#179 HVAC, Plumbing & Electrical SOPs: Multi-Touchpoint Strategies for Business

Summary

Owned and Operated Podcast Episode #179: HVAC, Plumbing & Electrical SOPs: Multi-Touchpoint Strategies for Business

Release Date: March 20, 2025
Hosts: John Wilson and Jack Carr

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Introduction

In Episode #179 of the Owned and Operated podcast, hosts John Wilson and Jack Carr delve deep into the significance of Standard Operating Procedures (SOPs) within HVAC, plumbing, and electrical businesses. The conversation centers around implementing multi-touchpoint strategies to enhance accountability, streamline processes, and ensure sustainable business growth. Through real-world examples and expert insights, Tyson and Jack explore how businesses can prevent critical processes from failing by involving multiple departments and layers of oversight.

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The Critical Role of Multi-Touchpoint SOPs

Tyson emphasizes the vulnerability of single-department processes:
"If a process only hits one department, the likelihood of it failing is very high." ([00:00])

Tyson shares an anecdote about a friend who ran a $60 million business that failed to pay payroll taxes, underscoring the severe consequences of single-point accountability. He highlights the importance of integrating SOPs across multiple departments to mitigate such risks.

Jack Carr echoes the necessity of multi-departmental involvement:
"If I'm creating a SOP, then multi-touchpoint ensures it's not just lost in one department." ([16:31])

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Implementing Multi-Touchpoint Accountability

Tyson's Tactical Approach:
Tyson outlines his company's three-step process to ensure SOPs are effectively monitored and executed:

1. Install Coordination Team Accountability: Responsible for keeping jobs closed and running weekly reports.
2. Director of Fulfillment Oversight: Conducts monthly checks to ensure accurate month-end closures.
3. Accounting Follow-Up: Ensures timely completion through checks and balances.

"It's checks and balances is probably the best way to think about it." ([08:57])

Jack's Insights on Managerial Accountability:
Jack discusses the challenge of holding managers accountable when wearing multiple hats within a small team. He suggests leveraging different layers of management to maintain oversight without overburdening any single individual.

"I think there's a term for this... it's something like triple confirmation." ([09:53])

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Challenges in Maintaining Accountability

Risk of Process Failure:
Both hosts highlight scenarios where processes can falter despite having SOPs in place. Tyson provides tactical solutions, while Jack raises concerns about potential gaps in their own accountability structures.

"But what ends up happening is like, who's going to hold it accountable?" ([03:30])

Handling Mistakes and Oversights:
Jack poses a hypothetical question about dealing with missed SOPs, such as failing to run a critical report. Tyson responds by emphasizing the importance of having systems that track and publicly assign tasks to ensure accountability.

"So like, you're gonna talk about this. And did you complete your to do?" ([17:30])

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Best Practices for SOP Implementation

Public Accountability:
Tyson champions the use of public to-do lists and open ledgers to foster transparency and accountability among team members.

"It's like a public accountability, but it, it does put it on by you." ([17:48])

Regular Leadership Meetings:
He describes the integration of accountability checks into regular leadership meetings using platforms like 90's EOS software, ensuring that tasks are not just assigned but also reviewed and followed up on.

"We sit down with each frontline leader by department... and then the director helps me hold them accountable to the plan that we set on Monday." ([14:10])

Leveraging External Support:
To manage complex areas like HR and accounting, Jack and Tyson advocate for bringing in external consultants or accounting firms to oversee critical processes, reducing the risk of internal oversights.

"We're bringing on a... watching the watchers." ([38:36])

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Addressing High-Risk Areas: HR and Accounting

Importance of Specialized Oversight:
The conversation shifts to high-risk areas such as HR and accounting, where mistakes can lead to severe legal and financial repercussions. Tyson shares stories of businesses facing dire consequences due to neglected payroll taxes and 401(k) contributions.

"You are personally liable for it. They can take your house." ([12:50])

Solutions for Small to Mid-Sized Businesses:
Jack suggests utilizing affordable external consultants to monitor these areas, ensuring compliance and accuracy without the need for extensive in-house teams.

"We keep them on retainer. They come in on the back end and say, hey, you did this correctly." ([38:59])

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Key Takeaways and Conclusions

1. Multi-Touchpoint Strategies Enhance Accountability:
   Involving multiple departments and layers ensures that no critical process is overlooked, reducing the risk of failures that can jeopardize the business.

2. Public Accountability and Transparent Systems:
   Utilizing public to-do lists and regular check-ins fosters a culture of transparency and responsibility among team members.

3. External Oversight for High-Risk Functions:
   Bringing in external consultants for areas like HR and accounting can safeguard against costly mistakes and ensure regulatory compliance.

4. Proactive SOP Implementation:
   Establishing SOPs before problems arise is crucial for scalable and sustainable business growth, preventing minor issues from escalating into major setbacks.

Final Thoughts:
Jack and Tyson collectively emphasize that as businesses grow, so do the complexities and risks. Implementing robust, multi-touchpoint SOPs is not just a strategic advantage but a necessity for ensuring business continuity and financial health. Their insights provide actionable strategies for business owners looking to fortify their operations against unforeseen challenges.

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Notable Quotes

• Tyson on Process Vulnerability:
  "If a process only hits one department, the likelihood of it failing is very high." ([00:00])

• Tyson on Checks and Balances:
  "It's checks and balances is probably the best way to think about it." ([08:57])

• Jack on Multi-Touchpoint Structures:
  "And that accountability is created by creating public ledger and holding the director accountable." ([17:48])

• Tyson on Legal Liabilities in HR:
  "You are personally liable for it. They can take your house." ([12:50])

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Conclusion

Episode #179 of Owned and Operated serves as a comprehensive guide for home service business owners seeking to implement effective SOPs through multi-touchpoint strategies. By fostering a culture of accountability and leveraging both internal and external resources, businesses can navigate the complexities of growth while safeguarding their financial and legal standing. Tyson and Jack's candid discussion offers invaluable lessons for entrepreneurs aiming to build resilient and thriving service-based enterprises.

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For more insights and actionable advice on growing your plumbing, electrical, or HVAC business, visit www.ownedandoperated.com.

Transcript

[Tyson]

If a process only hits one department, the likelihood of it failing is very high. I have a friend who runs a $60 million business and wasn't paying payroll taxes, and that is a you can go to prison offense. Everyone's like, oh, yeah, I don't think I'm ready for an HR person. I'm like, bro. We're about eight months into using Avoca, and Evoca has been an awesome partner for us in our call center. So what Evoca does for us is, 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 overflow and, 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 allowed us to ramp up our marketing to continue to grow even more. Thank you, Evoca, and thank you, Tyson, for your partnership.

[Jack Car]

Welcome back to owned and operated with your host, Jack the Maniac Car and John Wilson.

[Tyson]

I really feel like you're living. We talk about it every time, but.

[Jack Car]

I. I just like having a microphone.

[Tyson]

I think. I think you're a white dude with a mic, which, you know, 100 and. And on top of that, I think you missed, like, this. This calling to professional wrestling. I think that that's what you wanted to do in life.

[Jack Car]

Watch a lot of WWF as a kid.

[Tyson]

Yeah. Yeah.

[Jack Car]

Mostly I think it's voice acting. I think I would have. I think I have a great voice for voice acting.

[Tyson]

Wow. Okay.

[Jack Car]

Wait, wait. Not that anyone has told me that ever in my entire life. Not a single person.

[Tyson]

I just personally love the sound of my own voice.

[Jack Car]

I just, like. I think that my voice would fit really well on a cartoon character. Like, that's the extent of it. Sweet, man. So awesome. I'm really excited to RIFT today because I got a text message right before we started, and this is how prepared and ready we are, guys, for all of these episodes is one of my managers. I told him to run a report because we're supposed to be running this specific report in Service Titan every week. And he said, hey, Jack, that report that you told me to run. We have $9,000 in uncollected completed jobs that are falling through the cracks. If I didn't run this report, we wouldn't know about it and you'd be screwed. So I think today I just wanted to touch base, John, on like processes in place on the back end of like financial procedures, if that even logically makes sense. Yeah. To make sure that you're getting paid and you're not getting screwed in every corner. Because I feel like as you grow, like that's the last thing to grow. You don't grow your finance processes on how to make sure you collect first, you just grow and then you go, oh, I'm missing money. Let's put a process in place. And that's where we have been. And we put the process in place. But then what ends up happening is like, who's going to hold it accountable? Because there's only 16 of us.

[Tyson]

Yeah.

[Jack Car]

And we're all wearing 10 hats each. We're all generalists still trying to become specialists.

[Tyson]

Yeah.

[Jack Car]

So I mean, first one to start I think is collection, like making sure you collect. And, and I know people on here are going, what the hell is Jack talking about? Like just collect the money on site. Yes, for most things. But I think that there's a crack. And that specific crack in our business is this junction between, especially as we took on plumbing, like with H vac, you do the job, you finish the job, you get paid. With plumbing, sometimes there's this kind of waterfall of you do the job, you do the roughing, and then there's a three week period before the trim out and then the customer doesn't know to call you back or something happens and they go with a different plumber for the trim out. And now you have a job where you still did the rough in, you're still owed that money, maybe you took a deposit, but there's still thousands of dollars on the line that has been. It's technically not closed out and it's in, it's not an AR because the job's not finished. And so it's in like no man's land. I don't know if there's an answer to that.

[Tyson]

Well, I think there is and I think I want to give like the tactical for this specific issue. But I also think we should talk like higher level because this is, this is more, it's. I think it's a enterprise wide philosophy of hey, I'm going to make this process, then what happens? And, or at least the way I Think of it is who's watching the watcher. So if I'm putting like that same issue that you just described, which again, we can talk about the tactical of how you solve that with your frontline managers, but that same issue could be any issue. So it could be like, hey, we require background checks during the hiring process, and maybe one day your HR person decides they don't want to do background checks anymore, they forget, and then it just falls off. And then you find out a year later, oh, whoops. Or keeping control of cash in accounting, marketing budgets. I mean, it's almost like who owns the process? And then who watches who owns the process? I think, like, that's the thing I think we can try to solve here today. And the only reason I don't think we're masters at it, I think we're farther along. And the only reason we're farther along is because we have made so many mistakes that are exactly like what you just described. We've had to, we've had to figure out how to resolve it.

[Jack Car]

Let's just make sure though, that we do get tactical, because this is an open source.

[Tyson]

I think we start with tactical.

[Jack Car]

Yeah.

[Tyson]

So we. This used to happen a ton and it still does happen. So it's not that it doesn't happen, it's just that we now have a process to catch it. So we every month, as a. The tactical. Every month as a part of our end of month process in operations and then held accountable by accounting, we have a uncompleted jobs report. It's exactly what you just described. It's like, hey, here's the jobs. And like, it could be what you're describing where it's like, the job was complete but we didn't go back, we didn't collect, whatever. It also could be somebody made a mistake. So, like what we find what we found a ton. And it used to be like 50 grand a month of revenue that like, oh, I forgot to clock out that day and then dispatch clock out. But then when they clocked me out, the invoice didn't complete. So it says like, three of four completed. So I have an open $9,000 job that just was never completed. Which means we didn't collect because it was on financing and we didn't go through the process there. So it was 50 grand a month for us.

[Jack Car]

The other one that we notice a lot is, so those are two definite scenarios. The other one is that the job from a CSR perspective wasn't booked through the estimate.

[Tyson]

Yeah.

[Jack Car]

So the, the $0 ticket that was created. The $0 job was closed out. But the open estimate that was sold totally is, is sitting in an open estimates report not completed even though we've completed it. So that's another one that we found. And so our process actually is the same as yours. It sounds like it's just the follow up. It's. We run that weekly. The managers are supposed to run that weekly and yours truly is supposed to follow up on that weekly with them to make sure that they're running.

[Tyson]

That's how ours works. So it's now, ours is now a three step process. It's the install coordination team is accountable for keeping jobs closed and running it weekly. The director of fulfillment is accountable for checking in on it monthly so that we can close out the month accurately. And then accounting is accountable for following up with the director of fulfillment to make sure that that gets done in a timely manner. So it is, it is a, it's checks and balances is probably the best way to think about it because what we have, we have found just like on repeat and I'll give some other examples outside of just this, but we found on repeat is like you have to create. If a process only hits one department, the likelihood of it failing is very high.

[Jack Car]

Yeah. And that's, that's what I'm learning is the one department followed up by me is not a good plan. It's not a good plan. I mean even if I'm, I'm, I'm considering even bringing on. I know you used to do it a long time ago for different scenarios but even like overseas talent to just ensure processes were completed. Like hey this, your job is just as a follow up person as Jack's VA that does direct follow up on hey, this process is supposed to be done. Did we go through and ensure that the, that the report for Ferguson is correct? Like did you do that? Did the manager do that? No. Well that's someone that now that's a second department which is going to be like quality assurance of processes is complete. Just because you know, when I'm wearing all these hats it's so difficult to, to maintain and track like hey, did you do what I asked you to do weekly type of deal.

[Tyson]

I think there's a term for this. I don't remember the name for it but our controller uses it and it's something like triple confirmation. It's mainly used in purchasing or maybe it's like three tag or something like that. But you there, there's three different tags and this is like if I'm going to go buy a part. And one of the big issues that we have in our industry and us specifically, is we have low dollar. Like average ticket is like three grand low dollar but high velocity of pos. So like, if so, I might buy from vendors a hundred different POs a day, which for a $30 million company that like, that's a lot of POs, that's a ton of transaction volume and they're all small POS. So like the POS might be like 10 bucks, 15 bucks, 20 bucks. Then there's a few thousand dollars ones mixed in there, but it's a ton of volume of small dollars. So what inevitably happens is you run into the same scenario where, hey, this, this vendor billed me and like, I don't even think I got these parts. Or like, oh, I agreed on this pricing for this part, but they billed me 30 more than that. Like, what the heck just happened? Or hey, they sent it, but I only got half the order. What happened to the other order? I'm being billed for the whole thing. Like any variation of those could happen. Yeah, so we put in a. It's a triple tag system where like it, like we have to before we pay an invoice, we're going to check the po, we're going to check our PO confirmation, we're going to check our receive tag. Like, did everything happen the way that we thought it was going to happen? So we've taken a similar philosophy or are in the midst of taking a similar philosophy with most of the other parts of our business. One area that this shows up in a ton, which like, frankly scares the heck out of me. For companies that aren't prioritizing an HR or accounting hire like a high level HR accounting hire is. It shows up like crazy in hr. Like how so? Well, who. It's. It's back to like triple confirmation.

[Jack Car]

So just that the process is being followed, is that what you're saying? It shows up a lot that they're.

[Tyson]

HR owns the process then are who's making sure that you paid your benefits on time, which by the way, you are personally legally liable for. They can take your house. Who's making sure you pay your 401k contributions for your team members? Who's making sure you put your medical in on time? You have a strict amount of time to do that. Who's making sure you pay your payroll taxes? Like, these are like I. And this isn't like small business stuff. Like, I have a friend who runs a $60 million business and they found out that their HR director wasn't doing deductions properly and wasn't paying payroll taxes. And that is a. You can go to prison, like, offense.

[Jack Car]

Offense.

[Tyson]

It's crazy.

[Jack Car]

I think the hard part around HR specifically too is like, who around finance, right? Everybody's responsible for some level of purchasing, buying, selling, you know, the whole revenue generation, collection. But in hr, there's no secondary person, right? There's no secondary function or person that really does a check and balance on the HR systems themselves. So who do you have? I want to two part this question. Who do you have for that? What's the, your solve? And then I want you, I mean, obviously your business. This, this three touch, three tag system, it's more, there's, there's more opportunity because you have more people, right?

[Tyson]

Yes.

[Jack Car]

And so I don't want to shoot this over the heads of everybody under 5 million. I don't think so.

[Tyson]

Because I'm involved in some of this. Like, this isn't like, oh, I'll delegate it to wherever.

[Jack Car]

No, no, no, no. I mean, I'm not saying it like that because if you look at like Tommy's mellow' the same thing. Obviously he has more people who can do that. But there's also more systems. So there's more connections. And I'm not lost on that. My, my. What I'm trying to get to is, hey, I'm thinking for my businesses I could do a two touch system, but a three touch system would still be extremely difficult just because I don't have the head count. Like, I don't know who the third person would be.

[Tyson]

An example. I'm going to give you an example. Okay, so let's do this unsold jobs. And you have a service manager, ops manager, something.

[Jack Car]

Yeah, service manager.

[Tyson]

Okay. And is there an ops manager or you're the ops manager. Right.

[Jack Car]

There is an ops manager too that.

[Tyson]

The service manager directs to.

[Jack Car]

Correct.

[Tyson]

Okay, so this is perfect. So like, titles are different, but that's my setup too. Now granted, I have one more layer in between, but I don't think that matters. So every Monday I'm going to. I know you probably know this, but I'm going to go through it because I think this hits this every Monday from 12:30 to 3. I sit 30 minutes each. I sit down with each frontline leader by department. So plumbing has two frontline leaders, drains has one, electric has two, H Vac has two, and restoration has one. So I sit down with each leader, the frontline teams, and we go through Their measurables and their measurables can be financial but it can also be qualitative. So like hey, what was your gross margin month to date? We on track, off track. Do you have anybody that's struggling? Like I am a $30 million business and I am helping them identify and then holding them accountable every Monday to hey, this guy is struggling. What are we doing coaching wise? How are we helping support them? Are we doing ride alongs? When was your last one on one and then what we do from there. So that's two touch and that's me like skip leveling. That's me multiple levels away from this, this manager structure. And then I inform their director of like hey this was the plan, here's the to do for this week and now the director helps me hold them accountable to the plan that we set on Monday. So that's a three touch. There's three different people in there to help improve the performance of our field pros.

[Jack Car]

Yeah it, that's interesting though the way that you, you phrase that. Because in my mind I'm almost viewing that as you're creating two separate processes and then you're only two touching two separate things.

[Tyson]

What do you mean?

[Jack Car]

This SOP is or the, the issue I guess if you will, the opportunity is tech underperformance. If we're going to say yeah, the, the single touch is the manager knowing that he's tech underperforming.

[Tyson]

Is the manager watching and has the manager set his own plan?

[Jack Car]

Correct. The second touch is you managing the manager asking him those questions. But then you've created a kind of an auxiliary system where you've let the director or a different level of position know. But now like this whole kind of in my mind and this I could be completely wrong. I mean I'm asking you the expert, subject matter expert here is the question. But how is not kind of a a side leg in the sense that now you're single touching a process to a director level to now handle this. So you, you did complete the circuit in a third touch but by doing so you created a single touch with the director level. Because who, who says that the director level is doing that? Who says that he's going through that process? You should find out in a year that hey Joey hasn't had a conversation with a follow up conversation with the managers about that.

[Tyson]

So we, so we, we track it in like public to dos.

[Jack Car]

Okay.

[Tyson]

So like when I'm sitting there with the frontline leaders, it's like hey, this is what you agreed to do. This week, like you agreed to go on a ride along with this person and then it goes into a public to do so his boss and his peers can all see the. The to do that was agreed on.

[Jack Car]

Okay. So it's an open ledger essentially that.

[Tyson]

Yeah.

[Jack Car]

So that's interesting because that was going to be. My next question is could you utilize systems and processes to actually be that third to like automation systems or, or follow up ledgers. And in this case I would almost, I would almost say that the third touch is actually having. Yeah, that makes a director owning that.

[Tyson]

Job to hold them accountable to the plan that they said themselves they would do. So in your case, I'm going to play this out for you. So you've got, you have the same work structure I do. I have one more layer. Doesn't matter. You've got the ops manager and you have the frontline leaders that report to that ops manager and then you're above that ops manager. So you'd have the same setup. So if I'm going to sit down every Monday and I'm going to give an example that's non tech performance. We have a spreadsheet called job issues. And job issues is typically like materialist issues or like hey, this job went too long. So I think it's somewhat closer relates to the problem that you're going through right now. Did we close them out? So on Mondays like we, we hit those job issues list. Like hey, these are the job issues. I'm not going to go over all 20 of them last week with you. Like are you up to date on coaching? Did you review them? Did you do the thing? And then the. We put in the to do. If there's any to do from that public ledger of here's the to do. And then the director, they have their L10 on Wednesdays. So it's like, okay, did you make any progress between the meeting on Monday and today? If not, then I'll help move it along. But yeah, it is sort of like a, it's a public accountability, but it, it is put on by you. Yeah.

[Jack Car]

Which is very interesting. That actually makes a lot of sense too because that would solve a huge sloth of the issues. Sloth Sl. A huge grouping of my issues is hey, like okay, so instead of you know, letting a manager know and then following up with them on these individuals on items on individual days, you do essentially one on ones where you have a list of kind of here's our top issues or KPIs or processes that need to be followed are they being followed and are you having any issues subsequently? Right.

[Tyson]

It also gets you impulse with the organization. Now this is my, I was, we did this morning we have a, we have like a leadership cohort on Wednesday morning. So Wednesdays are like the leadership day. So from 7 to 8 we do a leadership training with upand cominging leaders. Like they're not leaders yet but they're hoping to enter that leadership track. And, and then like Wednesday late morning like 10 we do existing managers, we do like a training for them. So this morning they, from seven to eight in the upcoming leaders they did a training on the six different styles of leadership. And I was like hey Brandon, what's my style of leadership? And he said like aristocratic or something. It's like I have full and complete total control. Like so what I'm saying, I, I understand that like some people might look at it and be like oh that's like you're skip leveling. Like that's other people's jobs, that's whatever. And like two responses one, I don't care.

[Jack Car]

I knew that was coming. Number one is like, you know, it's worse a failing business. So yeah, I think like I think.

[Tyson]

That failing frontline obsession from the top of the org chart is more important than are we following the proper pecking order. Like it, it is irrelevant. So that's number one is like I think the frontline obsession is more important than like ego of the org chart of oh, I shouldn't be doing that. And two, as long as accountability is still in the right spot, I'm good with it. And the accountability is created by creating public ledger and holding the director accountable. And number three, I think you can only lead us who you are. And this is who I am. So yes. But I do think skip levels are good and I think no matter what size of a business you are having a Chris Hoffman did a tweet like a year ago and it honestly really like challenged us in a way that I think was good. And, and he said roughly exactly this And Chris runs $180 million business. And it was hey, our entire leadership team has a frontline obsession. I know when individual techs are struggling and I know what the plan is to solve that. And when I read that this was like a year ago, I was like I, I don't know that and I don't know what the plan is to solve it. And because of that I think I'm out of tune with the day to day organization which I don't think is good. I think having a 30, 000 foot view is good. I also think understanding the day to day issues is important because otherwise you can't like my job is to like remove future bottlenecks but if you don't know what the current bottlenecks are, how are you supposed to remove the future ones? And then you just, you know, you pay intelligent people to solve the current ones. But you should know. So Chris's tweet in a business six times my size really challenged me to be like if he knows it, I should know it. So we started making process changes around it and it happened to solve some of these like two three point touch SOP issues that we had. FieldPulse is the all in one field service management solution. Built specifically for field service teams, FieldPulse is designed to simplify your day to day operations by combining everything that you need into one platform. This includes multiple integrations with other softwares you might already use like QuickBooks online or desktop. With advanced tools and features for scheduling and dispatching, CRM estimates, invoices, project management, team communication, and detailed Reporting and insights, FieldPulse will transform the way that your team operates, saving you time and finding revenue potential you didn't even know existed. Whether you're a small business, business looking to grow or a larger company Ready to scale, FieldPulse gives you the tools to increase productivity and keep everything running smoothly. And don't just take our word for it. Field Pulse has earned over 580 glowing reviews with an average of 4.8 stars. That's field P U L S E. Head to their website to learn more. That's FieldPulse.com and because we know how impressed you all are going to be, we got you guys an exclusive limited time offer. So make sure you mention owned and operated and get 15 off their annual plan with Field Pulse. Now check it out.

[Jack Car]

I think that's really helpful because I, I do, I do foresee like that being a great solving point because this kind of reverberates throughout the entire business, right?

[Tyson]

Yeah.

[Jack Car]

And specifically today. I mean I'm talking just about like the financial in and out and where do you find those heads and where do you find the, the time and the bodies to, to maintain it? But it sounds like the bodies are already there, the processes are already there. It's just accountability standpoint that even though I feel like I'm swamped and that shouldn't be on my to do list that it does need to be. But if you created a system in place.

[Tyson]

Yeah.

[Jack Car]

To Manage almost. I'm always thinking like Monday.com where you just have like all these SOPs.

[Tyson]

We use 90 for this like 90s, our EOS software. So the to DOS that we assign actually show up in their L10s. And we like that because then it's like, you're gonna talk about this. John assigned it like you're going to talk about this. And did you complete your to do?

[Jack Car]

Yeah. And then here, let me ask one more follow up question which I, I think is a very important part of this. Right. So there's the one part of it, for example, this specific in instance I'm going to use because it's a great one, running a report to see how much is falling through the cracks. And then you holding them accountable for that action and running that sop. What if they're messing up? Right? So I'm running the report. He's missing or Jack is the frontline manager. I'm running the report. I don't. Maybe my training's bad. Who knows, Maybe I'm lazy that day. Maybe I had too much to drink last night because I partied and I just missed like a giant job that fell through. And then six months later the customer calls in and it's like, hey, I was supposed to pay you guys for this, but like you guys never followed up.

[Tyson]

Yeah, so I, I think, I don't.

[Jack Car]

Know if there's an answer because like that's super hypothetical. But like, what, what, how do you view that? Because there's, there's an accountability and then there's, there's an assurance that the job is done correctly.

[Tyson]

Yeah, yeah, I, I think this was my point with HR and accounting is it feels like such a black box. You have to build these systems. But I would say that like it's easier to understand in HR because like you're not thinking about HR 24 7. Like we had somebody in HR a few months ago that literally missed our open enrollment. Like it was a clusterfuck and fortunately we found it. But like we found it January 1st and Anthem gave us a 30 day window. But like she was fired on the spot. Because that is insane. That's your only job is to make, is to take care of our people. But I think as my quick, my like take here and then we can dive a little bit deeper. But from what I've seen and from what we have experienced, like how we have run our business, accountability of leadership hardly exists in smaller businesses. We all are too willing to hold our salespeople, installers and techs highly accountable to measurement. But we will not give our managers the same respect. Like, so I, I will often see managers or senior leaders not held as accountable as they should be and they run rampant or they don't, they aren't effective in their role. But the problem is it's harder to measure and it's over a longer stretch of time. Like a technician. Like, hey, if you have two bad weeks, we're going to have, we're going to like talk and try to coach you and like help you. Like, we want you to win. Manager or senior leaders might be measured in quarters or months for like effectiveness. So it's harder to measure and it's really hard to measure if you don't have a target. So you know, we've talked about budgeting, but like that same thing I do on Monday, I actually do on Thursday too. So I take two and a half hours of my day, two days a week. And on Monday it's for our frontline ops leaders, on Thursday it's for our cost center leaders. And it's the same thing like, hey, accounting, this was your budget salary wise. This is what I expected to spend on cogs. This is where I expect my credit card to be, my ar, my ap. Like, these are the rough metrics that I'm going to measure that you're doing a good job. As the leader of my accounting department, did you do a good job? Like, yes, no. And if you didn't, let's talk about it. Call center, we have a budgeted number of calls. We need a week. Like, it's not that complicated. If you have eight texts, they all run four calls a day. You need 32 calls a day. So we have that budget and I meet with my call center manager, Lori every Thursday for half an hour. And did we hit? Did we not? Who on your team is struggling? What are you doing to help support them? So we took the same lessons that we learned in the frontline ops leaders and we took it to our cost centers because we were seeing the same problem of like, oh, there's low accountability over here. We need to, first we need to set the target. So I need 150 calls a week for this department and then I need to work with them weekly on, hey, did you hit what I expected out of your team? And if you didn't, what is your plan? And then great, did you complete your plan? Was it successful? And that back line is where you start holding managers accountable and where jobs get at risk. Like, oh, you, you didn't complete your Plan you didn't do what you said you were going to do, then what the are you doing here? Like, why am I paying you money? Like, it's okay if we have problems, but if you commit to doing something and you either don't do it or you do it horribly, then like, what.

[Jack Car]

Are we doing on those examples? Let me ask you a question because I think those are really good examples to try and showcase what I'm, what I'm asking here. And yes. Right. Holding them accountable. But the metric in particular, I mean, I'm guessing that's where the secret sauce is, is picking a metric that you, John, or your GM or your OPS manager is able to measure effectively. Yeah, because what I imagine, right. So for example, we had something similar in HR where somebody had quit and they. I go in two months, three months, four months later and they're still sitting in our. We're still paying their benefits. And yeah, we have an sop. We followed up with the individual and said, hey, this person was let go. Like, are they off the benefits? Yep, they're off. But realistically they weren't. And so like the, the extra steps to ensure that the person is doing what they're supposed to be doing. If it just, it feels like I would have to go back behind everyone and do everyone in the entire company's individual job to get to that. So I would imagine that instead of you going back through, there is some level of like, hey, you're number two. You're number three. The managers are going back through and then the managers, Managers are following up.

[Tyson]

Yeah.

[Jack Car]

And the manager. Managers, managers, managers are following up so that you don't have to get super intricate and down to the.

[Tyson]

Yeah, ideally. And like our plan, because I don't think we have it totally solved for HR or accounting. So our plan there is creating a. Who's watching the watchers. Like, I have been burned enough by accounting and HR leaders making massive mistakes and me holding the bag like I'm good. It is, it has happened a lot.

[Jack Car]

So there's so much risk there. There's so much risk there.

[Tyson]

No idea. Everyone' like, oh, yeah, I don't think I'm ready for an HR person. I'm like, bro, like, you have no idea. And like there's no way to convince them and they're going to lose 200 grand and then they'll be like, yeah, I should have done that. Yeah. But people, people are on their own journey.

[Jack Car]

I such a way to say that, yeah, people are a day on this and they're on their own, like letting go.

[Tyson]

They are like if you're above 30 people, like you need somebody in HR.

[Jack Car]

We're at 16 and we have someone in HR. I mean they do HR, slash recruiting, slash this. But like their payroll. But like that person, I consider them hr. Hr. And then we hire a consultant that watches her.

[Tyson]

That, that is the, that's what we're doing now for HR and accounting is we have a. Watching the watchers. So we're bringing on a. In accounting. It's already done. It's gonna be like a, A monthly review of process. A monthly review of reports. Like millions of dollars can go missing in a real quick hurry. And I've had it happen with so many friends where like their controller or their AP person or somebody makes a fake vendor and suddenly you have millions of dollars gone in a year. So we're looking to avoid that.

[Jack Car]

Not to mention like if you're in, if you're in California, as someone who used to live in California and a lot of other states, like employment law is so. Oh yeah, like absolutely mind numbing. And there's so many rules and regulations that you have to follow to the T and, and track and like someone's time card, you better have them their signature changing their time card and why and where and like in ink and all this kind of. Absolutely. I mean that's not that wild, but there is a lot of wild rules and to a point where like it is absolutely. You need to have HR and you need to have somebody who knows what they're talking about because the, the, the fines on the backside and like the back pay. It is, it's and business destroying.

[Tyson]

People don't understand. Like you don't, you don't know what you are personally liable for. And there's a book that really like shook me up on this. It's by Jeff Sands. And it's like the business of turnaround or something like that. Like payroll taxes is a great example. Or 401k contributions is a great example. Like if you don't pay those, you are personally liable. You will go to prison. They will take your home. Like it is not. There's no. Some like personal guarantee with the sba. Like, no, you are just frankly personally liable. And it is like business shutdown. And it. With 401k, it's, it's kind of the same thing. Anybody that touches the 401k program, it could be your bookkeeper, it could be you, it could be one ops manager. They're personally liable if they Touch that plan for the contributions of your employees. Personally liable.

[Jack Car]

Yeah.

[Tyson]

Prison.

[Jack Car]

Yeah. Like, I mean it makes sense to some extent. From a logical level it makes total sense.

[Tyson]

But people have no idea what they're exposed to. So you read these books and it's like no one meant to do this stuff, right? Like I have a friend whose controller stole or like misallocated $4 million two years ago and yeah, nearly business destroying, they got out of it. But it's, it was a crazy story. The they didn't pay payroll tax for a year, they didn't pay 401k contributions and like I don't know how like it was an army of attorneys, just absolute army of attorneys. Houses were on the line. It was like a real deal. But they never, it was like it was never on purpose, right? It was just this, oh, I, I gotta make payroll so I won't pay this part or I'm gonna hold this back so I can pay this vendor and keep things going. And it, it just turned into this snowball where they have a million dollars of employment based liability that they are personally liable for and they didn't even know that they were personally liable for it.

[Jack Car]

So the answer here, don't do a 401k program for your. No, I'm just kidding. Just avoid altogether.

[Tyson]

I think you should explain to anybody that is touching your 401k because our HR people actually didn't know that like our first HR person, they had no idea that they were personally liable because they were helping administer the plan. Like is a very real intangible personal risk.

[Jack Car]

That one reminds me of too. Like the people who do the sweepstakes, they do, they give away something for free. The amount of law around sweepstakes in your state and in the country is absolutely wild. And you see a lot of these small businesses doing free giveaways or sweepstakes or lotteries of some sort and just blatantly breaking the law in many cases. And on the back end like not giving out the prize or incorrectly giving out the prize. We had to, when we did ours. The, the explanation by our lawyer on what would happen if we didn't give out the prize that we promised to every single person was astonishing. It was business destroying fines over like a three or four thousand dollar unit. Like just crazy stuff and people forget. They, you know, get lazy. They couldn't get a hold of him. Like what do you do when you don't get a hold of the winner? Like do you have that lined out? Do you understand what the next steps are. And if you don't and you do it wrong. Absolutely. Business screwed.

[Tyson]

Yeah.

[Jack Car]

Which is, which is wild, but I know that's a little bit tangential.

[Tyson]

Yeah, well, I, I think the point is like have a process. We're bringing on teams to review our team to make sure that our team is holding up. So when you don't have the org. I think you were talking about like, oh, you have more people. And, and my backing on that is 100. I do. But even for the people that we like, I don't have a cfo and the CFO would hold the controller accountable. So my alternative is an accounting firm. But like even if I had a cfo, I would, I would probably be even more rigorous because the CFO would have even more power to indebted the company to spend our money to like they could do way more damage than a controller could. So I think it gets more important and more important the bigger the responsibility you give out of. How are we monitoring the. What we're, what we're giving access to.

[Jack Car]

No, I, I think that that's, that's a good point. We naturally did that with the HR department just because we, like we said, don't have a full time person. It's, it's an outside vendor who. They specialize in HR and making sure that they are coming through.

[Tyson]

Yeah.

[Jack Car]

And we keep them on retainer. They, they go through the, the HR reports every month. Make sure everything looks correctly or looks correct. Is done correctly.

[Tyson]

What does that cost for you?

[Jack Car]

It's like 100 bucks a month. It's nothing.

[Tyson]

Geez. That is, that is nothing.

[Jack Car]

But I mean we don't have a huge.

[Tyson]

Who's the firm?

[Jack Car]

It's not a firm, it's an individual. So they help set up the program initially with our person because our person, although they are in hr, they weren't like hr like a builder. Like you have to build the program first. So they helped consult on building the program.

[Tyson]

Yeah.

[Jack Car]

And then put the processes in place that we then run and follow. And then they come in on the back end and say, hey, you did this correctly. Your taxes are correct, you've allocated correctly. Great, perfect. Good job on the month.

[Tyson]

So yeah, yeah, we're bringing in, we're starting with accounting and then HR is our next one. But we, we just brought on a new accounting firm. They're going to do our taxes and stuff. But you know something, that was a really interesting challenge to me. Similar to like Chris is like, oh yeah, I always know what's Going on. I'm like, oh dang. I have a good friend, Mike Michael Gurdley. And. And he like incubates these businesses. Right. So he. I'm going to invest 100 grand and we're going to start this business. And like he software business and a coffee business. Fireworks. Yeah. He has all these different things, but anytime a business crosses a million dollars of year, he begins an annual financial review. Like an audit. So he does a financial audit on every business. Like more than a million dollars. Which to me as like that's a true ownership. That's like, that's a good freaking idea. Like you're trusting people with a lot of money. That makes total sense to me. And I was, I had never completed an audit before and my business was like 25. And I was like, damn. Like, what am. I'm not really. We're prepping for our first one.

[Jack Car]

Oh my goodness. That's gonna be exciting.

[Tyson]

It's. Well it.

[Jack Car]

He like nerve wracking.

[Tyson]

Like he's totally right. He's. It's like who is watching the people that you're entrusting and like how do you build. Same as your. Oh, I didn't build this. And I just lost. You essentially lost $9,000. Or you could have. That's a.

[Jack Car]

We lost way more than that.

[Tyson]

Real economic loss like that is a very real problem.

[Jack Car]

So the harder part that people don't realize too with that. Sorry. Just to like reiterate the point home to everybody is if our EBITDA margins or net margins are 10% like the amount that you have to make.

[Tyson]

Yeah.

[Jack Car]

To. To recoup. That is you have to sell another $90,000 worth of stuffed 100. The. The losses are 10x what they actually are because of the way that the business works. So making sure that all that owed money comes in is so critically important so that you don't have to sell another 90k to make that back.

[Tyson]

We have the same conversation regarding collections. It's like, oh, we're. We collected 95 last month. I'm like, okay. So that 5% was like most of the profit. Like because our business, if we're a 10 or 15 business, that's half to one third of our actual cash flow that we just accepted the fact that we didn't collect. Like that's not okay with me. So.

[Jack Car]

Yeah.

[Tyson]

And the problem only gets bigger because now 95 is like that's hundreds of thousands of dollars.

[Jack Car]

Yeah. It grows. It grows quickly as your business grows. Yeah. I mean and that's why I Mean, you see, speaking of Hoffman, I mean he does a lot of things really, really, really, really well because he has to. And one of the things he does really well is collection and H vac and plumbing on site.

[Tyson]

Yeah.

[Jack Car]

Because of this. I mean, I think he realized at some point in his journey that hey, the margins are so low that if we don't collect and we leave that in AR doesn't ever get paid. So let's focus on it as a company. Yeah. Speaking of Three touch, he touches it right when you, when they call in.

[Tyson]

Yep.

[Jack Car]

Before they arrive, as they arrive on site and then as they leave. So he's like four or five touches. How are you going to pay today? Because it's due today.

[Tyson]

Yeah, I think so. If I was giving input to anybody out there on like, oh, I need to create a sop, I just had this problem is who's going to watch the. Who is going to be accountable and who ideally who are the two parties that are going to be accountable for that stop being completed? So you have the frontline person, which is like the day to day owner of this problem. But then you have their direct and I ideally that direct or appear that is also affected by the completion of that sop. Multiple eyes. Because every time, maybe not every time, there's a few unique cases, but for the most part, if we create a SOP that starts and ends with one role, it does not exist for very long. Like it just, they just don't do it. You know, they get, they get a little bit busy, they get a little bit swamped. No one's asking them about it, no one's holding them accountable. So it goes away.

[Jack Car]

And on the back end of that, start creating SOPs as you grow. Don't wait till the problem becomes a problem because you, once you go back and you try to collect that 9,000, 10,000, 50,000amonth, whatever the case may be, it's much harder to collect after the fact. So run that report in your business. Figure out how to run a report similar to that in your business. Because as you scale, you, you as the owner cannot manage all the incoming money and finishing of jobs and making sure you get paid. Like it needs to be a CRM or a system in place. That's been one of the hardest things for me. Same with actually AP as well. Right. AR and ap. Both of those is you can't be the one checking every single of your 270 invoices to make sure that you didn't get double charged.

[Tyson]

Yeah.

[Jack Car]

So system, system system start now when you have the time and it's not an issue because it's will become will.

[Tyson]

Become 1100 this was a good good topic so creating multi touch point for SOPs. Who knew that this topic could be so fun.

[Jack Car]

It's so sexy.

[Tyson]

Yeah. The amount of money at this point it would be measured in the millions over the course of my career on this exact problem like the multiples of.

[Jack Car]

Millions I wouldn't be surprised if we've lost between like I said ar AP on those two items just fall through the cracks and then double pay Ferguson hundreds of thousands and we're not that big.

[Tyson]

Yeah.

[Jack Car]

Like we've been business three years ago. Yeah.

[Tyson]

How crazy. How crazy it gets sweet guys.

[Jack Car]

Well that was fun.

[Tyson]

If if you like what you heard five star wherever it is that you listen to shows make sure you check out YouTube. We're like we just crossed 1300 subs which I think is kind of fun. And check out owns and operated.com sub for the newsletter. We have good stuff twice a week.