#164 - "We Lose $1,000s Every Day": The Simple Fix to Streamline Your Accounts

Summary

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.

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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.

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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.

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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).

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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).

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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).

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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).

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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.

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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).

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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.

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10. Practical Advice and Implementation Tips

In concluding their discussion, both hosts offer actionable advice for listeners aiming to streamline their accounts:

• Restrict Purchasing Access: Limit purchasing authority to a few trusted individuals to prevent unauthorized spending.

• Implement a Robust PO System: Ensure every purchase is tied to a specific job and follows the approved PO structure.

• Adopt Assignable Credit Systems: Utilize tools like Divi to manage and monitor credit card usage effectively.

• Minimize On-Hand Inventory: Keep truck stock lean and rely on vendors to supply necessary parts as needed.

• 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.

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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.

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Notable Quotes

• John Wilson (00:00):

  “We find thousands of dollars a day in mistakes.”

• Jack Carr (05:16):

  “The techn… are going to create a location that is going to be our warehouse.”

• John Wilson (07:55):

  “We just set that up as an autoresponder for bill.com.”

• Jack Carr (15:05):

  “Everyone starts off with a $0 credit limit.”

• John Wilson (34:09):

  “The biggest thing is cut off access. That will always be the biggest win.”

• Jack Carr (15:43):

  “The number one rule of purchasing is like, the less people, the better.”

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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.

Transcript

[A]

Should be able to run an H VAC service truck with like $1,000 on the truck. The bigger you get, the more controls you have to put in. The biggest thing is cut off access. We find thousands of dollars a day in mistakes.

[B]

Just answer the phone is one of those phrases that's always easier said than done. I know it was hard for me in my business because the phone always rings while you're out in the field trying to get something done or it's 8pm and you're trying to get your kids to bed. Well, I have the solution for you. I'm extremely excited today to announce quick staffers your go to solution for building a high performing cost effective customer service team. We are placing CSRs who have been pre trained on proven home service SOPs and scripts. The same ones that Wilson and I use in our business. For a limited time we're offering $500 off your initial placement costs for the first 10 signups. See link in the description below or head over to quickstaffers.com for more information.

[A]

Welcome back, welcome back, welcome back.

[B]

What's going on? We're back.

[A]

I feel good like we're going into 25. We're locked in on our targets. We've got clear budgets, we've got a bunch of process to help drive us there.

[B]

Sweet man. I mean this, this actually dovetails really nicely into what we wanted to talk to about today is yeah, we as part of our initiatives are going into 2025 is we need, we, we did the crunch the numbers at our budget this year. We looked at next year and it came out that we are spending close to 34 to 35% of revenue on material. And so that's in some inefficiencies on jobs. You, you know messing up and not utilizing correctly, bidding wrong things like that which we're working on. But we think a large portion of that is not having good data. Right. We don't know what we don't know. And so how do we fix that in our. What we're working on right now is going to a full PO system and so I, I have some questions on like what was implementation looking like for you? So we, We've just got two 400 square feet of warehouse. It is empty warehouse, we're putting in shelving, we're doing co signment with Ferguson. They are working with us directly to provide boxes and we're going to use the scanning tool and all this kind of stuff. But there's like a, there's a lot there that I'M trying to imagine and trying to build, but I don't know. What, I don't know. What was your first iteration of VMI before vmi? Like, what did that look like for you prior to you having an entire sales structure inside your actual business, A shop inside your shop that you don't own, which is.

[A]

Yeah, it's. It is cool. I need to. I need to do like another shop tour soon. We're doing a bunch of like, interior decorations and walls and doing a bunch of cool stuff. So we've. We tried warehouse a bunch of different ways. We've tried actually warehousing it, like barcode scanner, all that stuff. We did a consignment for parts. So there's a bunch of vendors out there. Wolverine Brass, local ones too, where they'll come in and be like, they'll come in weekly and count your parts basically, and then they'll just min max. So, okay, hey, you're at 10. Box here says you want 20, here's 10 more. So we did that. We really. I mean, we bounced all over the place. A lot of different processes.

[B]

I mean, that's what we're trying to avoid is we want to put a system in place that can drive us from here until vmi. Right. Like, that's the goal at the end is if we can, you know, sell Ferguson 2,500, you know, 2,400 square foot of DMI that they can just provide for us, that would be amazing. But for now, like, I guess the question is, how do you view the PO system in. In general? And how did it start and then how did it tie into the best functioning warehouse that you think could get you from if you were to go back in time? If you can get you from point A to VMI now.

[A]

It's hard.

[B]

I agree.

[A]

Yeah. I mean, the, the big thing, the big reason we ended up choosing VMI is like the investment of staff.

[B]

Yeah.

[A]

And that's the hard part is it is really hard to find and be able to afford like incredible warehousing staff that understands your business and you're competing with all the wholesalers for. For that. For that talent. And it's not. It's not cheap. Now, granted, you can have like, sort of the quintessential retired plumber, retired H VAC guy, sort of be the parts guy. And that's probably how I would do it if I was attacking this problem again is I would go find somebody who was. Didn't want to be in the truck anymore and ask him if he wanted a Part time job managing parts because he understood them and he could understand how to, you know, save costs and stuff. So that would be my first like inclination. Besides that. I mean the big lesson with inventory is have as little as possible on hand.

[B]

Yeah.

[A]

And negotiate the hell out of it.

[B]

So maybe, maybe it'll be helpful that you could poke holes in what our plan is.

[A]

Okay, let's do it.

[B]

So our plan is starting from a PO perspective is we are planning on tying every single job to any single purchase. Because that's where we're having issues right now is hey, we're missing some things. They're not tying in directly. They're not tied in service time. We can't control it. So we created a system kind of based on yours where we have heating in or H Vac install. Hi the job number HS the job number for service and then P for all plug and that's our plan. Initially they the tech uses Service Titan to enter in any kind of parts that they buy at the warehouses utilizing the Service Titan system properly for special purchases. Then our dispatcher is going to also be our who currently order some parts.

[A]

Yeah.

[B]

She will be ordering parts and then entering the PO system through Service Titan correctly there as well. And then in. In terms of truck stock we are going to create a location that is going to be our warehouse and we have a list of truck stock min max essentially like what the. The co Simon does. And then the plumbers and H Vac guys will be responsible for filling their truck stock up directly from our warehouse and then we can reorder it and then we have one or two people here at the office who will managers mostly who will be the ones who scan for that because it'll be completely locked down. And that's what our plan is.

[A]

Sounds good to me.

[B]

To lock in everything. Try to keep as little as possible. Really just truck stock and then a few different units now. So we'll store some units for weekend work. Yeah. We're really excited about. We have. We have water heaters and stuff but we don't actually have H VAC units. So we're going to really try and push to. To get some H Vac units in here. That'll be huge. Like just the.

[A]

Yeah.

[B]

What we normally the immediate availability is good.

[A]

Yeah. I think the big thing like the bigger you get the more controls you have to put in. And the first thing you already talked about it but like centralizing purchasing and not allowing purchasing. So you know when we first implemented our PO structure four years ago, same thing but then the next step was we communicated with every vendor. If this comes without my class code PO structure, I'm not paying your invoice. I don't care. Someone's probably stealing from me. Someone's buying on our account. And then we locked it down and we enabled only two or three buyers like me, our purchaser, one of our managers.

[B]

Was that an approval thing where they called you to approve that po?

[A]

No. No one could place an order.

[B]

Okay. So everything had to be on will call from the few people.

[A]

Here's the approved buyers. Here's our approved PO system.

[B]

Yeah, if.

[A]

If you. If you don't follow these two things, I'm not paying your invoice. So we just set that up as an autoresponder for bill.com. so you email us your invoice and you get an automatic response. Hey, here's my P.O. structure. If it doesn't say this, I'm not paying it. Here's reminding you. Here's our approved buyers. If it's not them, I'm not paying it. Like, somebody else bought it. I didn't approve of this purchase. And then usually once you, you know, once you kick back a couple invoices, they get it pretty quick.

[B]

Yeah. The crazy thing about this and. And I. I challenge anybody out there who's our size, you know, sub 5 million. Really dig in on your POS from your.

[A]

Yeah.

[B]

Your vendors. Because everybody makes mistakes.

[A]

Painful.

[B]

We went ahead and did this exercise starting in like, June, and we found like $60,000 in stuff that either was repeat or wasn't us.

[A]

Yep.

[B]

Kind of wild, honestly.

[A]

Oh, yeah.

[B]

I was blown away. Like, we find thousand dollars.

[A]

We find thousands of dollars a day in mistakes today. Like right now, every single day. Thousands of dollars a day. And it could be. So like, now we're actually in the same process as you. We're just like, down to the next couple steps, which is like, what's our receiving process? We didn't have one, so. So, like, someone would make $1,000. This is an actual error that I'm about to say. Yeah, we got billed for two parts at $500 a piece. I got the invoice. I'm like, what's going on here? This is weird because I was going through. I was personally approving them as I tried to understand the problem like a month ago. And I go back there and I find 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. So we got over billed by $975 or something like that. Just random mistake just on a Tuesday and any day of the week you can just find thousands of dollars of errors and then you just have to kick it back. Hey, this is wrong. Hey, this is wrong. Hey, this is wrong. Why is this price the way it is? That's the next thing is we're finding like thousand percent markups on screws and we're just kicking it back and you know, hey, we'll return it or you can change the price, let us know. But yeah, that's, that's the process we're in. So that never goes away.

[B]

Yeah, I think the, the big thing is like just starting it. Right. Because just getting something in place to try and get the lowest hanging fruit, which is where we're, we're going to now.

[A]

And the lowest hanging fruit is reducing the number of buyers. Like that is it. Because what, when we, when we first did that, our, our material expense dropped 2% because what would happen is guys would go, they would go to whatever shop they liked unnegotiated pricing. They would fill their truck with stuff that they used earlier that day and it was just like buy whatever you want, it's Home Depot. You know, that was gonna be my.

[B]

Next question, but we'll get there in a second.

[A]

So we, this was two or three years ago. We just turned off all buying like text. You can't buy period. Got to call to the purchaser. We will call it in. And that's the approved buyer thing. Yeah, but shutting off buying to non field was very important because they, they always bought two of everything. So hey, I want two of this. I want five of this just in case I need an extra one. Then suddenly you've got 30 grand rolling around on a truck.

[B]

I was just going to say, man, we just cleaned out a truck and it had so much money. I've just unutilized o rings and wax rings and screws that have never been used and, and something for like commercial jobs or for new, new residential installations going. We needed two of these and we bought two boxes of these.

[A]

Yeah.

[B]

You know, at 150 bucks each. And it sounds silly but that $30,000 in the truck, I mean it's a lot. It adds up across every truck, especially as you scale.

[A]

And so.

[B]

Okay, so shutting off purchasing extremely important.

[A]

How did really important. I would say that that's probably the biggest lever. The number one thing who is buying and that, that Lever doesn't go away. Like, it just gets more complicated as you, as you grow. But like even now we're, we're in the, we're in the middle of your project. Like we're doing the same thing, which is kind of funny. We're just like, you know, step or two, a different step, but like same problem. So look, we're now centralizing our. Because our material purchases is pretty tight. Like we can gain a percent or two, but we catch a lot of problems. But where we're struggling is like opex. Like random stuff just slides through. So now we're doing the same thing for managers. Like you can't buy anything even Brandon and I cut off our own credit card access because we were part of the problem. We weren't going through like accounting to approve to make sure it's in budget.

[B]

And, and so when you talk about that, right this, this inevitably opens this conversation about truck stock and like having the correct truck stock. Because if they don't have the correct truck stock and you don't have build outs. I know for anyone who's listening, John has like these Milwaukee packouts. And each job has its own like beautiful, beautiful organization. And jobs are packed out prior.

[A]

But like managers did a great job. I had nothing to do with it. We really like ran with that.

[B]

Good job, Wilson. Managers who are listening but from like, from a smaller perspective, right? That's not always possible initially. So, so how was the first iteration of locking in truck stock and then making sure that that was as little as possible but still met the needs. And then to dovetail our last conversation, how did you cut off the auxiliary items? So like for maybe start with this one. But like Home Depot purchases, how did it. Was it the same process? Approved managers only, even though it's not a will call scenario.

[A]

So that's like a credit card. So like our philosophy is, and we're, we're getting deeper and deeper into this, but every dollar has to be approved because $2 million a month flows through our checking account. It is just too much money. And there are, I don't even know, like tens of thousands of transactions a month. It's a lot. So what you have to do is you have to create these rules. We're just like our, our credit cards will literally not work without being sent money. So we use a credit card program called Divi. And what we do is we set these, we call them assignable purchasing. So everyone starts off with a $0 credit limit. Like you can swipe that card a million times and it won't do a single thing. You have to send in via Slack. You have to request funds for the amount of money that you'd like to use. What's the use case? What's the job number? Same thing. Because credit cards are a big leaky ship.

[B]

Yeah. We shut all ours down early this year, so only three people have them, including myself. Because of that, we noticed the same thing is credit cards leak, leak, leak, leak, leak. Went to wex, got rid of that for. And so, like, that's been all better. So that's pretty neat, though. Divi sends, like, approvals to release funds on credit. Okay.

[A]

Like, it's literally like if it's a $25 part at Lowe's, you're requesting funds.

[B]

Okay.

[A]

Manager's going to approve it, but it's another set of eyes. It's not like Wendy's.

[B]

Yeah. Because I mean. Right. That's going to be a purchasing manager. Still purchasing that.

[A]

Right.

[B]

But they need to get it approved first.

[A]

Right.

[B]

For that job.

[A]

Yeah. I, I think the number one rule of purchasing is like, the less people, the better. Ideally. One.

[B]

Yeah.

[A]

Like, that's it. How do you consolidate your buying down to like, one person? And I, I remember this. There's this book. It's how to double your profit in six months or less by Bob Pfeiffer. Top five favorite book.

[B]

Oh, I love it.

[A]

It's a great. It's a great book. But one of the, one of the chapters, which we're probably going to do this for quarter one. So, like, fair warning to anybody who's listening to this. But they. It's force. Anytime a dollar has to get spent, force it to go through you personally. And they have to come in person and ask for it. And he's like, you'd be amazed how many requests for money just go away.

[B]

Yeah.

[A]

So, yeah, you got to have people ask, make sure they can come up with the reason why, substantiate that spend and have an approver and then oversight over that approver.

[B]

Okay. That makes sense. I mean, all that really starts with, like you said, removing the ability for text to purchase.

[A]

Yes.

[B]

Make it go through really a few people. And then stage two is to take that and then even make. Give it another approval process on the back end of that. Okay. So then moving into Trek stock. Right. So if we're taking away the ability for the team to buy what they need, when they need they wanted, whatever they want. What is the, what was the initial process you used to. I mean, because I'm sure Truck stock for you generally changes day to day, month, month, year to year. What. What is the truck? Your initial idea on building your first truck stock list, how was that done?

[C]

We're about eight months into using Avoca, and Evoka has been an awesome partner for us in our call center. So what Evoca does for us is they do two different things. One, they have their coach product, and Coach has been helping us do what it says, Coach our csrs every single day. It listens to every call and uses AI technology to basically pick apart that call and tell us where we can improve. And for the last eight months, we've been consistently improving our scores, which has been awesome. The other product they have is just conventional booking, and it's an AI tool that books over the phone. Customer calls in, and it either handles over flow, as in our phones are full, or it does nights and weekends for us. And a customer will call in and actually deal with an AI agent all the way through booking. And the savings inside call center has.

[A]

Allowed us to ramp up our marketing.

[C]

To continue to grow even more. Thank you, Boca, and thank you, Tyson, for your partnership.

[A]

There's easy ways and complicated ways to do this. I personally vote for easy.

[B]

Love easy.

[A]

And I. I do not think that we have this nailed down, by the way. I think that we're probably further along than you are. I think that we're a year away from being perfect at it. We. We spent this 2024, like our first packout for a job. And a packout's like. It's a Milwaukee kit. Kits. It's a kit, basically. So, hey, every time you want a furnace, you grab this kit, and it has everything you could need for it. So our first one went into practice January of this year. So we've had a year to perfect the packout system next year. We're really pushing hard on truck stock. So the.

[B]

Right.

[A]

The purpose of packouts is that you don't have truck stock.

[B]

Exactly.

[A]

That is the.

[B]

That works only for install. That, like, works for install, but. And even works.

[A]

You can do service package.

[B]

But how do you do. Like. So how do you do an H Vac service pack out? Walk me through.

[A]

So. So the. The way that we're. And we are not very far into this.

[B]

Okay, I won't hold you.

[A]

Yeah, 2025 is when this is happening. It's done in plumbing and electric. It's not done in H Vac.

[B]

That's what I was gonna say, because the H Vac seems like it's the difficult child here.

[A]

I Don't think so. To me, it's all the packout system and you just change how you do it. So we actually started removing shelves from vans because I don't think that you need empty shelves and your shelves should be empty because you shouldn't have truck stock anymore. So we started pulling shelves and then we started setting up truck stock packout kits. Okay, so it's an ab bin system where John has been A and B, both dedicated to John's truck. And on Monday, I have been A, I trade it in, Tuesday, I grab bin B, you refill bin A and you keep it lean. And maybe it's a thousand bucks per box. So you've got $2,000 a day dedicated to that truck. But that is the current plan. So we want mobile truck stock because I think truck stock gets much harder to manage when it's literally on the shelf versus I can wheel it off and on every day.

[B]

Okay, so then how do you balance then? Because, I mean, I, I like the theory behind that. Right. The theory behind that is you keep it lean. The team's doing what they're supposed to. You know, you're not, you're not losing anything to inventory. But where you have a potential for loss is how do you balance the amount of truck stock you have and the need for the technician now to run back and forth to the shop because parse runners.

[A]

Okay, so the answer or the, or the assignable purchasing budget, like if they need something, you request funds on your credit card and you go to Home Depot.

[B]

Yeah, because that's where I was going is like, even, even to take that step further. So that, I mean, I would assume in the pack up there's a condensate pump and things like that. But like, where I'm getting at is more. And I'm saying this, and as I'm saying this, I'm realizing like the. I ran in a van a couple months ago, like November. That big freeze we had, I ran for two, three weeks. Ran some calls here and there. And I'm saying this knowing that I know the answer. But, you know, I think what it comes back to, where we keep getting caught up personally, is like the need for rescue motors and the need for, okay, rescue blower this size, rescue blower that size, rescue top fan motor this size, rescue top fan motor that size. And once you get through like all of those potential parts, like, it becomes a really big list. That being said, the amount of times that I've needed an actual rescue blower is so minimal compared to the Times that I've actually used them. So, you know, I think that the answer is I, we, we plan, we're planning for the inefficiency when it's not a real issue.

[A]

Yeah, I, I, that's our belief. So we think that you should be able to run an H vac service truck with like a thousand dollars on the truck.

[B]

I think that's probably, it's going to be a bunch of capacitors, it's going to be some contactors, search protectors.

[A]

Yep. But realistically, we put a humidifier on each truck, we put some air scrubbers.

[B]

Some, some.

[A]

But everything else is gonna, you know, we're gonna order it for that job. We don't, we're gonna start putting some universal stuff on there. But like, our feeling is H Vac is custom order. So why am I, why am I burdening my balance sheet with random stuff? And as someone, you know, I've been, I've been in this business for a long time. I've owned it for almost 10, nine years. And the amount of H antiquated H vac stuff that I've thrown away off the shelves is sickening.

[B]

I'm also looking at, into my shop at some antiquated H vac stuff that we bought years ago that is just.

[A]

Oh yeah, just sits, doesn't do anything. I mean, I've just given it away, I've thrown it away, tens of thousands of dollars. So, yeah, we really just don't like stock.

[B]

I mean, it's a good, I think it's a good thing for everybody to hear because it's one of those, those hard ones that we like to collect and we like to build up stock to be able to have everything for efficiency purposes. Because H vac, I mean, whether we like it or not, is a, most of the time emergency business. It needs to be done, it needs to be done now. So then how are you dealing with, with weekend load then? Right, because that's going to end up, you just started doing weekends. The vmi, my guess is your VMI is closed on weekends. So how are you handling then that truck stock for off hours?

[A]

Well, we'll stage it. So if we know there's a weekend install, we stage the packout kit. So that's just back to packout kits. And then if somebody needs a part over the weekend, they'll either either go to Home Depot and request funds or they'll pull it and we have cameras and they'll just, you know, tell us what they pulled. Yeah, but that's not as common as you'd think.

[B]

So. Yeah. And that's the other thing is, is it ends up we're once again, I'm still planning for something that's very low probability.

[A]

Yeah. I mean the truck stock handles most of it. Home Depot handles the rest.

[B]

Don't make it so simple because then I feel dumb when you make it simple, it's like.

[A]

No, I think I, I think the reality is that it can be simple. Now truck stock. I, I'll. I'll make you feel better. Chris Hoffman, 180 million. Doesn't feel like he has a handle on truck stock.

[B]

His trucks. Right.

[A]

So like it is a complicated problem.

[B]

Yeah.

[A]

And my solution to the problem is telling the problem to go itself and have mobile truck stock. So I don't have the problem. But it's. That's the same approach. I don't know if that's scalable, but that's what we're planning on doing. And it's the same approach that we took to warehouse. Hey, warehouse is really complicated. I could spend a ton of time trying to solve the problem face value or I could avoid the problem completely by having VMI and have a different set of issues.

[B]

Yeah.

[A]

And we've tended to choose like what's the highest and best use of my energy and learning how to run a great warehouse. Isn't it?

[B]

Yeah.

[A]

Truck stock. Like I, I did see somebody doing truck stock incredibly. And it was Apollo down in Cincinnati. 40 million, maybe $38 million. Shop. Big shop. And it was a huge expenditure of resource, like absolutely huge to maintain incredible truck stock. And at the end of the day, I roughly feel like they had slightly better control than I do with my structure.

[B]

Did they do it where like each truck is its own little mini warehouse and they all dedicate. Yeah. So that was the way I've seen it as well. And we were thinking about too complicated road and I said this is too much. I can't. We started. I started entering it in s time I go the. The repercussions of having to utilize. I get better visibility on each truck, but not by that much.

[A]

Yep.

[B]

Because I, I mean I would get the same from. From being able to pull the same report of just the warehouse and who pulled it versus what, which truck. But that being said, I mean, honestly. And then the un unspoken thing which we haven't talked about yet is we've started running H vac service. One truck out of a Maverick with a bed. With, with a. Not a bed cap. But like the. What do you, what do you Call those the. It's not. I guess it is a bed cap. It's not the flat one.

[A]

Talk about.

[B]

Yeah, yeah. So we started running Mavericks. Yeah, I mean, we. We put a cap on it and a pullout drawer.

[A]

Okay. See, I told Brandon the other day, I was like, hey, I'm pretty sure I can put h service. Oh, he's g. Dude, he's gonna hate this. Like, my goal is I never want to buy another van.

[B]

Yeah, I agree. They're.

[A]

They're 20 grand.

[B]

I told you. I ran around in the van for those three weeks, and I didn't use anything out of the back, John, for service. I used nothing. I. I pulled out. I have a box that I keep all my stuff in, all the. The individual pieces and parts and my tool bags and everything like that. I didn't use anything. So the way we have it set up is we have all of the tools in the back seat. So they're locked up in the back seat. They're. They're torches, recovery machine, vacuum pump, handbag. It all fits in that back seat when you lift it up. And then in the back, there's a big rollout drawer that carries all the small stuff. And then on top of that is all the kind of little bit slightly larger stuff. The down one downside is it won't fit a coil. That's the big thing is, like, if you have a big coil or something like that won't fit. So the. The. The Mavericks can't do like the. The coil replacements or anything like that. Evaporator coil? Yes. Condenser coils? No. That's where it stops. And then the techs are forced to keep their bands clean because it is very small. So I loved it, though. Like th. Those trucks. One great gas mileage. The hybrids. We. We bought five this year, and we'll probably buy a few more next year as we start fa. And then the vans have been gone to all the installers, so they can. They can pull, you know, decent size equipment with it.

[A]

Pickups for service, guys, is the ultimate hack I've pitched.

[B]

I pitched the Rangers, right?

[A]

We're doing Rangers, we're doing Tacomas. But then I found out the price of Mavericks. Well, we couldn't get a hold of Mavericks. Yeah, yeah, we couldn't get a hold of them when we were doing all this buying because they just weren't available. But they're available now. So we're planning on bringing on 10 vehicles next year, maybe 15. And every single one of them was going to be a Maverick. And just like, because dude, I can buy 10 vehicles for like 250 grand.

[B]

Yep.

[A]

Like we're going to do it in cash. Like if we can do Mavericks, I'm literally done. I'm literally done buying vehicles with debt.

[B]

So cool thing too is the Maverick platform like the same engine, same body, same everything. Not body, same everything. Platform wise, they're putting a, a van body. So it's going to be like the back to the cities, like the transit cities. So they're essentially doing that with it here in the next year or so. But I love the Maverick platform. It has been a great truck for us. We have not had any issues with it. They're very reliable. Yeah, great gas mileage. So we're excited. So we'll probably end up pre ordering a few of those cities and see if that's some kind of good in between. But honestly the trucks have been solid themselves. Hiller bought like freaking 150 of them or something stupid like that.

[A]

Vans are like $3,000 for the price of one. You can literally buy three Mavericks for the price of one. Yeah. So yeah, our like we're buying 10 to 15 vehicles next year. Every single one of them is going to be a Maverick. Or that. The other one is Chevy Trailblazers.

[B]

Trailblazers.

[A]

I just bought three for 23 grand.

[B]

One second.

[A]

Let me Google like brand new 20, 25.

[B]

Oh, that's like a SUV, is it? Who's that for?

[A]

Salespeople.

[B]

Yeah, that makes sense.

[A]

I put some tax in there.

[B]

Why wouldn't you just. What's the cost on that? Why wouldn't you just put, put get a Maverick? So all of our sales people and the service guys, we just don't put bed caps on the sales people's Mavericks.

[A]

Well, because these were seven grand cheaper than the Maverick. I got mavericks for like 22, $23,000 brand new.

[B]

So that. What was the Trailblazers.

[A]

Oh, sorry. I got the trailblazers for 22, 23.

[B]

Oh, that's.

[A]

That's Mavericks.

[B]

I think like 25 to 28.

[A]

Yeah, that's a hybrid.

[B]

But if you get like the non hybrid, I think you can get them for all 25. Yeah, but anywho, okay, so, so yeah. Remove purchasing from all employees except a few dedicated. Implement a PO system that ties directly to every single job so that you can track all money inflow, outflow to jobs. Put in the PO system, numerical, whatever the code that you want them to utilize. Lock that in with your vendors, all of them so that a. You can track between Multiple departments, if you ever plan on going multiple departments. Because that was one of the issues we ran into. But even in H vac, dividing service from install, I think is important. So that you can do individual job costing as a department.

[A]

Yep.

[B]

Or gross margin job costing as a department. And then remove as little stock as possible to. And put it back onto the vendors as much as possible. So that you're not a warehousing company, you are a service residential company.

[A]

Yeah.

[B]

Sound about right.

[A]

And like, yeah. And VMI is becoming like much, much more mainstream. Like there's a vendor locally to us and they're putting VMI is like full blown staff VMIs in like four or five million dollars shops. And the idea for them is is they own that, they own that contractor now.

[B]

Like, which is true.

[A]

Yeah. Not they just got that entire account. Like it's such a slam dunk. So any growth that ever happens with that business, like all of it will go to them basically. Which is what we've seen too. Like we've centralized into our vmi. And I was talking, we did an end of the year sort of review with our vendors a couple of days ago. I used to have to manage like 40, 50 vendors. There were like, you know, three or four big ones that got the lion's share. But like 40 or 50 total, I literally manage three right now. Like, I manage three vendors. And it is awesome from, from an.

[B]

H vac perspective, like you still have to manage some spend to all the vendors. Right. Because there's certain ones that run certain brands.

[A]

A couple hundred bucks a month.

[B]

Yeah. Okay. Just want to make sure that we're clear on that because I was gonna say. How do you do that?

[A]

Yeah. No, so we're like, we're at, we have two vendors at a quarter of a million a month each.

[B]

Yeah.

[A]

And then we have a third vendor at like 50 and those. That's basically like what we manage. And then we have like a few vendors here and there for like under $1,000. But it really got very easy to, to manage and negotiate and handle that relationship. You know, it's very hard for a wholesaler to find a quarter of a million dollar month account.

[B]

Oh yeah, that's, I mean, I, I, 10 years ago that was somebody's yearly spend. Not even.

[A]

Right, right.

[B]

So now they're able to.

[A]

Yeah. A lot of vendors will bend over backwards regardless of size.

[B]

Sweet. Am I missing anything? Any advice, any big silver bullets when coming into this build of making sure my PO system is correct and that my inventory is correct.

[A]

Nope. The, the biggest thing is cut off access. That will always be the biggest win. And don't pussy foe with it.

[B]

Yeah. No, honestly, it's like giving, being given permission to do that feels so nice. Like it's, it. I know it's going to be a headache but at the same time like for two weeks, huge load off my.

[A]

Heart because I know two weeks technicians will complain. But then it's just like guys, the reason I'm doing this, I just brought, I brought example invoices. The reason I'm doing this is this and this and this. You bought four times too much on this invoice. You know where that comes from? Me like, so I, I think, yeah, I think it's easy to explain. And also the total amount starts if we displayed the total amount. Because when we first did it we're like, hey, just so we're on the same page, our overages for stuff that we did not need on jobs last month was $60,000. $60,000 to do. Then we brought up a couple examples of like egregious purchasing. And the joke is called jackets and lollipops. People bought a heated jacket on our account, like a Milwaukee 300 heated jacket. And then they bought these like five dollar lollipops. So the rule became. Yep. The rule became jackets and lollipops. Hey, if you want to know why we did this, Jackets and lollipops. Some asshole bought a 300 heated jacket on my account. We took it out of his paycheck, but we sliced per. Like no one can access purchasing.

[B]

Now that's a lot. But I, I mean it, it's. I don't see any other way through it because that, that's like I said, back to the, the beginning. 35 in materials, way too high. If we would have reduced that by 5%, we would have had last year an extra couple a few hundred thousand dollars.

[A]

Yeah.

[B]

In the bank account that we don't currently have. And, and thinking back to that. Amazing. That would be just absolutely amazing to have today. So we're looking forward at starting the first. Very excited. I mean we can update people at the end of next year, how it goes. But yeah. Pumped man.

[A]

Sweet. If you like what you heard, check out ownoprated.com. make sure to give us a five star review wherever it is that you listen to shows and tune in next week. April.

[B]

April. No, April. We have a workshop in April.

[A]

Oh yeah. Yeah, we have a workshop.

[B]

Yeah.

[A]

This will be our third workshop.

[B]

Yeah. If you want to see John shop, which is super cool and see those packouts and John really opens it up to everybody to take pictures of his pack out lists.

[A]

Yeah.

[B]

And it's very, very open and very helpful for a lot of people to get to actually see this, this in process. I mean the only reason I'm, I'm doing well with how I imagine it is because I've seen John shop working and actually working. So April workshop, check it out on the website. We hopefully we'll see you there and listen to us next week.