Owned and Operated - Episode #157 Summary: Commission, Supplier Leverage, and Training Strategies

Podcast Information:

• Title: Owned and Operated - A Plumbing, Electrical, and HVAC Business Growth Podcast
• Hosts: John Wilson and Jack Carr
• Description: Hosted by John Wilson and Jack Carr, this podcast delivers weekly insights and actionable advice for home service business owners, focusing on advertising, lead generation, marketing strategies, and business scaling.
• Episode: #157 Your Questions, Answered: Commission, Supplier Leverage, and Training Strategies
• Release Date: December 24, 2024

Introduction

In Episode #157 of Owned and Operated, host John Wilson, along with guest Jack Carr, delves into crucial aspects of running a successful plumbing, electrical, and HVAC business. This episode addresses listener questions on compensation structures, leveraging supplier partnerships, effective training strategies, and more. The conversation is rich with practical insights aimed at helping business owners enhance their operations and drive growth.

Compensation Strategies

Importance of Competitive Compensation

John emphasizes that compensation is a top priority for attracting and retaining talent. He states, “People are clearly going to care about compensation a lot. So your compensation has to be top of the industry or close to it” [05:30]. Ensuring that pay scales are competitive helps businesses stand out in a crowded market.

Commission Structures

The discussion covers various commission models:

• Full Hourly: No commission.
• Hourly Plus Commission: Typically $30-$45 per hour with a 3-4% commission based on performance.
• Full Commission: Commission paid out every two weeks.

John prefers a hybrid approach of hourly plus commission, as it aligns employee goals with company performance without relying solely on commission-based compensation.

Handling Quality Issues

When work quality necessitates return visits, commissions are docked to maintain accountability. “If the quality of work requires a return service visit, then that commission is going to get docked” [38:15]. This policy reinforces the company’s commitment to high standards and accountability.

Hiring and Interviewing

Effective Interview Questions

John advises focusing interview questions on a candidate’s past performance to predict future behavior. “The best way to tell what someone will do is look at what they have done” [07:45]. Questions centered around past actions, improvements made, and day-to-day responsibilities provide valuable insights into a candidate’s capabilities.

Legal Considerations

He cautions against asking illegal or discriminatory questions, recommending owners consult with labor attorneys and resources to stay compliant. “We don't ask the stuff that it's illegal to ask. You can Google it” [06:10].

Business Models and Focus Areas

New Construction Focus

Addressing whether an HVAC business can succeed by focusing on new construction, John acknowledges its challenges. “New construction to be playing on hard mode. So we really try to avoid it” [09:00]. While feasible, it requires a different approach and readiness to handle increased complexity.

Marketing and Cost Management

Cost Per Lead (CPL) and Customer Acquisition Cost (CAC)

John discusses defining best-in-class CPL and CAC based on geographical and revenue factors. “If I have a job that's $10,000 and I can afford to spend 10% on marketing… then that's best in class” [11:20]. He advocates for maintaining marketing costs below 10%, with top performers aiming for below 5%.

Supplier Partnerships

Service Scalrers and Nexstar are highlighted as key partners contributing to year-over-year growth and providing valuable marketing tools. “They've been a huge partner for us and we're really grateful for that partnership” [03:50]. Leveraging these partnerships has contributed to significant revenue growth and marketing efficiency.

Training Strategies

Non-Technical Training

John outlines a structured approach to non-technical training, emphasizing repetition and consistency. “We schedule it far out… repeat it… it takes seven repetitions to really get something into someone's head” [16:30]. This method ensures foundational knowledge is thoroughly ingrained.

Technical Training

Leveraging supplier-provided training is crucial for technical expertise. “We lean a lot on our suppliers… they are really effective technical experts” [19:00]. Continuous education on new technologies and products enhances both safety and sales capabilities.

Manager-Led Curriculum

While emphasizing supplier training, John also acknowledges the importance of manager-led training in developing tailored curricula that address specific company needs and improve overall effectiveness.

Incorporating Mission and Values

Embedding Core Values

John discusses ongoing efforts to integrate core values throughout the company. “We put them on the walls everywhere… hire and fire by them… give awards based on our core values” [24:55]. Regular recognition and communication help align the team with the company’s mission.

Challenges and Improvements

He admits the company is still a work in progress but is making strides by learning from industry leaders like Chad Peterbrin. “We're better than we were, but we're not where I want to be” [23:20]. Continuous improvement in this area is highlighted as essential for long-term success.

Leading a Diverse Workforce

Respect and Humility

Leading a team older or more experienced requires humility and respect. John shares his experience as a young business owner, “If you come into that with an open mind and with respect for how much more experience they have than you, then you're probably going to do okay” [35:10]. Building mutual respect and asking questions fosters a positive leadership environment.

Gaining Confidence

Confidence in leadership comes from acknowledging one's learning journey and valuing the team's expertise. “Be humble. You probably know almost nothing and just ask a lot of questions” [37:45].

Process Simplification

Simplifying Job Types

John recounts reducing job types from 90 to 20 to improve efficiency. “We went from 90 to like 20… shortened our call booking time… number of mistakes went way down” [28:30]. Simplifying processes enhances accuracy and speeds up operations.

Scalable Processes

Adopting scalable processes ensures that tasks can be easily managed, even with a growing team. “How can someone on the other side of the world perform the tasks… then we nailed that process” [30:10]. Continuous iteration and simplification help eliminate bottlenecks and support business growth.

Attracting Top Talent

Comprehensive Benefits

While standard benefits like health, vision, dental, and 401k are essential, John stresses the importance of additional perks. “What does your PTO look like? What does advancement look like?” [33:45]. Competitive compensation combined with robust benefits attracts and retains top talent.

Beyond Basics

Offering opportunities for growth, effective training, and clear advancement paths are crucial for attracting high-quality employees. “If you really want to attract top talent… you should be figuring out what your benefits look like outside of above and beyond” [34:15].

Leveraging AI and Overseas Hiring

Cost Efficiency

John highlights the strategic use of AI and overseas hiring to manage expenses. “People are your biggest asset, but people are also your largest expense… Move as much as you can to softwares and Philippines” [40:20]. Balancing in-house critical roles with outsourced tactical tasks optimizes cost and efficiency.

Implementing AI Solutions

Adopting AI tools like Evoca for call center management enhances training and operational efficiency. “Evoca is an AI call center solution… helps our call takers improve” [39:50]. Integrating AI supports scalability and consistent quality in customer interactions.

Service Packaging

Creating Tiered Packages

John discusses developing tiered service packages to cater to various customer needs and budgets. “We have six core services… designing packages around those six things” [42:10]. Offering multiple options from basic to premium ensures broader market appeal.

Value Differentiation

Each package level offers distinct value propositions, such as extended warranties and prepaid maintenance for higher tiers. “The further you get up into these options… differentiators become much less technical and more quality of option, like quality of life” [44:00]. Clear differentiation enhances customer satisfaction and sales.

Flexible Naming Conventions

While names like “Good, Better, Best” or “Bronze, Silver, Gold” are common, John encourages businesses to choose names that resonate with their brand and customer base. “You can pick your names. We’ve done good, better, best… it works” [45:30].

Closing Remarks

John wraps up the episode by encouraging listeners to engage with future content and leave reviews. He highlights the value of implementing the discussed strategies to drive business growth and improve operational efficiency.

Notable Quotes:

• “People are clearly going to care about compensation a lot. So your compensation has to be top of the industry or close to it.” [05:30]
• “The best way to tell what someone will do is look at what they have done.” [07:45]
• “If you come into that with an open mind and with respect for how much more experience they have than you, then you're probably going to do okay.” [35:10]
• “How can someone on the other side of the world perform the tasks… then we nailed that process.” [30:10]

Conclusion

Episode #157 of Owned and Operated offers a comprehensive exploration of key strategies for scaling a home service business. From competitive compensation and effective hiring practices to process simplification and leveraging technology, John Wilson provides actionable insights grounded in real-world experience. Business owners looking to enhance their operations and drive growth will find valuable lessons and practical advice in this episode.

For more detailed discussions and actionable strategies, visit www.ownedandoperated.com and subscribe to the podcast on your preferred platform.