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)

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.

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]

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]

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]

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]

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]

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]

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]

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: 815-481-1788

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