybe it's one guy, maybe it's five guys or gals. And we look to where we need to coach and improve in on their process. It really comes down to a process thing. So we're trying to look and dive in deep into every day. What, what, why are we not billing efficiently on the service side? And why do we, why do we have zero dog tickets or why do. What really, you know, really pisses me off is why do we have diag only tickets? John calls Migel Joe up and says I need your help.

[B]

Yeah.

[A]

And then I leave with a hundred and twenty nine dollars or whatever it is.

[B]

Yeah.

[A]

Why did they are paying us to leave? Yeah, they're not paying us to solve a problem because obviously you didn't, didn't create any work.

[B]

Yeah.

[A]

So like those are the most intriguing to me. So like my service manager Jordan, he's, he's on top of it and he's trying to dive into the reason why behind those things are happening and sometimes, and there's been an evolution here in our service department over the last 12 months too. It's like yeah, there are service techs out there that just go out there and go through the motions. Right. We have to decide is our, do they get it, do they want it, do they have the capacity to do the job we're looking for? And if they don't, if they can't check those three boxes, they're not the right person on our bus. You know, if they do, then it's our problem. We haven't trained them properly. We, we haven't given the resources they need to improve those zero dollar tickets or the kayag only tickets. So again back to the full circle, the billing efficiency, like we really take a look and really try and keep an eye on how we're doing that because again I would rather, I would like to pay my technicians more and more and more but they're going to produce more. Right?

[B]

Yeah. So all right, so you're managing I would say a high performing field team at a half a million of revenue a piece and then your team is getting 350,000 or so revenue per employee. So how often do you measure that? Is that like a trailing thirty? Just like trailing thirty.

[A]

It's not something I'm looking at every day. I'm probably taking a look at it every quarter just to make sure it's not. And at, at the end of the day John, I could probably not look at it for a year because all the stuff we're doing daily really drives that. Right?

[B]

Yeah.

[A]

I think it's something that contractors need to look at, see where they're at, create a Baseline and say in 12 months this is going to be 50,000 more per head. And these are the steps you take because really that trailing number is not gonna, not gonna go up and down dramatically overnight. Yeah, it's small improvements that you're making overnight over time that are going to lead to that. Like. So again, to answer your question, I'm not. Look, it's not something I look at every day. I look at numbers all, every morning. That's my thing, like looking for, trying to be proactive on KPIs and, and financial numbers and. But that's not one thing that I'm looking at every day. It's something I look at probably every quarter, every six months, just to see where we're at because I know the things we're doing daily are driving that number.

[B]

Yeah. Are you, are you tracking like EBITDA per head too? Is that like a similar. Yeah. Okay. What are the five main numbers you look at every day? Like, what's, what are the things that get you up?

[A]

Well, it sounds high level, but really, every day we're back to blocking and tackling. Simple, simple stuff. Call board. How many calls per tech do we have today? How many opportunities do we have on the board today? Who's getting the calls? That's my big thing. Who is getting the calls? How are we dispatching the calls on service and in sales? And if we can really massage those two things.

[B]

Yeah.

[A]

Then we can, we can kind of almost generate an outcome before it happens. Right. So on a, on a high level, we're looking at really the blocking and tackling. Do I have a minimum number of calls per technician? Check. Do I have, I'm looking for 33% of our calls on the board every day to be opportunities. I define opportunities as anything 10 years and older, right?

[B]

Yep.

[A]

And I have a minimum goal of 40% of those opportunities I'm turning over. So if we have 10 opportunities on the board today, I'm turning over four leads to the sales team. We have a stretch goal of 50%, which we can get to, We've gotten to this summer. And that takes a lot of cooperation between dispatch and the service leaders and the team and the distribution of the, of the calls. So that's the kind of front end we're looking at every day and how we, how we manage that. And then we're looking at. All right, so John, I got 10 opportunities only today. Who's getting these opportunities? We're very specific. We've, we've just recently got on Dispatch Pro. It's helped out a lot with that. Takes the subjectivity out of the dispatching role and really focus on making sure that the people that are hot are getting those same thing on the sales side. I got five sales guys. If I have three calls, they're going to one guy. This is, we don't have, this is not kindergarten. We're not trying to be fair. Everybody doesn't get a chocolate milk around here. Right. We're giving the calls to the people that are performing. And, and when there's a deviation from that, I get, I get a little excited.

[B]

Yeah.

[A]

You know, it's like, especially sales guys. I was a sale. I've done H VAC sales for a long time. I was managing a sales team. It's like we got the highest paid people in the industry that are crying because they don't have a lead today. Go find one. Right.

[B]

Yeah.

[A]

Bring your own leads in, you know. So anyways, to answer your question, like I'm really trying, just trying to focus on blocking and tackling every day. Yeah. You know, because I, I try to keep my leadership team and I like to say just freedom within the framework. Here's the framework we've laid out. Go to town, do what we need to do. You don't need to come to me to make the right decision.

[B]

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 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. So I'm, I'm hearing the things you're saying and as I like try to think about how that works in my business. So like the way we typically grow is we're going to remove a constraint, we're going to like there's a wall preventing us from something and that constraint could be we don't do weekends. That's a constraint. Or dispatch Pro. Like, that's a constraint. And what will typically, that's how we end up growing in these steps is we're constantly, like, resolving these things, preventing us from the next layer of growth. It doesn't sound like you guys are pushing on the growth lever.

[A]

You're not enough.

[B]

Okay. And that's not a criticism. It's more like if I'm trying to. I'm trying to imagine that same scenario in my business. And our. I. I think it's like the way that we're wired, like, you and I, where, like, the way you're wired is, hey, I just got that efficiency, which is awesome. And, like, you're more profitable, and that's awesome. And then the way I would look at that is, oh, I'm going to add five more service techs, because now, like, we just unlocked the ability to dispatch better, cheaper, you know, more effectively.

[A]

Yeah.

[B]

Does that make sense?

[A]

Yeah, totally. And I would agree with that. And that's really, like, just going into 2025 is how do I maintain this efficiency.

[B]

Yeah.

[A]

And pull the growth leather. Because I need to get both of them going at the same time.

[B]

Yeah.

[A]

That's the real, real.

[B]

That's tricky. That's. That's hard. Yeah, I know. I was talking with the folks from Gettle a couple years ago, and they were growing at like 20 or 30% with a 18% EBITDA. And I'm sitting here, like, that's a lot.

[A]

That's.

[B]

That is hard to do. That's hard to do.

[A]

Yeah. I really tip my hat to people, contractors that can pull both leather levers because it takes a lot of focus. As you know, it takes a lot of focus to grow. It takes a lot of focus to be profitable and to get both those plates spinning at the same time is. Is my challenge next year.

[B]

Yeah, I mean, us too. It's just. It's the opposite challenge. Right. So, like, we can grow. We can grow, but, like, maintaining Double Digigit Eida is hard while growing, like 30 or 50 or whatever percent. We are up this year. Like, it's a lot. Takes a ton of work.

[A]

Yeah, exactly. I. My. My personal goal is to add a million dollars of plumbing without any overhead. Yeah, that's my goal next year.

[B]

Yeah, just a. Yeah. So we. That's a good goal. We're. The thing that we're trying to do is we're trying to add this new sales team, and it also not impact overhead.

[A]

Right.

[B]

And I Think it'll have four people in it. So I don't know if. Well, I don't know if it'll actually work, but like, that. That's the goal. And like, we're trying to. I almost like it'll impact material, but I don't even know if it'll affect cogs very much. Like, I don't think it will even impact labor. So find out.

[A]

We'll do a recap In September of 25, see where. Where we're both at.

[B]

Yeah. So. All right, so the last 18 months, I really like the getting alignment from leaders and like bringing that up in. In your. Is that like during your L10s or something?

[A]

Yeah, our weekly meetings. And. And as you know, when you're the only person shouting at the. On the mountaintop, it gets very difficult. Right. Especially at our. At our level, our size, you need. You need a team that are all cascading this the same message. So, yeah, really it's been for me, like, also, we. But I've also invested a lot in leadership development over the last 18 months to help me get my team to the places they need to be. And it's paying off. Like, I think that's really a. A gap in our industry is leadership development, that field management, you know, leadership level, because those people are hard to find. And you hear it all the time is like, you never want to take a tech out, your best tech out and make them a service manager. Well, I'm guilty of that, you know, but yeah, I think that's. That's one focus is we. I've been really focused on also building my leadership team. You know, just share a quick story with you. Like, earlier this year, I had three managers walk out on me all at the same time. Go 30 days before summertime, like, worst possible time ever. And, you know, I just had to take a step back and recoup and think, all right, how are we going to get through this? And you know, when people leave, there's always a vacuum to be filled. Right. So overnight I had people step up, fill in and. And you know, raise their hand, say, you know, like, you know, I want to help. And we filled those roles. And I'm happy. I'm super happy in my team because we are gonna for Q3 here. We're gonna hit our budget numbers that, that were on, were laid out a year prior. We're gonna be above budget both on. On revenue and ebitda. And that's with losing three managers going into the summer, you know, so, like, we've been able to take a step back, readjust, recalculate, and move on, and time goes on. Right. Like so. But yeah, I think leadership development is. Is. Is important for myself. You know, I'm immersed in it personally, and I expect my. My leadership team to also do that. Like, because if you're. If you're not growing, you're dying.

[B]

Yeah. It's been a big investment, and I, I would. I'll give a Nexar plug here. That has been something that we've really, like, struggled to do in the past. And I think the ability to offer nextar leadership development, that wasn't even something that I. That we had in mind when we joined Nextar, like, nine, 10 months ago. And that ended up being one of the biggest benefits that we got, which I was sort of surprised by.

[A]

But, yeah, we had Heath Bets on site here from nexar.

[B]

Yeah.

[A]

In May or June. June. And, you know, it was. It was phenomenal. It's just what the team needed, you know?

[B]

Yeah. No, that's great. Yeah, that's great.

[A]

But, yeah, outside of. So, like, we're nextar. I know you guys are nextar. So we, We. We focus on their. Their leadership development. We're also, like, we've been through the MAP programs. Most of my leadership team has, so we trying to bring it from different angles and different perspective on. On where we need improvement.

[B]

So, yeah, something that, Something that I was thinking about that's been. It's been on my brain recently. We do this, like, every Friday. We share a takeaway. And my takeaway last week was. And I. And I think that Your example of 350,000 of revenue per employee is a. That's, that's, like, really good. And for people that don't know that that's. If that's not best in class, that's damn close. That's far better than me. So. And I think the. The big takeaway that I had last week was optimizing around the bigger ticket, which I think that H Vac sort of does, naturally, because the replacements are large. But even in H Vac, you could be optimizing around repairs. And obviously you guys are optimizing around replacements. But, you know, that's a lot of our big growth over the past year. Like, our headcounts barely changed, which is astonishing to me and anybody else that I tell that, because our headcount has barely changed, which tells you how ineffective we were 12 months ago that we were. It's good and bad. It's like, wow, a year Ago. Damn. But like our headcount's barely changed, but we're optimizing around the higher price in almost everything that we do. So like H Vac went from selling tech to comfort advising, and the difference is 10 extra thousand dollars in an average ticket.

[A]

Yeah, it's crazy.

[B]

And then our plumbing average ticket went from like 600 to $3,000. And electric is at 3,500 average ticket. And so we're, we're starting to think about our like inputs of time and energy and where does it go. And like we have one department where their average ticket's $250 and we're just like, I think it's time to just shut that department down, take that same amount of energy and like, let's go do this. And the average ticket is six or $7,000.

[A]

Yeah, just. And those are the things areas that you need. We, we both need to focus on because we, we still have some areas that, you know, we can improve on in terms of. Yeah, it's just maximizing every call is what it comes down to. Right? Like. Yeah, in, in the most ethical way possible.

[B]

Yeah, yeah. Well, I also think just like what type of calls do you take? Is, is probably the, the point I was trying to drive here is, you know, if you're a multi trade business, it gets more complicated to optimize it because you're dealing with different things. And like plumbing, your average ticket in plumbing might be 500 bucks, whereas like it could be 3,000 or 4,000 or something like that. Yeah. So we're, we're really trying to optimize around that, that higher ticket. Which seems like the, the big value for you guys.

[A]

Yeah, exactly. And one, one also thing that I think we've done and this has been for years and years is we've our, our kind of service area has been so compact in the north side of Chicago that. Yeah, we're not chasing calls that are two hours away. Like it, it might take us an hour to go five miles here sometimes. So like we've always been very like narrowly focused on areas in the city and we're starting to expand the, the service area. But that's really helped us become, be efficient too because we don't spend a lot of time on the windshield time. We do and we don't. Depending, depending on where we're going in the city. But. And we try to optimize the route too. You know, it's like, so there's, there is that.

[B]

Okay, so you're, you've been optimizing cost. You've got your leadership team on board. You're driving strong revenue per employee, which is both optimizing cost and running an effective sales side. And you've added plumbing to. As your growth lever for next year.

[A]

Yeah, exactly. And I'm gonna be calling you a lot about plumbing, because I know you're the plumbing guy.

[B]

Plumbing is still just such a machine for us, you know, H Vac. We're getting better. We're getting better. Continuing to get better with H vac, but plumbing, it's almost like you can't put the beast down. Like, H Vac grows, and then plumbing is still ahead of it. I. We're. We're. We're around a million a month in plumbing right now. Oh, wow.

[A]

Good.

[B]

And 55% gross margins. Just machine. Month after month. It's.

[A]

That's great.

[B]

Machine, man. It's a machine.

[A]

And, you know, like to speak to efficiency, like, on the install side, like, sometimes I talk to these. I'll talk to contractors that were out, you know, doing installs in basements with condensers on the ground in the backyard. And they're spending. They got four guys. It might take them a day or two. And it's like, how is that possible? We. We have guys on our team. They'll be hanging out out of a window on the 30th floor, Lakeshore Drive, and they're parked 15 minutes away, and every time they need a tool, it's a half an hour. Yeah. We're doing a change out in a day. Like, you know, so it. I think it's on the install side. We are super, super efficient. Like.

[B]

Yeah.

[A]

You know, we don't. We do have some days at trail or jobs at trail, but your standard change out, like, I mean, we're doing residential rooftop crane lifts in the summer for acs every day.

[B]

Yeah.

[A]

You know, so the. The application here in the city is a little more challenging than it is, say, out where Brian's at. Yeah. With a see on the ground. So I. I think that on the install side, we've always been efficient.

[B]

Yeah.

[A]

Like, we've always maximized our labor over there because the crew we have, like, my tenure on install is crazy, John. It's.

[B]

Yeah.

[A]

20 years.

[B]

That's amazing.

[A]

Yeah, it's. It's. It's unbelievable. I got some installers been here for 30 years, so we've never had a problem in that department.

[B]

Yeah. That's amazing. And that's the profit driver and really revenue driver of the. Yeah. Because if they started turning into Two days, your revenue would be cut in half.

[A]

Yeah, exactly.

[B]

Yeah.

[A]

Yeah.

[B]

That's wild. If you wanted to share sort of a parting lesson here on, like, optimizing costs in your business and where to start and how to make a plan, what do you think that looks like?

[A]

Well, I would say, you know, I, I took on the, the, the idea of being a no man, saying, I say no to the majority of things that are come up in terms of expenses. I make my leadership team present a business case for any expense that's, you know, above and beyond. So, like, I just started saying no to a lot of stuff, like, no, we can do without and trying to. Because it's easy to say yes and, and expend money. Right. It's a lot easier to say yes, but it's, It's. It's more of no for now.

[B]

Yeah.

[A]

Explain to me why this makes sense for the business and how we're gonna recoup this, you know, if there's a software improvement or something like that. So start. I have started by saying just being a no man and, and then really getting critical on the things you are spending money on. And you'd be surprised how many vendors that you go to and say, we're leaving, or we, we need a discount or we're leaving, and you'll get savings right out of the gate. Yeah. So twofold, if you're looking to be more efficient, start with saying no to things and start really with going through with a fine tooth comb of what. Where the money's going.

[B]

Yeah.

[A]

You know, and the savings are there. They're right in front of you.

[B]

Yeah, yeah, we, we really have been. You know, Tommy Mellow said this. A lot of that interview lives rent free in my head, but he kept saying, like, yeah, everywhere we look, we find a pile of money. And we around the office quote that. Because it's exactly what we find where, like, it's less money than what he was finding. But we'll look like, oh, we looked at Verizon and we saved $170,000. Like, that's insane.

[A]

Everywhere you look, there's a.

[B]

Or like, yeah, we looked at our voip. We just looked at it, and I don't even think we were thinking that hard about it because it's $3,000 a month. It's our phone system. Like, we just weren't even thinking that much about it. It became 1500amonth in, like, overnight. Yeah. In, like two hours. And. And it, it is sort of crazy, like, bit just echoing what you're Saying you just slightly glance at something and you can shed ten grand a year.

[A]

Yeah. I think if you just have a practice where once a week you look at something on your P and L and dive into it and ask yourself, do we truly need this or can we do find this cheaper, better, faster? Yeah, you'll find it. And if you do that once a week for a year, you're going to be highly profitable next year.

[B]

Yeah, no, I agree with you.

[A]

Without grow.

[B]

Where do you think a target percentage, like what do you think target gross margin or target EBITDA should be for a home service company?

[A]

Well, I, I, I, I really honestly think if you're in single digit profit, you're just, it's a hobby, you know, like you can do that in a lot of different places with less brain damage. Yeah. You know, if you, if you're, you could go get a money market and make 5% on your investment right now without, with minimal brain damage, you know, for the struggles that owners and operators go through these days and with people and you name it, we, you know, I, I think you have to be north of 15% to, to make it worth your time and energy. Now I think true players are north of 20, 25% and that's really, profit is not a bad word. It shouldn't be because it's just sustainability is what it is. But I, I think everybody's goal should be at least 20.

[B]

Yeah, yeah, I think that's, I think that's a good goal. And I think when you think about that target, obviously like effective cost management but also effective gross margin.

[A]

Yeah.

[B]

So is that, do you think like 60 is the target or 50 is the target or like where, how do you think about that?

[A]

Well, you know, I think 50 is a good start. Like if you can make leaps and bounds above 50, that's where you're going to really see those north of 20% profits.

[B]

Yeah.

[A]

But yeah, I think a minimum you have to be at 50% and I think a lot of it is, it's really simple. Right. Buying. Right. Yeah. And effective labor management. If you took it, your labor, you know, we talked about this a couple weeks ago, you took it. Look at your unapplied labor at any given time. That's, that's a big problem in our industry is that there's so much unapplied labor that we're not taking advantage of. And this whole mindset of oh, we have to have this labor standing around in the spring for summer, like, yeah, I don't, I don't buy into that. There's other ways to go about it. That's a whole other conversation. But I think those. Those two big things, labor management, labor efficiency, and make sure you're buying. Right. And if you are. If you are just blindly accepting distributor increases.

[B]

Yeah, that's wrong.

[A]

Like, I. I have literally wrote letters to distributors saying, we do not accept this increase and see what happens, you know?

[B]

Yeah, this was great. This was a good class in cost management.

[A]

Yeah. Well, thank you. I appreciate the time. It's been great. Hey, we got a lot to learn, too, and I. I'm. I'm hoping to be on here again next year and talking about growth.

[B]

Yeah, Well, I think it takes both. I. I really do. I think it. I think it takes both. And I think, like, the equation that we're trying to get better at is effective, profitable growth. And we've talked about that a little bit on the show, but, like, yeah, we can grow like a weed. But the problem is, if you're moving really fast, no one's looking at the cost and no one's looking at, hey, why are we spending 20 grand a month on Verizon? Or, like, what's. What's going on with this bucket over here? And that's the balance that we're trying to find. I think we're. I think we're getting there where we're still growing really fast. Like, we'll. We'll throw 35% above last September, I think.

[A]

Wow.

[B]

And we passed last year's revenue already. So, like, the last four months of the year. Gravy, I guess. But now it's like, okay, how can we do that at 20% EBITDA? Like, how do we make that happen at 20% EBITDA? And that's the. That's the trick we're trying to solve.

[A]

Well, I think you got a great guy in Brandon over there that can solve that for you. He.

[B]

I'll. I'll delete that part so his head doesn't get too big, but I agree with you. Thanks for coming on the show today, Luke. If people want to get. If people want to get in touch with you to learn more, how can they do it?

[A]

It they find me on LinkedIn pretty accessible there, or they can shoot me a text message. My cell Phone number is 815-481-1788. Happy to talk to contractors. I le live, sleep, and eat this stuff every day. So again, 815-481-1788.

[B]

Hell, yeah, man. Thanks for coming.