#178 - Leveraging Discounts and Inside Sales for HVAC Growth

Summary

Episode #178 - Leveraging Discounts and Inside Sales for HVAC Growth

Hosted by John Wilson and Jack Carr

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Introduction

In Episode #178 of Owned and Operated - A Plumbing, Electrical, and HVAC Business Growth Podcast, hosts John Wilson and Jack Carr delve into effective strategies for driving growth in HVAC businesses. The conversation primarily focuses on optimizing closing rates, leveraging discounts, enhancing inside sales teams, and managing shoulder seasons to ensure consistent profitability.

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Optimizing Closing Rates

John and Jack emphasize the critical importance of optimizing closing rates to maximize revenue. They highlight the potential missed opportunities when a significant portion of leads go unconverted.

John [00:00]: "Choosing to not optimize. It's like a ridiculous mindset. Our closing rate's pretty good and I'm like, what is it? They're like 50%. Okay, so half of your jobs are not being closed on. Well, can you close an extra 20 grand a day? And the answer is absolutely."

They discuss strategies to improve these rates, including better training and more effective sales processes.

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Tracking Financial Metrics

The hosts underline the necessity of meticulous tracking of financial metrics such as gross margin and net profit. Jack shares insights into their recent financial performance, showcasing the benefits of disciplined financial monitoring.

Jack [03:08]: "We hit break even, which is huge."

John [31:42]: "Year to date we're net profitable. We're at like 14% net year to date, so I'm under."

This tracking allows them to make informed decisions and adjust strategies in real-time to maintain profitability.

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Leveraging Discounts and Promotions

A significant portion of the episode is dedicated to the strategic use of discounts and promotions to drive sales, especially during slower periods.

John [06:16]: "We did a bogo. So you know, people have mixed opinions on this. But like, my opinion is I don't really care. Like, our job is to keep our installers going, basically any cost. So a bogo is like thousands of dollars off a system during a very specific period of time."

They elaborate on how bulk purchasing and negotiating better rates with vendors have enabled them to offer substantial discounts without sacrificing margins.

John [07:55]: "We did a bulk buy of equipment, which we got the price 30% off our retail price for equipment."

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Managing Shoulder Seasons

John and Jack discuss the challenges of shoulder seasons—the periods between peak seasons—and how proactive management can turn these times into profitable opportunities.

John [10:07]: "Be proactive with shoulder season like this. We spend a lot of our time thinking about how to survive shoulder season...what special promo do I have?"

They share actionable advice on planning promotions, negotiating with vendors, and maintaining a steady flow of work even during traditionally slow periods.

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Enhancing Inside Sales Teams

A pivotal theme is the expansion and optimization of inside sales teams to handle leads more effectively and ensure higher conversion rates.

John [18:06]: "Our cost structure is built to be variable. If I have an empty plane seat... We built an inside sales team. I think we've talked about it a bunch on the show."

Jack echoes the importance of a dedicated inside sales force, noting their impact on closing rates and overall revenue.

Jack [27:36]: "It's a salesperson. If they don't sell, it's not really a loss. If they do sell, then it's a win."

They discuss various strategies, including live closes and leveraging automated outreach tools like Hatch, to maximize the performance of their inside sales teams.

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Equipment and Inventory Management

Effective inventory management is highlighted as a cornerstone of their growth strategy. The hosts explain how bulk purchasing and efficient storage solutions contribute to their ability to offer competitive pricing.

John [37:00]: "You need specific inventory ready to go. You need custom packouts ready to roll. It takes a ton of freaking work to make this thing happen."

They also touch upon the expansion of their warehouse capabilities to support increased inventory and streamline operations.

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Cross-Selling and Service Integration

Cross-selling across different service lines—such as plumbing and electrical services—is discussed as a means to increase revenue and enhance customer satisfaction.

John [26:03]: "That's one of our service things. If the service is in code red, like we will mention like hey everybody, H Vac load today."

By integrating services, they ensure that customers receive comprehensive solutions, thereby increasing the likelihood of repeat business and referrals.

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Achieving Profitability Goals

The hosts share their ambitious goal of achieving profitability every month of the year. Their disciplined approach to cost management and revenue optimization is presented as a replicable model for other businesses.

John [30:29]: "Year to date we're net profitable. We're at like 14% net year to date."

Jack [31:41]: "Never hitting a negative one."

They attribute their success to a combination of strategic discounts, effective inside sales, and rigorous financial tracking.

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Conclusion and Takeaways

John and Jack conclude the episode by reiterating the importance of proactive management, continuous optimization, and strategic leverage of inside sales and discounts to drive HVAC business growth. They encourage listeners to implement these strategies to not only survive but thrive throughout the year.

John [33:16]: "It's all so simple. It's like, hey, you got to focus on this and just drive this lever, this lever, and this lever, and you'll get there."

Listeners are invited to join their upcoming workshop and engage with the Owned and Operated community for further support and insights.

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Notable Quotes with Timestamps

• John [00:00]: Discusses the missed revenue from unoptimized closing rates.
• Jack [03:08]: Shares the achievement of breaking even.
• John [07:55]: Explains the benefits of bulk purchasing for significant discounts.
• John [10:07]: Emphasizes being proactive during shoulder seasons.
• Jack [27:36]: Highlights the effectiveness of a dedicated salesperson.
• John [37:00]: Talks about the necessity of specific inventory for same-day installs.
• John [30:29]: Announces year-to-date net profitability.
• Jack [31:41]: Celebrates the streak of profitable months.
• John [33:16]: Encourages focusing on key business levers for growth.

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Final Thoughts

Episode #178 offers a wealth of actionable strategies for HVAC businesses aiming to enhance their growth trajectory. By focusing on optimizing sales processes, leveraging discounts smartly, and maintaining rigorous financial discipline, John Wilson and Jack Carr provide a roadmap for achieving sustained profitability and operational excellence.

For more insights and to join the community, visit www.ownedandoperated.com.

Transcript

[A]

Choosing to not optimize. It's like a ridiculous mindset. Our closing rate's pretty good and I'm like, what is it? They're like 50%. Okay, so half of your jobs are not being closed on. Well, can you close an extra 20 grand a day? And the answer is absolutely.

[B]

That's so ridiculous.

[A]

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[B]

We haven't had one of these in a long time. John. Just John and Jack.

[A]

I missed you.

[B]

But April's coming up too soon, so I'm excited for that. I look forward, I look really forward to the workshop. Not like actual April like the workshop.

[A]

What are you talking about? April is the worst.

[B]

No, I'm referring into, like, missing you and you're just over there being a jerk and doing my feelings.

[A]

I know, I know. The. The workshop's going to be a lot of fun. That'll be a lot of fun. But yeah, April. Aside from the workshop, April is the literal worst.

[B]

Yeah, it definitely is. Except February last year was the worst for me and I posted on Twitter and we're up 236% year over year, which means absolutely nothing because I should have only been up like 50 to 60.

[A]

But still, February was just like. It was just like so bad last year. Is that the idea?

[B]

Oh, bad with the same amount of H vac people. I have today. Last year I did $60,000.

[A]

Yeah, I'm sure we could, like, somebody should link back to that episode because I'm sure you talk about that.

[B]

I'm sure I'm probably crying, but like.

[A]

Just like weeping blood.

[B]

So the good news though is we're starting to track everything. We've been talking about gross margin and gross profit, all this kind of crazy, crazy stuff over the past like six months on the podcast. And I have numbers, I came bearing numbers. And those numbers are, let's do it. We hit break even, which is huge.

[A]

Okay. Like net. Net break even.

[B]

Net break even. So I think we made like $14,000. Like, it wasn't a bad month.

[A]

That's a win.

[B]

That's a, that's a win. Like not losing 30.

[A]

What is a. What is a budgeted net profit per month? Like, what do you expect to.

[B]

To break even per month?

[A]

No, like, what you said 14 is a win. Is it a. Like what. What are you expecting for net profit per month?

[B]

I don't think we granularize that much. We're more focused. Like if you look, think back to when you were our size, we're focused on growth a little bit more than profit. So we want our revenue numbers to be high while keeping our gross margin kind of.

[A]

Okay. Yeah. I basically ran.

[B]

We shoot for like 10, 10%. Like that's what I want is gross profit or excuse me, net to be 10% because we're shooting for 15 over on the year this year. But like 10 would be awesome.

[A]

Sweet.

[B]

10%. But yeah, H Vac saved the day. And I don't know how my saleswoman did it. Amazing, John, amazing. So she sold most of that. 75% of that with a gross. A gross margin of 59% in H Vac installs 59% in February.

[A]

That's great.

[B]

And then my Sales service did 57% in February, which is awesome. Plumbing sat around 60, which they did great, but they didn't make a whole lot. We had a lot of people that were out, so they did about. I think they did like 60 or 70, 000.

[A]

Okay.

[B]

And so we ended the year or the month with 57 blended, I believe. All nice company wide. 50.

[A]

Yeah, that's amazing.

[B]

Percent blended, non weighted, but really excited about that. Like, that was huge. And it's huge. And you can feel it like you can see it in the bottom line. Like, oh, we actually have like more money.

[A]

Yeah, no, that's awesome. That sound. Dude, that sounds like a huge win.

[B]

Yeah. And then the backside of it is then we, we went through and said, okay, well that, that sounds like a huge win, but let's make sure it was like, what was our close rate on H vac install? Because I don't want, you know, 120% a gross margin with like a 2% close rate. Right. Yeah, it can, can hurt you in some instances, but we still had a 75 plus close rate. So like it was beautiful. Very, very happy. But now the name of the game going into March is we don't want our March to be our February. Right.

[A]

Okay.

[B]

So we're really trying to stay on top of it because it's moderate. We went into like hard modern weather, like 60 degrees.

[A]

Same here. Yeah, same here. Yeah, we've still been selling. We're actually, I mean, we're three days in, but so far we've sold the budget every day, which has been good, which is 120. But we're like, we're ripping some discounts to do that.

[B]

I want you to go back and listen, John, to like earlier episodes when you're like 100k day. Yeah, we finally are getting 100k days or five.

[A]

Yeah, I know.

[B]

And now you're like, oh, my budget's 120 a day.

[A]

Yeah, yeah, I mean, does feel like a big deal. So if that helps. It doesn't. It hasn't totally rolled off yet, but yeah, it, it's good. We've been selling the budget, which is, which has been a big win. Revenue in February was not good. We did not execute as well as we would have liked, primarily in electric. And we had a bunch of sickness. Our sales were pretty close to what we expected. It's just we actually didn't complete the work. So that was pretty lame. And then for March, what we did, we do a bogo. So you know, people have mixed opinions on this. But like, my opinion is I don't really care. Like, our job is to keep our installers going, basically any cost. So a bogo is like thousands of dollars off a system during a very specific period of time. So we did that this year and what was really interesting is we ended up doing a large equipment purchase for a huge amount of money off from one of our vendors. Because normally we just have like, I'll tell you how it usually goes. Usually we go and we tell a vendor, hey, for this 45 day period, I need an extra 5 to 8% rebate payable at day 60. And that's going to allow me to be more competitive for our Shoulder seasons. So we do that in March, April, and we do that in September. October.

[B]

For H Vac 2 or Just Plumbing.

[A]

This is exclusively H Vac.

[B]

Okay, awesome.

[A]

So we've. This is our third or fourth shoulder season doing this and it's been a big win. It allows us to shave like 20 points off retail price without it impacting our gross margin. So we get to get way more competitive, which helps us win more deals during shoulder. But because we negotiated so effectively last year for H Vac equipment, which we've talked about on here, I actually was not able to secure the Bogota programs again, good and bad. So what we ended up doing was we did a bulk buy of equipment, which we got the price 30 off our retail price for equipment. So we did a pretty large acquisition of equipment and instead of an 8% rebate, we got 30% off.

[B]

Oh.

[A]

So it was really interesting.

[B]

How did you plan?

[A]

We were able to.

[B]

We.

[A]

I mean, we didn't plan for it. We now know to plan for it. It kind of fell into our lap. But this is now another tool that we're going to use in our toolbox.

[B]

I guess what scares me right, is like we. There's so many different types, sizes and. And types of equipment. Like, how did you plan?

[A]

Two and two and a half tons only.

[B]

Okay. Interesting.

[A]

Yep.

[B]

No, I mean that's. That's the way to go. Split two and a half tons only. All heat pump or gas or I guess you guys only do gas in.

[A]

Ohio's not. Yeah, Ohio's not a heat pump.

[B]

That makes it easy. So we. We actually just launched something not the same, but similar into March, hoping that we can drive traffic is. We're doing essentially a $7,000 heat pump split any size all March. And that's the. That's the plan. That's the game. And we've secured with a vendor special pricing.

[A]

Yep.

[B]

To make sure that that works across the board.

[A]

Yeah.

[B]

Higher pricing on the lower side, just slightly. But slightly lower pricing on the bigger units so that we can even that out. And I mean, there's really no 5 ton heat pump splits anyway. Like, nobody uses those. So our hope is that we're going to drive a ton of two, two, two and a half and three ton heat pump splits. And we've just launched that yesterday and we've already seen some new decent traffic.

[A]

Yeah. Yeah. Dude, that's awesome. March, I think, I think the big. The big probably lesson here is like, be proactive with shoulder season like this. We spend a lot of our time thinking about how to survive shoulder season. Like when we're in peak season, we're preparing for the next shoulder season. So like in the middle of July, what I'm going to be focusing on isn't July. I'm going to be focusing on, okay, September's coming up. What special promo do I have? How can I make sure I keep moving boxes for this 30 day period from hell? And that's what, that's how we focus on most of the year also for like February to the end of April.

[B]

Yeah. That idea changed my business, by the way. So we restructured pretty much everything to understand, like, hey, we need to be taking pictures at every job site. Not because, like, hey, it's the right thing to do, but we need those photos. We need that data so that we can actually actively go after certain customers in the off season and subsequently also like anything that we run, any kind of promotion that we run, the goal is collecting data. And not necessarily for the middle of summer. Like, we don't need the extra, I guess we love the extra jobs, don't get me wrong. But like we don't need the extra jobs in the middle of summer. When we need them is to call them later on. Right. Call them for the fall maintenance or the spring service. And so that, that's really changed how we function. And like the switches we flip and pull to survive Shoulder. Like that one, that one thought that I remember sitting in a, sitting in a storage unit talking with you about.

[A]

Anything you can do to prep yourself for slow season is the win. There's actually, I think it's right here. Yeah. Oh my gosh, it is. I get to reference a book on this shelf. I read this book like 10 years ago. H vac spells wealth. Let's go. Yeah, it's good. So somewhere in here they talk about this concept.

[B]

For those that didn't see that awesome thing that just happened on Live, John.

[A]

And I both, both happen to have the same book right behind our heads. That was not intentional. We are not being paid by Ron Smith to do this. Anyways. There's a part in here where it talks about, it talks about that like, hey, they spent, they're working on shoulder season six months ahead.

[B]

Yeah.

[A]

And what I'm seeing right now, what I'm seeing on like LinkedIn and like Facebook groups right now is like good sized businesses that were not working on shoulder season six months ahead. Like there's a $20 million business in our market and like 40 of their 50 texts are sitting right now and they are normally like A good. I don't know where they whiffed because they're normally good, like solid executors. So that was. Yeah, it was pretty interesting, but like, you got to prep. So are you taking calls? What's your outbound strategy? What's your inbound strategy? And is it robust enough? We've spent a ton of work on that over the last two years. And then like, how can you go to market in a way that drives leads? So for us, that was the Bogo. We're going to drive leads through Bogo this year. We're not doing it through Bogo, we're just doing it like, hey, we have this crazy cheap system. You want it? It's like a Goodman, you know, and for us it gave us a full system at like $8,300, which puts us on pace with like the chucks in a truck in our market. And for us, that's still a full 60/ some percent gross margin because we got it for so cheap.

[B]

Which is crazy when you think about purchasing power in that. That sense from all like the, the people.

[A]

Yeah.

[B]

In the private equity groups.

[A]

Yeah, I bought air conditioners for like 400 bucks. Yeah, these air conditioners are like $400.

[B]

So jealous when you say Bogo. What are they getting one free normally, like the furnace.

[A]

So you buy an air conditioner, you get a furnace for free. Now we still charge for the install. So basically it would take a $10,000 system down to like 85, $500.

[B]

Good deal.

[A]

But. But you sacrifice margin to do that. It's actually, this is a better one because one, because the price is so big, the discount so big, we don't sacrifice any margin. We actually make a higher margin, less gross profit dollars, but a higher margin. And we've already started closing the sales and because we own it, we get to, you know, we can make this a longer Runway of a deal. So if we still have some leftover going into May, then we're going to use it for September's deal.

[B]

Yeah, I was gonna say that's interesting because if you don't sell them all like they, they don't go bad either. You get to keep them and sell them still at it at full price now going into summer with the cheaper thing, if you had the capital. Have you ever thought about that? Buying in bulk and storing in your warehouse if you had the capital.

[A]

This was the first time we've ever actually done. Well, we did it one other time for generators like three years ago, and that was a mistake, but it's because we didn't have a mature enough, like, marketing and sales process, because it. It is a big risk. I mean, you. You bring on hundreds of thousands of dollars of equipment, which is how much we brought on. And, like, you have to believe that you're going to put it in because that's a. That's a big load. We believe we're going to put it in. We know how to move boxes. We know how to market. So. Yeah, but I. I think. I think it is intimidating. We're. We're thinking about doing it again with generators, because we've started more and more generators, like two a week at this point, which is kind of crazy.

[B]

That is crazy.

[A]

And we're. We're starting to, like, really hone in on selling them and how to price them and where to get them. And so it. It's kind of fun. I think generators this year will do, like, a few million dollars of generators this year, which is, like, just nuts. And so I think it'll be the same thing. I think we'll end up bulk buying a couple hundred grand at a time.

[B]

How did. How did electrical flop in February? Was it because of. There was snow on the ground? Oh, no.

[A]

It's literally the flu. Yeah. Our install team. Yeah, we got wrecked. Yeah, we just got absolutely wrecked. I mean, they basically missed an entire week of revenue.

[B]

No, I'm with you on that one. I mean, it wrecked me and half of our team as well, for, like, four days. And mostly the plumbing division. And so our plumbers, like, we. We're not big enough to have, like, the. The capacity to continue. Like, we just pretty much shut down. Like, sorry. We have one guy who can kind of run some stuff. Push it out.

[A]

Yeah. And I'm feeling especially grateful for this. This year, like, last year, it'll be interesting to have a Q1. So last year, I'm gonna look this up. Our electrical was still really pretty small last February, and we were doing, like, layoffs for electric. And that's been our big, like, celebration this year is, like, plumbing and electric. We're typically talking about, like, okay, we might have to reduce the team size. We're, you know, we're thinking about, like, what levers we can pull. We haven't even begun those conversations this year. We haven't needed to, like, full schedule on every single team, most days included. Yeah. So that. That has been freaking awesome. So the electrical team is, like, really vibing because they're like, last year, a lot of them were here. Like, it's all the same team, and they're just like, oh, my God. Like, last year at this time, we were doing layoffs, and, like, we didn't. This year, I'm, like, looking up. I'm looking up last year's revenue.

[B]

So what other kind of levers are you pulling? So you have the bogo, but it's really not a bogo. This year we actually accidentally did the same one. But what other, Especially across different service lines like electrical and plumbing. What other kind of specials or outbounding or what. What. What levers are you pulling to keep the board full and to keep sales coming in?

[A]

I mean, discounting is our really big one, and inside sales is huge for us. People probably have mixed opinions on this, but our, like, our cost structure is built to be variable. If I have an empty plane seat. I was actually talking to somebody about this the other day in one of my peer groups, and her business is amazing and, like, better than us gross margin, which is pretty cool. And I was like, how are you guys doing this? Like, you're a mid 20 million shop and your gross margins, like, 60, like, that's crazy. And they just, like, really hold tight to gross margin, which I think is good, and I think totally works for them. For us, what we have found drives the bus and continues our growth, which is important to us is not being that tight to it. Like, we want to hit 53 to 55%. We will give discounts to fill the board. Like, we're a big believer of the ultimate enemy is an empty plane seat. So if that. If that plane's taken off regardless, and I have empty seats and I didn't want to sell them because I was, like, holding tight to my gross margin. I believe that's a mistake for us. For other companies, maybe. Not for us. I think that's a mistake. So the big levers we pull is like, we built an inside sales team. I think we talked about it a bunch of the. On the show. We have five inside salespeople we built. We use hatch like crazy for outbounding those estimates and. And messaging them, and that's been a huge win. And we get, like. We have this whole, like, code system I'm sure we've talked about, where it's like code green through ice and blue. That's a really important part of us maximizing every day is our inside sales, our hatch and our code system, which I made like, a year ago.

[B]

That's incredible. I mean, I. I see what you're saying, because we. We. For those who don't know My wife and I just went on a cruise with our kids and, and we, we gambled in the casino teeny bit. And what's crazy about it was they have the same belief. They said hey, an empty cruise seat or an empty cruise room is worth nothing and actually hits them negatively. So what they do is they give out these free cruises if you gamble a little bit because they're saying hey, we'll get it back. We. And rather than putting just anybody in, we're going to put somebody who's going to lose money in the casino inside that room so that they lose enough money that it makes sense. But yeah, I mean it completely makes sense. You know, I think last time I was there though, you only had three inside salespeople.

[A]

Yeah, we added, we added, we're up to five. And it's been a really interesting lever inside our business. I, I don't know anybody else. Like even folks like three, four times my size do not have the number of inside salespeople we have just going.

[B]

To say yeah, yeah.

[A]

But we leverage it in really interesting ways. So like we'll do live closes. So if a tech is in front of a homeowner and maybe it's a newer technician, they're just getting used to our pricing, they'll actually call in and inside sales will present their options for them and live close it. So that's been interesting. We started selling over the phone for inbound leads. We're experimenting with selling water heaters over zoom right now. We sold two on Monday. So that's been interesting. A lot of rehash. Like there's not an estimate that goes unfollowed up because we, we have all this capacity with five agents to do it. So it has been a very big win for us. Earlier this year we started an outbounding campaign and we really didn't know where to begin. So we were using dialing on the phone phones, we were sending text messages, we were trying emails, tried a couple different softwares and ultimately we ended up with Hatch. Hatch has been an awesome partner for us. We started with them about five or six months ago and we've just continued to ramp. Every month we add three or four more automations. And my personal favorite thing about working with Hatch is Hatch comes out of the box ready to go. With Hatch you get automated multi touch outreach across text, voicemail, drop email and a ton more. So every single lead that you have gets worked. Every invoice that you leave gets retouched and rehashed, hashed and it's Freaking awesome. Check out usehatchapp.com OAO.

[B]

That's incredible. And so talk about this, this, these live closes. What is the close percentage? What does it look like compared to, you know, a, a comfort advisor or sending a salesperson out there or even just a experienced tech?

[A]

I mean, it depends. There's some com, you know, we use it for live closing. H vac, average ticket and close rates pretty much the same as a CA and obviously more convenient to the homeowner. So that's cool. We also use it for newer texts, like I said, that don't know how to present options yet.

[B]

Yeah.

[A]

And that's been a really big benefit. Or like if someone's struggling in service and their close rate is like 30% or 20% or something, then like we just assign them to an inside sales agent. They're like, hey, your close rate isn't good. Like, you will work with this guy until you get your clothes right back up. Like you're just, you're wasting our leads. And it's March and it's 60 degrees. Like, you can't waste our leads. We spent too much money on that. Like, honestly, a lot of guys end up really liking it because it takes a ton of the pressure of the clothes off of them. They don't even have to close anymore. They just hand it over to inside sales.

[B]

That's interesting. I, I, we do a pretty terrible job at following up on, on leads or on estimates. And so I wonder if we tried to, to get that SOP down and the scripts down and pull those levers.

[A]

Oh yeah.

[B]

Because it feels, it does feel like wasted opportunity.

[A]

Huge. It's huge. Do you have any inside sales at all?

[B]

We, I mean, like half and half. Somebody who's doing outside sales or out outbounding is our inside salesperson. So they're like running.

[A]

Yeah. Yeah.

[B]

Dual.

[A]

Yeah, you should, you could focus that up. It was one of our big growth levers for last year was adding an inside sales component. Literally just from rehash places we had already been to, calling them back. And the big thing is like, hey, if I have empty seats tomorrow, if I have open install, what do I do? Yeah, and it's sort of, it's the same playbook. Like we, we, I think we talked about this, but our company's divided into sales and install. So hey, if, if service is empty, you have a playbook probably, right? You're gonna outbound, you're gonna turn up your ppc, you're gonna send some mailboxes, you'll knock on doors, like you have 10 things you're gonna go figure out how to do. You're gonna advertise on Tick Tock. Like you're gonna do something in order to attempt to get stuff on the service board. People seem to miss the back half of that, which is okay. But what happens if install is empty?

[B]

Yeah.

[A]

And like hey shocker, install is 80% of your revenue probably. So like we care a ton about the thing that's 20% of our revenue and we're like choosing to not optimize the thing that is 80%. It's like a ridiculous mindset. So. Yeah, so build a, build a series of levers that looks exactly like what you've built for your service team. If your service team is empty, you've got 10 things you're going to do. If your install team is empty, you've got 10 things you're going to do. And like that mindset is what helped us drive and honestly I think is helping us. I, I wasn't super excited about revenue in February but like gross margin was big. Revenue was 20 some percent, 25% over last year's February. We were net profitable January and February and we just don't have a lot of dead days.

[B]

Yeah.

[A]

So it's a win.

[B]

It's definitely a win. And, and the last one that I'm curious about is cross sales. Are you guys focusing a lot on cross sales right now and trying to get the other groups in? I know it's a thing that not really one. We always do. You're always supposed to do it. But is there any additional focus?

[A]

That's like one of our service things. So if, if the service is in code red, like we will mention like hey everybody, H Vac load today. H Vac service slow today. If you see something, say something. But that is one of the levers we have. Like it's a pretty robust call board management system that we put into place last year. We add more onto it every month. I don't think it's 20 steps, but there's a lot of steps like we do a lot of which ultimately is I think why we don't have very many like slow service days is like we really even now March 60 degrees. Like our H Vac service team is full tilt running.

[B]

Yeah. Have you, have you guys started maintenances yet?

[A]

Oh yeah.

[B]

Oh yeah, yeah. We were trying to wait till the 15th or the 20th but I mean once the 60 degree weather hit, we just said hey yeah, full speed ahead.

[A]

We, we flipped as fast as we Possibly could. Yeah. Shoulder season is tough, but you can proactively manage it. So like, I think we just talked about a bunch of ways to different. Proactively manage it. You can plan your promotions, work with your vendors on what those promotions are. Maybe do a pre buy set up. Set up a rehash system so you can try to close stuff. Set up an outbound system so you can call your customers, be like, hey, it's time for that tune up.

[B]

Going to do that one. Let's circle back in a month on that. I'm curious. I'm going to track the. Out of that and see which.

[A]

Which one inside sales re.

[B]

Yeah, rehashing. It's. It's like a ca. In the sense that you can bring them on as like a commission only structure as well, right? In a sense, yeah. One. Yeah.

[A]

It's a salesperson.

[B]

So it's a salesperson. If they don't sell, it's not really a loss. If they do sell, then it's a win.

[A]

Right. I mean, there's a base comp.

[B]

Yeah.

[A]

But it's a low base comp. I mean, they're a salesperson. Their job is to sell. And it's. It's just like a different bucket. So like, if, you know, if I've got this bucket up here, like, hey, this is jobs that we went and sold on site. Okay, great. If you have a 50 closing rate, you have 50% of your jobs that you didn't close on site. Because every, every time I bring this up to somebody that's never done it, they're like, our closing rate's pretty good. And I'm like, what is it? They're like 50%. I'm like, okay, so half of your jobs are not being closed on. What are you doing about that? And they're just like, I'll train in rcas. And I'm like, that's not the point, bro. Like, you have to do something else. You got to go one more step. You have to actually like think and how do we close another 10%.

[B]

Yeah.

[A]

Of those jobs because. And you proactively discount you. You use a code system like us. Like, okay, hey, I'm empty. Tomorrow, 20% off. I got to fill the board. I got installers sitting. Let's get this thing done. So that's how our structure works. Like, we'll. We'll rip all the way down to.

[B]

30 is so obvious and simple that it actually hurts because we. It hurts especially because you called me out. Like, we were at 56%. I'm thinking he's right. Like 10%. Like you can make. Yeah. 10 calls a day.

[A]

Yeah.

[B]

Maybe not that many on inside sales, but still you make. And you, you do 10% more. I mean, our estimates are hundreds of thousands of dollars. Like that's totally, that's just money.

[A]

I mean, so, so there's, there's an interesting, if you guys use the service Titan app, there's an interesting component at the bottom of the homepage. So Today we have 327,000. I don't know if you can see that of open estimates. And it's one. So for us, a normal, like we consider it a good day of open EST, 7 to $800,000. And that's going to include every single option. Right. Like every single. So like if I went out to a customer's house for HVC, I probably left $100,000 of options at that house if we didn't close it. So that's a, that's a good day. That means the board was full and then it's like, okay, well can you close an extra 20 grand a day? And the answer is absolutely. And especially during shoulder season, like, this is probably one of the biggest levers that we pull is we rip discounts and. But the only reason we can go so low on discounts is because we proactively handled a code system. We have a variable cost structure. We set negotiations with vendors. There's like 10 other steps in there, but it allows us to, you know, full send.

[B]

I love it. I love it. This is how you survive shoulder season. Everybody is how you thrive.

[A]

I mean, year to date we're net profitable. We're at like 11% net year to date. And we're in March.

[B]

That's amazing because normally, right, you start off low and then you, in summer you pick back. Right. You survive.

[A]

Well, our big, our big like North Star is we are going to be profitable 12 out of 12 months this year. We give, we give zero fucks. So we're going to give 12 out of 12 months. Man. It's happening. So we, we did a ton of work and we've talked about all the different like components of this over the last couple of months. But like, okay, what's our vendor negotiation system look like? What's our cashback system look like? What's our rebates look like? How do we make sure we're doing just in time? Can we bulk buy so our, our gross margin goes down? Can we put our, our installers on task rate that way there's no like Sitting labor cost. Like, how do you make as much of your P and L variable? Can you put your call takers on commission? Like, it's all these different components. It's all the same thing. We don't want a single negative month. I actually think we're at month 10 of, like, straight.

[B]

Never hitting a negative one.

[A]

Yeah.

[B]

Oh, my gosh.

[A]

Which, like, my previous record was seven. So like, 10 straight months, especially in February, we're just like, all right, that's awesome.

[B]

I mean, if you look at enough P Ls too, from H vac companies, you realize that's so difficult. Or like.

[A]

Yeah. You know, I mean, that's taken, like, the Lord's freaking work.

[B]

Yeah. That was wild.

[A]

10. I just looked at where we're actually 14% net year to date, so I under. Underestimated it slightly.

[B]

Gosh.

[A]

Yeah, it's pretty awesome.

[B]

Straight jealous. Straight jealous.

[A]

All the work implement half of what we talked about in this episode, and you should be fine. Well, the other thing that was really, like, really interesting is we did reach the point where we outgrew our costs.

[B]

Yeah.

[A]

Which is a very important distinction. I had a feeling it happened last year, but we were still like, investing and, like, in the height of it. But our overhead for January and February of this year was below our overhead of January and February last year. We actually spent $50,000 less this year than last year, and that's with driving about a million dollars more in revenue.

[B]

Mic drop.

[A]

Sweet.

[B]

Yeah. No, you know, the crazy part about all this, to me, is all of these implementations that. You don't get me wrong, there's a ton of nuance. They're all simple. They're. None of them are easy, but they're all so simple. It's like, hey, you got to focus on this and just drive this lever, this lever, and this lever, and you'll get there.

[A]

And we've literally talked about it. Like, listen to the show. Like, I think I've talked about inside sales on here. I'm. I'm. We had to have.

[B]

Yeah, we definitely have. But it was like back when you were still. I don't want to say still figuring it out, but it was still fresher. It was like, late last. Late last year. Like, maybe October. Yeah, yeah, yeah, man. That. That's wild. That is absolutely wild. 50,000 less. Hundred. A million more in revenue.

[A]

Yeah. And then we were able. You know, February was a miss for us, for flu, and we. We did discount substantially. But even after all that discounting, we still had 47 gross margin. So like, we don't like it to be below 50, but I mean, we ripped some discounts to keep going, so 47. Whereas last year, our gross margin last February was like 30. But we just, yeah, we learned how to play the game a lot better.

[B]

Because that now it has me thinking like the same thing. Like, if I were to have ripped a bunch of discounts and called back all those open invoice or open estimates in February, what would we have said? What would we have sat at? If we could have another 50,500k, it would have been.

[A]

Did you have dead days? Yeah, if you, if you had installers sitting, then like you should have done that.

[B]

H Vac for sure. Plumbing, it was not as straightforward just because of all the sickness. Right. You could, you know, get as many leads as you want, but I can't run them or, or sales.

[A]

Yeah, I mean, I think that's, I think that's the really just big question here is like, did you, if you had sitting later, what could you have done? What could you have done with those days? How can we fill them? Is it going to be creating urgency? Is it going to be limited time pricing? Like, what are we going to do to. To make this better?

[B]

Where did your inside salespeople come from?

[A]

A man all over, like, all over.

[B]

Just any industry.

[A]

Just like, hey, we, we optimized for people that have sold before.

[B]

Yeah. Especially phone deals. Right.

[A]

Yeah, it's a different, it's a different thing. Like it's harder to pick up queues. I mean, they closed 35 grand today so far. Like.

[B]

I. John, these conversations hurt so much. It's good. Idiot right now.

[A]

But at the same time, just go do it.

[B]

They're just going to go do it. Like I March. We're going to March or April 5th.

[A]

Yeah, April 5th.

[B]

I'm a check back in on this that week. Hold me to it. Market in your calendars. We're going to go and hire an inside salesperson and then we're just going to run it as hard as we can.

[A]

I mean, it's so good. It's so good. Yeah, yeah. Today, just to like really rub this in, I guess.

[B]

Yeah, I'm already.

[A]

It's one, it's 120 and we're at 91,000 for the day. Pretty. Pretty, actually. Good split across all trades, which usually, like, ideally each trade does like 40 or 50 grand each. Right. But yeah, before I walked in today, not before I walked in, but like a few minutes after I walked in, it was like a few minutes after eight. And like there was already like 30 grand on the board and it was inside sales closing up an H Vac system that we put in today. Like we literally closed it this morning at like 7:30. We're installing it today because we got a sitting install crew.

[B]

Yeah.

[A]

And then we did the same thing with excavation.

[B]

Oh my God. For people in the trains, who actually knows what it takes to sell 50, like 50,000 in H vac a day is like what, four, five to seven units? Yeah. Plumbing.

[A]

I mean we have like, I think.

[B]

We have four crews right now or.

[A]

Yeah.

[B]

Like that's just so much work going on out of your place that I just can't even. Excuse me. You can't even.

[A]

Well, and then it takes, it takes a. It takes a ton of backend too, because what H Vac has been really interesting because like the equipment that you need on site, like if I want to be able to do same day, next day, like a same day H vac install or even next day, like what do you need to be able to do that? And the answer is a lot. You need all the equipment on site. You need specific inventory ready to go. You need custom packouts ready to roll. Like it takes a ton of freaking work to make this thing happen. But once you get it cruising, you can, you know, drop 13 grand before you go in the office that day and you can have a crew working. So like, juice is worth the squeeze.

[B]

I'm gonna, I'm gonna take a video and post it on the Facebook group here soon of our office because we are just starting to implement the packouts for nice for water heaters, same day water heater. It's super easy to do. So it's like right up front and we're just getting our electrical side down for the packout for H Vac because that's where we're going to start the big, big items. And then the, the. The warehouse just got organized and we're still building and stuff, but it's not a spot where I'm ready to show it. It doesn't look like super ugly anymore. Just looks like a little bit ugly. So I'm really excited to, to like the MTV Cribs, H vac plumbing, home services style.

[A]

Dude, I love it. I love it. Yeah, we have our. We're bringing on a second VMI like right now. And it's H VAC exclusive so that we can better support like packouts for H Vac service and install because it is just such a beast.

[B]

That's so wild. Is that what you guys are using, I don't know if we're able to talk about. Is that what you're using the other building for?

[A]

Yeah. Okay, well, when's the workshop?

[B]

In a month and 10 days.

[A]

You guys actually might be able to see the second VMI going. Yeah, it goes. It goes live like early April.

[B]

Okay. So. But we're gonna see some moving.

[A]

We're gonna see some jaws hit the floor because we're gonna walk in and see 400 pieces of equipment.

[B]

I was just gonna say it's gonna be a warehouse in there of just like.

[A]

Yeah, dude.

[B]

It's gonna be.

[A]

It's gonna be crazy. It's gonna be crazy. So huge amount of equipment and then an entire second BMI rolling.

[B]

I'm wondering, man, I'm gonna talk to you offline about this, but I'm wondering if we were to go to some of the really small vendors if they would. If they would think about it. Like, like super small distribution warehouses. Like the ones that are trying to get footholds and like they could use our facilities as vmi, but also like in that like, like you were ship.

[A]

Ship out of.

[B]

Technically it's a. It's a location. Like it'sn't someone else walk into your store.

[A]

Yeah.

[B]

And buy something from it.

[A]

Yeah.

[B]

Why. Why wouldn't we allow the same thing and they just service us a little bit better. I'm wondering if I could convince one because I have a small distributor in mind who they're itching for some more business.

[A]

I think you just found a great way, man.

[B]

That would be nice. Show up. Jack's got a little VMI going on too.

[A]

That'd be good. That'd be good. Yeah. I think it's gonna be. They start construction like next week and so if it's not done, it will be so close to being done by the time workshops here. Maybe we'll even host workshop over in that building. That'd be kind of fun because there is like a classroom section that'll be neat.

[B]

I'm excited to see it. That's going to be. That's going to be wild. It's crazy because like when we started these workshops too, you were just moving into the building you're now. And now you're getting another building and you're moving into that building. Like a three workshops later, two workshops later.

[A]

And like hopefully this time we have some fun. Like enhancements. So we added like, like an employee swag shop. So that's kind of cool. We're doing a bunch of the walls, which is cool. We've just like enhanced building. It's been good culture stuff. It's been good.

[B]

Sweet. Well, this has been an awesome episode. I'm gonna leave here with like some big to dos surviving Q1.

[A]

Not only surviving Q1, but, like, sell stuff. I mean, net profitable in Q1. Yeah. I mean, we're. We're at 12 and a half percent.

[B]

That's amazing. Amazing. I love it. Awesome. If you like what you heard today, come take a look at us at the website. Owned and operated dot com. Join the Facebook group. Facebook group is amazing. Love you guys on there. It is a lot of fun. Good information all the time. And then if you haven't, I know there's like a few seats left. Like what, three seats, four seats? Not many are left at the workshop. This will probably drop right before the workshop, so you won't have much time to get there. Anyway, if there's any left, seats. April 15th through the 18th. Come take a look at John's new shop. Yeah, I'm so pumped up. And leave us a review wherever you leave reviews at. Appreciate it, guys.

[A]

Thanks.