Owned and Operated Podcast Episode #164 Summary
Title: "We Lose $1,000s Every Day": The Simple Fix to Streamline Your Accounts
Release Date: January 28, 2025
Hosts: John Wilson and Jack Carr
In Episode #164 of the "Owned and Operated" podcast, hosts John Wilson and Jack Carr delve into the critical issue of financial inefficiencies within plumbing, electrical, and HVAC businesses. The episode centers on strategies to streamline accounts, minimize costly errors, and implement effective purchasing and inventory systems to foster substantial business growth.
1. Identifying Financial Leakages
John Wilson opens the discussion by highlighting the pervasive issue of financial losses due to operational mistakes. He states, “We find thousands of dollars a day in mistakes” (00:00), underscoring the urgent need for robust financial controls in growing home service businesses.
Jack Carr concurs, sharing his struggles with maintaining consistent customer service amidst daily operational challenges. He emphasizes the importance of addressing these financial leakages to ensure sustainable growth.
2. Budgeting and Material Costs
As businesses scale, material expenses can consume a significant portion of revenue. Jack Carr reveals that their analysis showed they were spending 34-35% of revenue on materials, attributing this to inefficiencies like incorrect bidding and lack of accurate data (01:19). This realization prompted the need for a more comprehensive purchasing system to gain better control over material expenses.
3. Implementing a Purchase Order (PO) System
To combat these inefficiencies, both hosts discuss the adoption of a Purchase Order (PO) system. John Wilson shares his experience of transitioning to a PO system, emphasizing the necessity of centralizing purchasing. He remarks, “The biggest thing is cut off access” (07:55), highlighting the importance of restricting purchasing authority to prevent unauthorized and unnecessary expenditures.
Jack Carr outlines their strategy to tie every job to a specific purchase, ensuring meticulous tracking of parts and materials. He explains their use of Service Titan for entering parts purchases, which allows for precise job costing and accountability (05:16).
4. Centralizing Purchasing and Assignable Credit Systems
Both hosts stress the importance of limiting purchasing authority to a select few individuals. John Wilson describes how they restricted purchasing capabilities to himself and a manager, preventing unauthorized orders. He notes, “We just set that up as an autoresponder for bill.com” (08:35), ensuring that all invoices adhere strictly to the approved PO structure.
Jack Carr adds that transitioning to an assignable purchasing system, such as Divi, further tightens financial controls. By assigning a $0 credit limit initially and requiring explicit fund requests for any purchases, they create an additional layer of oversight (15:05).
5. Inventory Management and Vendor Relationships
The conversation shifts to inventory management, where both hosts advocate for minimizing on-hand inventory to reduce costs and waste. John Wilson recounts their journey through various warehousing strategies, ultimately adopting a Vendor Managed Inventory (VMI) system. He shares, “I need to do like another shop tour soon” (02:53), indicating ongoing efforts to optimize their warehouse operations.
Jack Carr discusses their collaboration with vendors like Ferguson to manage inventory more efficiently. By leveraging vendor relationships, they aim to reduce material expenses and enhance operational efficiency, stating, “It is awesome from, from an… partnership” (18:10).
6. Truck Stock Management and Packout Systems
Effective truck stock management is pivotal for service efficiency. John Wilson introduces the concept of packout systems, where specific kits are prepared for each job type. He explains, “So our first one went into practice January of this year” (18:21), detailing how packouts help maintain lean truck stock by ensuring that only necessary parts are carried on each truck.
Jack Carr elaborates on their approach to mobile truck stock, aiming to keep truck stock to around $1,000 per truck. This strategy minimizes excess inventory and ensures technicians have only the parts they need, reducing the likelihood of overstocking and associated costs (22:18).
7. Vehicle Optimization and Cost-Efficiency
Choosing the right vehicles for service operations is another key topic. Jack Carr shares their preference for the Ford Maverick due to its reliability and cost-effectiveness. He mentions, “If we can do Mavericks, I'm literally done buying vehicles with debt” (29:16), highlighting the financial benefits of selecting vehicles that offer durability without excessive costs.
John Wilson concurs, discussing their transition to using Mavericks and Chevy Trailblazers for different operational needs. This strategic vehicle selection supports their overall goal of minimizing expenses while maintaining service efficiency.
8. Error and Loss Prevention
Both hosts emphasize the critical role of monitoring and preventing errors in purchasing and inventory management. John Wilson shares a poignant example: “Just random mistake just on a Tuesday… I found out that there was refrigeration caps. So like $3, they build us for refrigeration canisters. $500. They gave us the Caps, they didn't give us the canisters” (09:05). This incident highlights the importance of diligent oversight in financial transactions to prevent significant losses.
Jack Carr echoes this sentiment, revealing that their PO system helped them identify and rectify over $60,000 in billing errors, reinforcing the effectiveness of stringent financial controls (08:45).
9. Vendor Managed Inventory (VMI) Integration
Adopting VMI has streamlined their inventory processes. John Wilson explains how consolidating vendors has simplified management: “We used to have to manage like 40, 50 vendors… but now I manage three right now” (32:11). This consolidation not only reduces complexity but also strengthens vendor relationships, enabling better negotiation and more favorable terms.
Jack Carr adds that by centralizing their purchasing through a few key vendors, businesses can gain better visibility and control over their inventory, leading to improved material cost management and operational efficiency.
10. Practical Advice and Implementation Tips
In concluding their discussion, both hosts offer actionable advice for listeners aiming to streamline their accounts:
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Restrict Purchasing Access: Limit purchasing authority to a few trusted individuals to prevent unauthorized spending.
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Implement a Robust PO System: Ensure every purchase is tied to a specific job and follows the approved PO structure.
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Adopt Assignable Credit Systems: Utilize tools like Divi to manage and monitor credit card usage effectively.
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Minimize On-Hand Inventory: Keep truck stock lean and rely on vendors to supply necessary parts as needed.
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Leverage Vendor Relationships: Consolidate vendors to simplify management and improve negotiating power.
John Wilson reinforces the importance of taking decisive action: “The biggest thing is cut off access. That will always be the biggest win” (34:09).
Jack Carr adds, “The number one rule of purchasing is like, the less people, the better” (15:43), encapsulating their strategy for financial control and operational efficiency.
Conclusion
Episode #164 of "Owned and Operated" provides invaluable insights into mitigating financial inefficiencies within home service businesses. Through strategic implementation of purchase order systems, centralized purchasing, effective inventory management, and vehicle optimization, John Wilson and Jack Carr illustrate practical methods to reclaim thousands of dollars lost daily. Their experiences and actionable advice serve as a guide for business owners aiming to enhance profitability and achieve sustainable growth.
Notable Quotes
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John Wilson (00:00):
“We find thousands of dollars a day in mistakes.”
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Jack Carr (05:16):
“The techn… are going to create a location that is going to be our warehouse.”
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John Wilson (07:55):
“We just set that up as an autoresponder for bill.com.”
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Jack Carr (15:05):
“Everyone starts off with a $0 credit limit.”
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John Wilson (34:09):
“The biggest thing is cut off access. That will always be the biggest win.”
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Jack Carr (15:43):
“The number one rule of purchasing is like, the less people, the better.”
For more insights and resources, visit www.ownedandoperated.com. Don’t miss their upcoming workshop in April, where John and Jack will showcase their packout systems and provide hands-on guidance for optimizing your business operations.
