#189 How to Scale a Small HVAC Business with Proven Strategies

Summary

Owned and Operated - Episode #189: How to Scale a Small HVAC Business with Proven Strategies

Hosts: John Wilson and Jack Carr
Guest: Will [Last Name]
Release Date: April 24, 2025

In Episode #189 of the Owned and Operated podcast, hosts John Wilson and Jack Carr delve into the intricacies of scaling a small HVAC business. Featuring insights from guest Will [Last Name], a seasoned entrepreneur in the home service industry, the episode offers a comprehensive exploration of proven strategies to grow HVAC, plumbing, and electrical businesses amidst evolving market conditions.

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1. Transitioning from White Collar to Blue Collar Management

John Wilson opens the discussion by addressing the significant differences between managing white-collar and blue-collar teams. Drawing from his personal experience transitioning from investment banking to managing an HVAC company, John emphasizes the necessity of adapting leadership styles to suit the unique dynamics of blue-collar workers.

John [00:01]: “Managing white collar and now managing blue collar guys is very, very different. You cannot scale a company through one individual wearing five, six different hats.”

Wilson acknowledges the challenges of this transition but underscores its importance for sustainable growth. He highlights that effective blue-collar management requires a different mindset and approach to operational efficiency.

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2. Scaling Strategies for Small HVAC Businesses

The conversation shifts to strategic approaches for scaling a small HVAC business. John Wilson shares his strategy of acquiring smaller, under-the-radar companies that are not yet on the radar of private equity firms. This method reduces competition and allows for a more controlled and methodical expansion.

John [05:10]: “So with no one Air a couple months ago... we're already making some pretty positive changes.”

John discusses his vision to build a sizable asset in Southwest Florida by focusing on a select group of brands, rather than a disjointed collection across various markets. This focused approach allows for the capture of cost synergies and streamlined operations.

Will echoes this sentiment, noting the pitfalls of acquiring larger companies only to face the complexities of pivoting their operations.

Will [17:05]: “Most people... they go the other way and they get the larger company and then they try to pivot it, and it's just a nightmare.”

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3. Managing Tariffs and Pricing Strategies

A significant portion of the episode is dedicated to navigating the challenges posed by tariffs and fluctuating material costs. John Wilson highlights the importance of promptly adjusting prices to maintain margins amidst rising costs due to tariffs.

John [24:11]: “We're immediately passing that on. I'm going to maintain our margins... contractors out there who do not react... are going to be out of business.”

The hosts discuss strategies to mitigate the impact of tariffs, such as negotiating better terms with distributors and implementing dynamic pricing models. Will shares his experience with fluctuating commission structures and strict timeline price points to manage increased costs without compromising service quality.

Will [35:09]: “We go hard on, like, very strict timeline price points... We're, we're built to be a premium service provider, but be flexible enough in March that we can take a 30% clip and still be okay.”

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4. Understanding and Managing Cost Structures

Understanding the cost structure is crucial for maintaining profitability. John Wilson emphasizes the necessity of conducting a detailed break-even analysis to comprehend how fluctuations in volume affect the bottom line.

John [44:58]: “Everyone should have a break even analysis to say I need to do X amount of service calls per day...”

Jack Carr concurs, sharing his journey in establishing a clear understanding of his company's financials.

Jack [46:04]: “If it makes you feel better, that took me three years to even get close to that number.”

The trio discusses the importance of distinguishing between fixed and variable costs, enabling better financial planning and adaptability in times of economic uncertainty.

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5. Customer Segmentation and Profitability

Effective customer segmentation is highlighted as a key strategy for optimizing profitability. John Wilson introduces the concept of categorizing customers into A’s, B’s, and C’s based on their profitability and potential to finance growth initiatives.

John [52:41]: “I categorized his customers as A's, B's and C's. C's... to cover the bills... A's... that finances growth.”

This classification allows businesses to prioritize high-margin customers (A’s) while ensuring that lower-margin customers (C’s) sustain the operational costs. Jack Carr adds that maintaining consistency in service quality across all customer segments is vital to prevent internal conflicts and maintain team morale.

Jack [54:34]: “I try to stay away from that, those kind of denominations just because it gets you in trouble...”

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6. Optimizing Payment Terms and Pricing Transparency

A critical operational change discussed is the optimization of payment terms to ensure cash flow stability. John Wilson implemented a policy requiring a 50% deposit upon estimate acceptance, significantly improving the company's financial footing.

John [59:02]: “I need to make just so I can sleep at night, what is the company making?”

This approach not only safeguards the company's margins but also fosters a professional relationship with clients, ensuring transparency and commitment from both parties.

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7. Advice for First 90 Days of Ownership

Drawing from his own experiences, John Wilson offers actionable advice for new business owners in their initial months of ownership:

1. Change the Obvious: Address glaring inefficiencies immediately without overhauling established systems wholesale.

2. Understand Financials: Implement a detailed break-even analysis and ensure that all estimates are meticulously calculated to reflect true profitability.

3. Optimize Operations: Streamline roles to eliminate bottlenecks, such as dedicating specific team members to tasks like customer service and purchasing.

4. Maintain Stability: Avoid disruptive changes that could destabilize the business during critical growth phases.

John [57:47]: “Change the obvious things. Don’t sit on stuff that doesn’t make sense.”

Jack Carr reinforces these points, emphasizing the importance of selective and strategic changes to foster growth without overwhelming the organization.

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8. Conclusion and Key Takeaways

The episode concludes with a synthesis of the discussed strategies, underscoring the importance of adaptability, financial acumen, and strategic customer management in scaling a small HVAC business. The hosts encourage listeners to implement these proven strategies to navigate market challenges and achieve sustainable growth.

Key Takeaways:

• Strategic Acquisitions: Focus on acquiring smaller, manageable companies to build a cohesive and scalable business platform.

• Dynamic Pricing: Continuously adjust pricing in response to market changes and material cost fluctuations to maintain profitability.

• Financial Planning: Conduct thorough break-even analyses and understand the distinction between fixed and variable costs.

• Customer Focus: Segment customers based on profitability to prioritize high-margin clients while maintaining fair service for all.

• Operational Efficiency: Streamline roles to eliminate bottlenecks and enhance operational efficiency.

• Balanced Change: Implement necessary changes promptly while avoiding overwhelming the organization with excessive modifications.

Notable Quotes:

• John Wilson [00:01]: “Managing white collar and now managing blue collar guys is very, very different. You cannot scale a company through one individual wearing five, six different hats.”

• John Wilson [24:11]: “We're immediately passing that on. I'm going to maintain our margins... contractors out there who do not react... are going to be out of business.”

• Will [35:09]: “We're built to be a premium service provider, but be flexible enough in March that we can take a 30% clip and still be okay.”

• John Wilson [57:47]: “Change the obvious things. Don’t sit on stuff that doesn’t make sense.”

• Jack Carr [46:04]: “If it makes you feel better, that took me three years to even get close to that number.”

For further insights and resources discussed in this episode, visit www.ownedandoperated.com.

Transcript

[Will]

Do you like H Vac?

[John]

Managing white collar and now managing blue collar guys is very, very different. You cannot scale a company through one individual wearing five, six different hats.

[Will]

I actually got taught this lesson by a competitor who's bigger than us or they were bigger than us.

[Jack]

Yeah, can't stop a train, baby. Can't stop it.

[John]

So that's what we did. If these tariffs stay in place, contractors out there who do not react as I described, a year from now, going to be out of business.

[Will]

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[Jack]

Fieldpulse.com welcome back to owned and operated. Today we have an awesome new owner. Will, how is it going?

[John]

Very good.

[Jack]

Oh, and we have John here in the new studio. If you want to jump on YouTube, take a look at his fake plants in the background. I love it. Wow. I'm very jealous. That's. It's not me hating on it, it's more so just extreme jealousy of that. I don't have a studio yet, so.

[Will]

Yeah, it's, it's good. It's like big. Like it's big. So, you know, I'll dive into the studio and then we'll actually talk about, we'll hear. But like just finished the studio last week. There's a sofa thing over here we're optimizing for in person interviews. So if you're ever in Ohio and you want to talk, great. And then it's like a full blown production studio. So like we can do quite a bit here which is kind of fun.

[Jack]

Yeah, I mean legitimately. When I saw it, I did the whole Borat Thing of wah, wah, wah, as he walks into the room. Like, it is so big. I'm pumped. It's really cool looking. So everyone jump onto YouTube. Check it out.

[Will]

Check it out. Cool. Will, I'm pumped to have you on here. Thanks for jumping on. You've been.

[John]

Thanks for having me.

[Will]

Yeah. You've been sharing your story over the past, I don't know, six months or so on Twitter. Just sort of like the journey of buying H vac companies.

[John]

And yeah, it's.

[Will]

It was.

[John]

It's funny. I've had an account for, I think, 11 years, 10 or 11 years, something like that, and I never posted anything. I would just follow people. And pretty much the day I left investment banking is when I. I started. I said, let me post a couple things, my thoughts, my journey, and see if people find it interesting.

[Will]

Yeah.

[John]

And that was literally a year ago, almost to the date.

[Will]

Okay.

[John]

Yeah, it's been a pretty wild ride. I met some amazing people on that platform. I mean, there's a lot of weirdos out there, which I stay away from, and a lot of garbage, but guys like yourselves, I mean, this is why I do it. As I keep going, I keep posting because I've broadened my network beyond what I thought was possible. It's amazing out there. So, yeah, it's been good.

[Will]

Yeah. We. We just had Holdco Conf last week, and I did a talk on how media can accelerate your core business. And like, that was sort of. The whole concept is like, hey, you put yourself out there and you share and, you know, people pay attention. And on one hand, it's kind of disconnected from what you do during the day. Like, my day job is running a plumbing company. Why am I podcasting? But on the other, like, there are some pretty clear ways to make it. Make it win for you.

[John]

Definitely. Yeah. Yeah, definitely. I mean, even if it's. Maybe I don't directly benefit from it, but if I can help somebody else, they're going through something. I mean, my. My background is banking, so a lot of the guys that reach out to me, they're mid-60s and they're looking to sell. They just don't know what to do with their company or what it's worth. You know, basic questions where I. I consider it basic, but for them, it's like rocket science. But for me, it's. It's not. So that's where I can help them out. But on the flip side, I've had guys reach out to me and offer up advice like this, hey, I'm a first Time operator. I don't, I know a lot, but I don't know everything.

[Will]

Yeah.

[John]

So I'm trying to learn from guys that are reaching out to me and, and just help me out. So it's two way street. That's how I look at it.

[Will]

Yeah.

[Jack]

So when did you close on, on your business then?

[John]

So with no one Air a couple months ago. So I'm, I'm very early in on, on this journey. So there's, I'm learning a lot. Drinking from a fire hose literally daily, seven days a week in fact. But, but it, but it, but it's good. We're already making some pretty positive changes, which I can go into detail on that. But yeah, our plan is to create a nice sizable asset, whether that's Under Nolan Air or multiple brands that cover the majority of Florida. Not, not everywhere in Florida. I don't want to, I don't want to just focus on, you know, a shotgun blast approach of like, hey, I want to buy all these brands in random cities and MSAs that really have no rhyme or reason being together. I want to be methodical about it and focus really southwest Florida and build a, a nice, I'll call it a platform, but you know, a small collection of brands that are kind of operating together and we can capture those cost synergies. So I'm in inning one of that journey. Like, I know it needs to be built and that's what I'm focused on. And I know, John, you posted about building $100 million company one day. Like, I have a similar vision and I'm starting with something very, very small and I'm working my way towards that.

[Will]

Yeah, Nolan, now good news for you.

[Jack]

Wait, before John, before he gets there. Good news for him is that there is a bunch of companies that just came up for sale in and around Florida. Man, it might be a little bit hairy.

[Will]

Punches, bro.

[Jack]

It might be a little hairy and coming out of a bankruptcy, but I.

[John]

Haven'T heard of that. Please inform me what's, what's going on there. Yeah, that's a, that's a tough one right there.

[Jack]

Yeah, yeah, no, I'm sorry, I had to throw, I had to throw it in there because we, we just recorded a few weeks ago and it was super fun. So.

[John]

Yeah, well, I, I mean, I don't want to go on a tangent on that one, but I know the operating assets for Under Air Pros, they had some really good companies. It was just an over leveraged situation. I mean, they took on an insane amount of debt which I know you guys already covered that and yeah, one of your recent podcasts, but I mean the underlying assets themselves, they're, they're good brands making a lot of money. It's just way too much debt.

[Will]

Yeah, yeah, I mean that seems like the case and it just becomes like this spiral and it sucks. I mean I still feel like, I feel bad for, I mean the employee should be fine. Like should be fine.

[Jack]

Yeah.

[Will]

The, the challenge I think is going to be the owners that sold and all that equity just like is going away, like whatever, whatever rolled. I think that just sucks. It does, yeah. How big is Nolan Air now? Like what's the specs on this?

[John]

Yeah, I'll go into just high level details. I mean it's, it's a small brand but it's, it's what I consider is it's a really good start, you know, so this buy and build journey. Yeah, I thought it was a good starting point to build something. You know, we'll call it just under a hair, under 2 million. Top line. Yeah, when I first, when I first came across it, I said, you know, I like what I see, but I'm. And it was a broker deal. Yeah, I initially, I initially passed on it or at least put it on the back burner and said let me go look at a few other things. Larger assets, right. Closer to, you know, 5, 6, 7 million top line, closer to that million of EBITDA. But what I very quickly realized is guess what? Private equity is aware of those same assets and they're going to pay a multiple above and beyond what I can ever pay and I'm just not going to go overextend myself. So I decided to alter my strategy. I said, you know what, let me go down market, focus on something that flies below the radar of private equity. Something too small they're not even going to waste their time on. So there's less competition down there. But it's got to be large enough, have enough infrastructure in place that I can build, build something. It can't be the man in a van. Hey, we've got an owner operator. He, he wants to retire. Like two guys out in the field, like that's way too small. So I gotta find that like middle ground. And I, I think I found that with no 1A. It's got like just enough, it's got a good name. We just reached 5.0 star rating on Google. So it's got a good present. Yeah, we were at 4 9, now we got bumped up to 5 0. So yeah, so I've got some big plans with it. And so, yeah, it's a hair under 2 million top line. But I've got a pretty aggressive goal that. Why can't no.1 Air be a $10 million company in this market? I mean, I know it's possible. We're in a huge market down here in the Tampa St. Pete area, but I'm also running into a lot of competition. There's a lot of private equity guys down here too, so. And they're spending an insane amount on pay per click. So I gotta find creative ways, right, to deploy those marketing dollars to make that phone ring.

[Jack]

I don't mean to laugh. It's a mutual pain. So Nashville's very similar. We don't play the pay per click game just because I'm not gonna pay $1,200 for a lead. Like, it just doesn't make any sense. When a service lead for repair AC is 600 plus, there's not many things at a service level that actually cover that $600 lead only. So we have to play some very. To fight private equity. Because I mean, on a right, on a three tier or a three vertical, if they do plumbing, electrical, H vac, they can lose a little bit on H vac service, but they'll club them and then they'll gain it up over the lifetime of the customer. So there's some really interesting games that you have to play to circumvent that. But very, very similar beginnings. I mean, I was a little bit smaller than, than that starting, but sounds. Sounds like a similar journey.

[Will]

Yeah, we. How many people are in a 2 million dollar company?

[John]

So right now we've actually hired since I, you know, since I acquired the company. So I. It's funny, I said I wouldn't make a lot of changes the first 90 days. I've already made a ton of changes. It was so obvious. I said I, I have to make changes. And so, yeah, today we've got seven guys out in the field and we have one operations manager, which I know sounds very lean, but the one operations manager, he wears so many different hats. I mean, the call comes in, dispatch, you name it, dealing with the vendors, he's doing it all. So what I'm working on over time is, okay, we need a csr, right? And we need somebody dedicated to purchasing. So I'm working on that building process over time. So that's, that's what I've got. Yeah, seven guys on the field and then the one. One operations manager, I don't count myself, but yeah, that's what we got right now.

[Will]

One of the things that's helped our business grow the most has been peer groups. That's been for both myself and our leaders being able to talk to other companies about exactly how they've solved. The problems that I'm dealing with today has just been instrumental. Whether it's how to acquire companies or how to add new locations, how to hire directors or service managers, or what should compensation look like. All of those things are things that can be solved by just asking people a little bit ahead of you. Inside that group we have Fireside chats, weekly peer conversations by business size, resources to help you grow your business, and a lot more. Make sure you check out Owned and Operated.com and click on Join Pro.

[Jack]

And is that what the split, what does that look like in terms of techs to installers? And then are you running, selling text, then they're selling their own units.

[John]

So a lot of our guys are kind of hybrid. So our service guys can also flex and flip over to an install. So on the service side I would say we've got like, we have one lead called manager, a service manager and then below him we've got two guys. And then the, the balance, about four guys on the, on the install side. So it's, it's really made up of on the install side, I'm thinking through it, two leads and two helpers. So like we've got two young guys who, they're very green, 21 years old. They, they're just trying to figure out.

[Will]

Yeah, yeah, yeah, yeah.

[John]

But yeah, it's, it's, it's a good crew. I mean I would say 80% plus of the guys. I mean they have a strong work ethic. I mean they, they will grind. They don't mind work until 10 o'clock at night like that. That's not an issue. But the issue that I'm running into is, man, there are so many inefficiencies. I, that was obvious to me day one. They just sort of. And Jack, I don't know if you saw this immediately, but they just sort of figure it out. A call comes in, hey, we got a change out. All right, let's run to, you know, we knew about a change out on Thursday, it's Tuesday. Let's go sit in line at supply House Thursday morning, pick up everything we need and we don't get it to the job site till 10:30, 11. I'm like, guys, what, what are we doing? Like, we should, we should have already made that order, collected A deposit. Pick that up, have it ready to go at least by Wednesday. Load it up in the van. So we roll up 8am, begin our work on Thursday. That was a foreign concept to them. They just said, oh, never thought of that.

[Will]

One of the. There's a phrase. I'm pretty sure Brent B. Sure said it, but it was like, small companies stay small on purpose. As in, like, that type of thing is something you expect to find. Because, like, as you were saying, the first. The first sentence was like, there's so many inefficiencies. And my brain immediately was like, well, yeah, that's why they were 2 million bucks. Like, if there weren't inefficiencies, they would be 10.

[Jack]

Or like, how old is the company?

[John]

So Nolan started six years ago.

[Jack]

Yeah.

[John]

So that was another new.

[Will]

That's pretty new. Yeah, no, yeah, it's.

[John]

It's pretty new. It's not like two, but it's not 30. I mean, what I was looking for is, you know, their classic example of a guy that, hey, I've been doing this since 1982. I'm 72, I want to retire. I get it. And it's sizable. It's a million plus of ebitda. Like, what everybody wants, no new construction, blah, blah, blah. You know the drill.

[Will]

I do know the drill.

[John]

That. That's going to cost a lot, and private equity is going to be all over it.

[Will]

Yeah.

[John]

So. So I landed on no. 1A. I mean, all these deals, they have a little bit of hair on them. It's just you got to find the deal that has the least amount of hair on it. And so it's a younger brand, it's smaller, but I feel like it's enough to work with rather than like, as a. As an example, there was a larger one I was looking at right down the street. He was about eight, seven and a half, eight million, top line. But half his business was new construction. I don't want to be in new construction for a number of reasons. It's not just the exit multiple that everyone talks about. So what I'm thinking about is, okay, if I go lean in on something like this, buy something where half the business I don't want, I'm going to have to turn around. You know, an aircraft carrier like that, that's going to take a lot of work. So do I want to do that, step into that situation, or do I. And so basically, I'm scaling something large, bringing it down to what I want, or do I take something small and scale it up so I chose the latter.

[Will]

Yeah.

[John]

Kind of where I'm at. Yeah.

[Will]

I think that makes sense. I think it's like a resource thing. Most people. I think you're right for doing it that way. I'm just going to tell you what most people do, which is they go the other way and they get the larger company and then they try to pivot it, and it's just a nightmare. It's just too much of a nightmare. But I think, like, the idea is, oh, I can use these resources, but if you're not in the trade and you don't understand the difference between a service guy or install guy and a new construction guy, like, it's, you know, in your mind you can pivot it, but. Yeah. So. So first 90 days. 60 days.

[John]

Yeah, we're. We're within the first 90 days.

[Will]

Okay. Like ownership. Do you like H Vac? What do you think? Will you just jump in the pool? Is it warm?

[John]

Oh, it's. It's. It's warm. All right. No, I know. I like it. I mean, there's so many ups and downs. I think with owning. Doesn't have to be our industry. It could be anything. I mean, one day it's like Cloud nine. You're like, this is awesome. This is the greatest thing in the world. I'm so glad I left my W2. And then the very next day, it's like. It sucks.

[Will]

Yeah.

[John]

Like, everything comes down. Yeah, everything comes down on the owner. But, I mean, it's just. Take it day by day, hour by hour. Um. No, I. I don't have any regrets. It's just it. It is an adjustment from where I came from. I went from investment banking, very white collar.

[Jack]

I was gonna ask.

[John]

I've managed people. I. I've managed a ton of people in. In the past. Right. But managing white collar and now managing blue collar guys is very, very different. And so if there's one thing I underestimated, it was that. And it's not. I mean, they're good. They're good people. It's just. It's just different. Right? It's. You just need to alter your mindset and how you approach things, and there are different issues that arise on a random Wednesday that you didn't think you'd expect to come across that I. Or I never saw investment banking, so.

[Will]

Right.

[Jack]

I mean, I think that's a really good note. And it was one of my big surprises as well. Well, was moving from managing white collar to managing in blue collar. I always had a foot in blue collar. Just because we were in, you know, operations, in some facilities, maintenance. But it is an absolute night and day difference. I love it. But I definitely have heard from other owners who are in your position who don't like it as much, so. But that transition overall has been pretty positive for you.

[John]

Yeah, yeah, I would say so. I mean, I, I really, you know, I go out of my way to take care of the guys, make sure they're happy. But yeah, there are challenges that you just have to know going into it that's like, oh, this is very different than where the world that I left.

[Jack]

Yeah. And so as you move into these, these first 90 days. Right. As a smaller business owner, you can hear trucks outside. Sorry. But as a smaller business owner. Right. You have more on your back from all the positions from CSR to actually being out in the field potentially. Like, where do you as the owner draw the line on your skill set in being able to support the team?

[John]

Yeah, that's, that's a good question. So what I've quickly found is that as the owner, I mean you're responsible for everything. It's csr, the phone rings, handling the customer, marketing, operations, updating the fleet, you name it. Dealing with the landlord, employee issues. Like everything comes down to you. And you got to make a thousand decisions every single day. Which I knew, I kind of knew that going into that. Like, I understood that, but now I really understand that. So where do I spend my time? What I'm working. I mean, we're very early on. It's not like I've been doing this for three years. So what I'm. Now that I have a grasp of Null and Aaron, the capabilities of each one of our guys, I'm trying to task them with what I think they're capable of doing. So I saw for example, my operations manager, he's wearing like six different hats. Well, that's not sustainable. If I want to take Null and air from 2 million of revenue to 10, that's impossible to do that. So I need resources, I need to add to the team. So what I'm currently working on right now, we need a CSR to handle after hours calls or weekend calls. Like, it can't be myself or my ops manager on Call 247 to pick up the phone whenever it rings at 9:00 at night because it's 85 degrees in the house. Purchasing, there was another big bottleneck. Yeah, every, every time we had to order equipment or materials, whatever it may be, it would go to the ops manager. Everything went to go. He was the bottleneck. And you cannot scale a company through one individual doing wearing five, six different hats. So I have to add to the team. And so that's, that's what I'm working on right now is if I have a guy that. Or a gal that governs CSR when the phone rings and dispatch, and then I hone in on what we're doing with purchasing, so that frees him up to handle everything else. And so that's kind of what I'm tasked with. And, you know, immediately with our existing footprint of like, what do we have today? How can I improve it? And then like, the next step is to say, okay, now let's go in growth mode. Yeah. So once I have the team in place, then I can think about, okay, strategically, I would love to do either a greenfield or maybe we acquire a tuck in. What about adding plumbing? I really like plumbing. Does that make sense? Or electrical?

[Will]

Plumbing's the best.

[John]

Oh, no. I mean, preaching the choir. I mean, there's margins are phenomenal. No seasonality to it. I. I like plumbing a lot, but that's like chapter two. I'm still in chapter one. Let's get, like the basis. Right. So that we can launch off of this and get into something next, whether that's adding plumbing or going into a second market.

[Will]

Yeah. Today. What set this up, and I appreciate you sharing your story. What set this up is tariffs. Now, what was kind of funny is like, 20 minutes before we got on today, I heard a bunch of these tariffs are going to be delayed.

[John]

Well, yeah, I was looking. I'm looking at my phone right now. Yeah. So I think a bunch of the tariffs are going to be delayed for 90 days, but I don't think that includes China. So. Yeah, there's a lot of news.

[Will]

Yeah.

[John]

Hitting the wires as we speak.

[Will]

Yeah, I feel like what. What could be a good thing to riff on here? I think we've got some stuff on tariffs. I think we've got just like, you know, how do you run a bid a business admit amidst uncertainty and like, how do you think about making decisions? Obviously, you're new to this and I. But I'm curious about tariffs. I'm curious how you're thinking about it. You've got construction going on in Nolan, which in my mind does expose you a little bit more because you have longer sales cycles and longer projects. So how are you guys thinking about this sort of rapid increase in pricing?

[John]

Yeah, it's a good question. And it's. It's top of mind for me and it should be for every business owner. So we just got a price increase from daikin. So we're primarily a daikin dealer on April 1st. So immediately what I did, I went into our price book and updated our prices. So I, I'm not going to absorb that. We're immediately passing that on. I'm going to maintain our margins. That's outside of tariffs. But what I've been told is we're also, we are subject to further price adjustments based on tariffs. I don't know what that means. Did we get another 10%, 20% down the line? I don't know. We're sort of in limbo land. I just. We don't know. But once we, I'm assuming we receive a further price adjustment, I'm going to react. We have to adjust our own prices that we pass along to the customer. I mean, otherwise that's just going to destroy our margins. And that's contractors out there who do not react. Yeah. As I described, a year from now are going to be out of business. I mean, if these tariffs stay in place, I mean, what we're. Every day it comes up, it's like 30% here, 50% there. I mean, all of the goods that are coming into this country now cost 50% more. I promise you. Daikin train, pick your supplier, they're all going to pass it along to us. And if you don't pass that along, your margins are going to deteriorate and you're going to see your profitability is going to shrink very quickly and you're going to be out of business in 12, 12 months if you don't react. So.

[Jack]

Yeah, yeah. This is a good question, though. I mean, this is my question. You brought it up. Because this is what I, I thought as well for, for John and yourself is right. There's going to be an interim, though, where companies, especially companies with, let's say, less sales process, they don't have their financing dialed in. So the only lever they have to pull to make the sale is price reduction. And so you have a short term, a year, like you mentioned, where you're competing against other companies, generally smaller companies, who are having trouble making sales. And so they're, they're putting downward pressure on price. What's your next move? Because that's what I'm worried about.

[John]

Yeah, I mean, I'll speak on. You guys have been doing this longer than I have, but I, I explained to my guys, I don't want to compete with the man in a van or chuck in a truck as I Refer to them like the guys who are competing on price, let them go win on price. Right. We're going to win on reliability and quality and our customers should value that. But we need to demonstrate our value add and what that means. That may sound like a lot of fluff and maybe some customers like I don't really care, just give me the cheapest option possible. It's like, well then go talk to the man in the van down the street. That guy will win for a period of time until he doesn't. So I don't know that that's just how I view the world. Like am I wrong? Like I don't know how. What are you guys seeing in your market? I mean I don't want to, I, I don't want to win over business because I was the lowest bidder.

[Jack]

Yeah, I mean Chris Hoffman actually talks about this a lot is we'd rather compete against other well to do owners and other very high end companies because at the end of the day we can never compete against Truck in the. My, my worry right is we've had these, these increases since 2022 between the sear 2 changes and the refrigerant changes. Like since 2022, since I took over my company, we've had like 14 or 15 increases. Feels like every month or every two months. And so what we've seen in our market specifically because we don't actually have a license for H vac so anyone can go out and install an H vac unit, can go buy equipment, blah blah blah, that we see excessive downward pressure in off months, in you know, our, our shoulder season. And so we, we come, we've gotten really good at, at fighting this in the sense of. It's exactly what you said. It's, it's. We will drop margins to compete but we don't drop to the point that they drop. And so for us it's a mixture of carrying, being cognizant about our expenses, about the price of equipment, working with distributors to get prices down in those off seasons. Not as on but we try, we push because we're like hey, I know some guy up in Akron that's done it before, but we'll do that and then we will. And then we work a lot on sales or I mean it's sales, we work on a lot on sales in our company. It's just, hey, how do you drive full amount of value? How do you really come across as the professional in this aspect? Because that like you said, that's the only way to win in the long term, it's just, it's another data point that we have to go up against in the next year.

[Will]

Yeah.

[John]

Go ahead, go ahead. Well, okay. I just, I. You, Jack, you reminded me of a recent sale that we just were awarded and it was, it was huge for us. There was a gentleman and I posted about this on, on X. There was a gentleman in, on Davis island, which if you don't know the area but that's like a high rent district in Tampa. Like the house is, it's built like a hotel. It's beautiful, right on the water. Anyway, he has a massive system in there. It's Daikin VRV equipment. So it's, you know, cream of the crop. But he was plowing money into it every year. It wasn't under warranty and nobody would touch it. We came in, but we, we, we came in, looked at his situation. We took multiple visits. I mean we were out there every other day for three, four weeks and gave him that white glove service that nobody else would spend the time and energy and truly understand his issues and try to find a workaround like what can we do to solve this? This guy is a problem. How do we solve it? We're in the business of solving problems. And so Jack, to your point, I think if we can demonstrate that, I mean, and he saw like what we were doing, we were going out of our way to stop by every week. And so when we finally said this is our best recommendation, here's your problem, we're offering you a solution. What do you think? And he said, okay, you guys have exhausted all other options. I agree with you, you're the doctor, you know it's best. Let's go. And that was $120,000 job that we start next week. Yeah, I mean that's that, that's what I want. I want to be in, I want to be in that business. I don't want to compete with a five thousand dollar change out with man in a band. So I'd rather do that. Not this.

[Will]

Yeah, I feel like, I mean, I think everybody would. I think the, what we have found ends up being an advantage later on is that for while you're building like you need to be able to take exactly the opinion you're taking. I fully agree with it. And I don't know that there's ever a point where you should stop aiming to be premium. At a certain point your ability to be flexible during a down season becomes a superpower. So I also don't want to compete with the one you know, trucking the trucks. But if that's, if their pricing is what's winning jobs. When you have seven crews sitting in February, you start to think about it a little bit differently now during, during peak season. Absolutely. But you know, I'm, we talk about this a lot on the show where hey, I like, we'll, we'll absolutely wheel and deal if it's March, 100%, like, we'll, we'll go, we'll go deep and fast because we really don't care. And the part of the reason we don't care is because our business is built to do that. So we're, we're built to be a premium service provider, but be flexible enough in March that we can take a 30% clip and still be okay. And I think that that's the superpower. And all the way up until last year, we couldn't say that like if we took that discount, it was a direct hit to bottom line. But like we were taking 20 discounts all March and I still clipped an 11 EBITDA. Yeah, like, we delivered nice. That's on $2 million of revenue in a month. You know, there's a, there's enough there to, and we outgrew our overhead. So I think like while you're on your way up, 100%, really hard to compete. But. And I, I actually got taught this lesson by a competitor who's bigger than us. And they are. Or they were bigger than us. Yeah, but, but they were bigger than us and they, dude, the moment it hits March, they're doing like three thousand dollar air conditioners. And for the longest time I was like, I was like, I was like, holy. Like what? Like, no, it was, it was crazy because in my mind I was the same thing I was so locked in on like, dude, how do you do, how do you do that? But like, I don't know, about 3,000. I mean depending on the unit. We could. But like, yeah, I can do that now. So it does, it does become a superpower later on. So, so they sort of taught us that lesson because we, they were larger than us. They're a premium service provider. They've always been priced higher than us. We might be higher than them now, but. And they would consistently punch us in the face during slow season. So we, we got, we got served that lesson a few times from them. We finally learned we have as well.

[Jack]

And John, do you, do you. Was that. And this is, I mean we did it through kind of fluctuating commission structures and, and things like that. Is that a big part of where that came from for you? Yeah.

[Will]

So we fluctuate commission structures. We go hard on, like, very strict timeline price points. So, like, hey, for these 45 days supplier, I need X additional rebate on this equipment or I need X discount on this equipment. We'll keep moving your stuff. I'll keep our guys going. So usually we hit labor and cogs and then we really get very specific about what financing programs we're willing to offer because that's like a secret. That's a secret eater, you know, like, if you, if you aren't really watching your financing programs and you're offering 20% discount and you're still offering the one with an 8% dealer fee, like you're.

[Jack]

Going to lose 0% for 60 for 30% to you. And if you eat that. Yeah, you're in trouble.

[John]

Yeah.

[Will]

Yeah, you're in trouble. Yeah. So, yeah, we really watch financing plan, make sure we negotiate commission, make sure we negotiate equipment. So we go into every down season with those in mind and will.

[Jack]

So how has that process been for you? I'm very curious. So right when I bought a business, I ran with the same distributor that the last owner ran with who was completely selling me at like the most, the highest price possible, even though I.

[Will]

Was like, above, above retail. Like some random guy walks into the building and he's like, buying it better than you.

[Jack]

Yeah, exactly. It was pretty much that it was the same price as somebody who sold $2 in equipment. And I was, I was selling $400,000 in equipment and I was getting the same price. So it's not about me, it's about you on this one. How has that process been? How are you going about, like, vetting different distribution warehouses and making those contacts?

[John]

No, I, I have thought about it. I mean, I guess with. I'll just pick on equipment, our largest expense, because I know so many guys in the industry. I will go and talk to them and I'll compare price books. And I know that's probably, you know, frowned upon, but I, I know a guy 90 minutes south of us. We don't compete. We're both daikon dealers. What are you. What are you getting? And if, if I'm getting ripped off, I'm going to call my rep immediately and say, excuse me, we need to talk. And it's, it's good to know people because I can get pushed up high up into the food chain at Daikin or Carrier. Like, I know VPs that I could talk to and say, hey, if I'M going to switch from dyke into carrier or what have you. I. I can use that as leverage to beat up my rep, so to speak. I don't want to do that, but if I have to. But Jack, to answer your question, I don't feel like I'm getting ripped off based on the conversations with other dealers in my market. I feel like we're, we're okay. We're not great, but we're not getting ripped off.

[Will]

Yeah.

[John]

So, yeah, I feel like we're in a decent spot.

[Jack]

That's interesting. And so, so was the last owner, daikin, and then you just went with Daikin as well?

[John]

Yeah. Okay. I didn't make any changes. And with my, you know, previous background in banking, I covered this space and a lot of my clients were daikin dealers themselves. So I was pretty familiar with the brand and I didn't see a need to switch. Certainly not within the first 90 days like that. Just.

[Jack]

Yeah, that's not my pressure on you more. So I'm just curious if you're starting to have those conversations because I didn't like. So, you know, I'm kind of the absolute worst example of somebody who probably should have, but just super naive going into the industry.

[John]

I mean, I, I'm aware of train and carrier and I know those are more household names and so that's, you know, a disadvantage to us. You know, maybe not everyone knows about daikin, so that might be a little bit of an uphill battle. Although those are pricier brands. So I, I've got to strike a balance. I'm not saying I'll switch in a year, but feel pretty good with where we're at. Yeah.

[Jack]

I mean, my off the wall comment that I'll tell anybody is I don't think it matters other than trane and there's very few customers that specifically want train or they'll specifically want carrier. Everything else, it's the salesperson. It's the, the salesperson. They don't care. They really don't.

[John]

And if we have a customer that we had one, he was doing a new build right on the beach and he said, no, I want train only train.

[Jack]

Can't stop a train, baby.

[John]

So that's what we did. I mean, we will sell train. Yeah.

[Jack]

Primarily pushing daikon until there's a leak in the evaporator coal. And you have to take the entire thing apart and condenser coil apart to even get to the evaporator coil. It takes a day and a half to do. So can't stop it until that happens.

[Will]

Until you absolutely stopped it.

[Jack]

Super bitter.

[Will]

You can't tell Jack what, what have you done for like managing material expense during uncertain tariffs and everything else going on?

[Jack]

Me?

[Will]

Yeah.

[Jack]

I mean, it's been the same thing. This has been kind of for us. It's been there since the beginning. So I don't actually know any difference. Like the tariff thing has come out. We just, just watch for increases. I posted on, on Twitter yesterday or two days ago, I don't know a thing about tariffs. I know how to fix units. I know how to run a business. I don't know anything about tariffs or how they roll through. So all I focus on is am I going to get a price increase or not? I mean, I'm sure there's some level that I could be more intelligent on this and pre buying equipment and parts and things that I know are coming from certain companies or countries that are having these tariffs. But realistically, at the end of the day, there's so much to focus on. My focus is say, do I get a price increase? Great. That's getting passed on to the customer. Our team has already been trained on, hey, how do we handle the increase, the price increase and focus on sales and focus on, how do you say? Financing. Thank you. Focus on financing. We don't run 0 for 60 anymore because we're not going to eat those costs.

[Will]

Yeah.

[Jack]

So they have, we have our program set out, we have our scripts around this program set out. Like it's just another day. To be honest with you. I know that that may be not the most intelligent answer in the world, but you know, we've, we've just been focused from the beginning on how to deal with price increases.

[Will]

Yeah.

[Jack]

So we're living that life already.

[Will]

Yeah. I feel like the thing that we, some of the lessons we learned from 2022 when we were like, we're still doing construction but like, like, hey, be really careful what's inside those contracts. So if you're doing, if you're, you know, before 2022, price increases like this weren't like normal. Now it feels like kind of normal. But that was wild. I remember it was like it was six or nine. It was somewhere between six and nine straight weeks of copper wire price increases. And by the end of the that time period, wire was three times the price that it was when we started. It went from 30 bucks a roll to like 92. And our, our projects didn't include material price escalations or ability to stop projects. And we just got absolutely smoked. And then you Know the more inflation became a thing we realized that like hey, we didn't have price escalations, we didn't have estimated material. Because if it's a six or 12 month sales cycle, like hey, I sold this today. But they're break my, my section of it starts in six months. What happens if there's a 10 tariff or 30 tariff on that wire? So like really being careful what's inside the contracts. And then the other thing that's just been a win for us and I encourage everybody to like figure out how they're going to do it is can your, can your overhead withstand a shock? Like is your cost structure, how variable is your entire P and L? Like are your call centers on commissions? Are your managers heavily bonus based? Like what does marketing look like? Is it locked in contracts or variable spend? What does fuel look like? Like how much of this can be variable? How much like of the hundred line items in your P L, what can you make modulate on demand and like can't. What happens if you, with, if you deal with a 30 punch to the face on cogs? Like what do you do? Like, you know, plan.

[John]

You bring up a really good point. One thing I used to do with my clients when I was in investment banking is we would look at their P L and we would break it up, their cost structure. How much of that is variable? How much of that is fixed? You know why? I mean. Well, a couple reasons why. Exactly what you stated right there. If volume drops by X, what falls to the bottom line? What do I need to cover every month, every quarter just to cover overhead? Everyone should know that. Everyone should have a break even analysis to say I need to do X amount of service calls per day, per week, per month, X amount X number of change outs just to cover the bills. Yeah. And I mean I did that in banking and I'm working on that right now with no one air and I, I kind of know in my head like all right, we got to do about this. But I'm working on actually honing in. No, we got to make X dollars per day just to keep the lights on. Yeah, anything above that, I know it falls to the bottom line.

[Jack]

If it makes you feel better, that took me three years to even get close to that number. It's such a process. But took me. It takes a while. Yeah. John took even longer.

[Will]

Guys. I'm the dumbest guy in the room. But yeah, it took, it took us eight. But the one thing that we did that was helpful in addition to that was we Tracked against it every day. Like, hey, here's our break even point. Like the whole company knows when we hit breakeven and then we added debt to our break even. So like, hey, if our debt load is 50 grand a month, then I add 50 grand a month to our OPEX budget to claim break even. So that would just be another helpful one because I feel like it's important to know, like there's. You have two break evens, right? You have paper break even and you have cash break even. And those are two different things. So just like really over communicating, hey, on paper, we're profitable. I need X to break in to break even on cash.

[Jack]

Yep.

[John]

That'S a good point. You know, it's, it's funny because you bring this up and so many owners out there just operate. They're just like, they're winging it day to day. And nothing against Nolan, but I remember it was ours. It was the second day after I closed and we were driving to a job site. We're going to give an estimate. Pretty big.

[Will]

Yeah.

[John]

Pretty big job. Like 30 grand.

[Will]

Yeah.

[John]

And I asked Nolan, I said, so, what's profitability? What's gross margin on this? Say, I don't know, it's about this. I was like, how do I almost, like, stop the truck? I said, how do you not know, like almost to a penny or at least a dollar, like, how much you're making on this 30,000 change out. He's like, well, it should be about this. And so almost immediately, I developed a very simple calculator per change out. And it's a worksheet that I can share with my ops manager or anybody else that's going to give an estimate. I said, equipment, materials, add in sales tax. How many man hours are we talking? We need a lead. We need a helper. Total man hours. Add payroll tax, because they forgot about that in the past. And then here's my target margin. Like, that's how you should think about bidding on, on, on an estimate. And ever since then, it's like a light bulb went off, like, oh, wow. Never thought of it like this. I just, I would strongly encourage anybody out there that they should know their margins. Like down almost to the penny.

[Will]

Yeah.

[John]

Like you should. When you submit an estimate for 10 grand, you should know the company is going to make X on that change out. Yeah, that's one of those changes that I've, I talked about earlier at the top of the call. Like, that was an immediate change that I made. Like day one. It's like no, full stop. I need to know just so I can sleep at night, what is the company making?

[Will]

Yeah, yeah, yeah. And then it's, you know, how do you build a system around maximizing that? So maybe it's commissions that de escalate and escalate depending on profitability or manager bonuses. How are you thinking about that so far?

[John]

Yeah, so, yeah, I failed to mention that. So that includes commissions. So yeah, our guys get 5%. If they sell, they get 5%. So that, so that, that is also baked into my, my gross profit that, that little calculator I was referring to. Yeah, that is baked in there and say, okay, well, Joe sold it, he gets 5%. Who's going to install it? Here's the labor, here's the equipment and materials net to the company before overhead is X.

[Will]

What, what gross margin are you selling at right now?

[Jack]

Big questions, John.

[Will]

Big questions.

[John]

All right, call me out. So line in the sand is 40 on a change out. Where I would like to get to over time, I want to get it to 45% plus. Now service is very different service. We're actually getting some pretty, pretty nice margins on. When I put it all together on a consolidated basis, I would like our gross margins to blended at 50%. That, like that. That's my goal, 50%. If we shoot north of that, we're doing great. Historically, that has not been the case. So I've already made those adjustments and I'm already seeing a lift like day one on gross margin. So I know 40 for an equal change out might seem light to probably you guys or some others, Chris, that's been doing it for a while, but I'm like building up to, you know, 45 plus. Like that's the goal. I don't want to rip the mandate off, lose a deal. You know what I mean?

[Will]

So.

[Jack]

And all those things are raised in the long term as you start building those relationships and push down your price and lock in the systems. Like that's where all that comes from. In the long term, 40 is not a bad bottom line. Like we don't go below that number. I mean, that's where ours is. We've done 137 in the last year. And that job ended up being the worst job last three months or four months, but it ended up being the worst job because, you know, it's always the worst customers. When you kill the last 3% and go bottom, bottom it out and cut everyone's commission and get, you know, ends up being just a show and the customer's Unhappy about one of the fins popping out or something like that and wants a full refund. So, you know, but 40% that our bottom is as well, you know, we, we shoot for much, much higher. We start much higher. But 40 on the low side is not a bad number. It doesn't, I mean in the long term, it doesn't leave a huge amount of room for growth initiatives. But I mean as this 2 million dollar company, the amount of expenses that you have on top line or expenses you have on bottom line to get there isn't huge. So. So you can, you can eat a little bit more of that. Right?

[John]

So, so you, you just reminded me of something. So when I was in banking, I had a client, different industry, still building products. They sold windows and doors and they just. All organic. They just blew up. They were amazing. All organic, no M and A. And I recall he, he categorized his customers as A's, B's and C's. C's, C customers, the low margin, it's like, we'll do it. It just keeps the lights on like that. That's how we thought about the Cs. The Bs, obviously a step up. Beyond that, they're not stellar margins, but it's, it's a little bit more. And then the A's, that's what we're targeting. We want more A customers because that finances growth. Like we want to go into a new market or we want to acquire another brand. It's the A customers that are going to finance that. And so as I build no one error, that's how I think about the world. Like, Jack, to your point, I'll dip below 40% for those C customers to pay the bills. Insurance is ripping my eyeballs out. Rent's due every month. Like, you know, I, I've got to cover the bills. Yeah. But I'm really focused on those A customers to help me get to the next market or add plumbing like that. So that's, that's how I categorize it. I don't know if you guys view the world in a similar lens or not, but that, that stuck out to me with that client years ago is A's, B's and C's is how you should think about your customers.

[Jack]

It's hard for me to, to, to do that. And John, I mean, I'm, I'm gonna let you run on this one because I'm actually interested what you have to say. But we get this pushback from our technicians a lot. It's, hey, I don't want to run thumbtack leads are low value or hey, I don't want to run this area because it's low value. And I always, my, my pushback for my entire team generally is, hey, in our eyes, all the customers need to be the same. They all get the same prices whether or not they're here or there. They all get the same service whether or not here or there, full evaluations here or there. It doesn't matter where the lead comes from, where the lead is, they're all going to get the same experience. I mean, I see the, the point from like an internal mindset standpoint because we probably do do that when we talk about growth initiatives like, hey, we want to move into this market because it has a very high average home value or whatever, or number of units on the house or, or age of equipment or age of plumbing. But in terms of, from like the trickle down in how I look at working with my team, personally, I try to stay away from that, that, those kind of denominations just because it gets you in trouble because then your technicians have a harder time selling because they don't, they don't go in with the same ideology. If I'm.

[John]

Yeah, yeah, sorry, I'll just jump in real quick. So, Jack, would I describe the A's, B's and C's? I, I would never let my selling text know like, hey, this is an A customer or this is a bottom feeder C customer.

[Jack]

No, I'm not saying you are.

[John]

That is like, yeah, accept a lower margin. Just so I know. It's like, all right, fine, I'll do it because I know I need to pay insurance or rent.

[Jack]

Yeah, cover the bills. I'm clarifying to all the listeners out there because sometimes if we're super clear, like they'll run with something and be like, Jack told me to say that they're C customers. I'm like, no, please don't. That's good.

[John]

Yeah, okay, that's fair point.

[Jack]

And, and I've, I've put my foot in my mouth in my own business personally, more than I'd like where I've told my technicians something where I've gone out in the field. I said, oh man, it's really hard to sell this year. They only want to do, you know, repairs. And then for the next six months all my technicians come out and says, jack, you're right man, they only want to do repairs. And I'm like, no, I, I, that, yeah, so I'm just, I'm super cognizant about like that, that Mindset. Because sometimes stage content.

[Will]

Yeah, yeah, it sets the stage. I mean, it preloads excuses. It's the same reason we don't like talking about, like, we're weather enhanced, not weather driven.

[Jack]

You know, I think the same thing there.

[Will]

It's a lot of like, hey, it's all, it's, it's all the same. We, we have a core customer. So I think that's probably what you're trying to say. We have a core customer that, like, yeah, that's, that's who we target. We'll obviously take others, but like, when we think about growth, when we think about zip codes we want to be in, it's driven by an icp. Like, here's our ideal customer profile, here's who we're looking for. Income. You know, you build like a caricature of what you think your customer would be. Yep, that's usually how we do it. Yeah, so we, so we covered, we covered a lot of good stuff here. So we covered first 90 days of ownership, some changes you made. We're talking pricing, some material focus checking on whether or not you're paying good stuff, types of projects you're getting. We did cover a little bit of tariffs mainly. The lesson I took from this was like, let's be flexible. You know, be able to take a punch and raise prices as needed. That makes total sense. That resonates. If you had any, like, quick tips for anybody out there thinking about buying a home service company, like, you're in your first 90 days, like, yeah, what, what's look like it's been a while since it's been my first 90 days.

[John]

Yeah, boy, where do I start? I guess go into it eyes wide open. You know, I knew a lot going into it, just given my background, but there's a lot I didn't know. You know, I, I knew how to manage people. I, I knew about the industry and all that. It's not like I went from, I don't know, accounting, and I've never managed people before, and I jumped into this, like, so I had sort of a head start, but I'm also sort of adjusting, you know, my, my management style, given it's, it's a different environment. Like, these are different guys, different people. And so you just have to be flexible and, you know, take the punches as they come. So it's, I, I, I mean it when I say you don't want to change too much the first 90 days. And I told myself I wouldn't, but there are some basic things that if you See, it's glaringly obvious. Like, yeah, this is fundamentally not right. Like, the, The. The margin that we were talking about. How do you not know going into a $30,000 bid what your margin is like? That, to me, just doesn't seem right.

[Jack]

100%.

[Will]

Yeah.

[John]

Or like here. Here's another obvious one. So I, I made this change within the first week. I said, what are our payment terms? We go into whether it's a service call or an equal change out. And they said, well, the customer will get to it when they get to it. I said, well, that's crazy to me. I mean, our guys are paid every Friday and we have to pay our vendors every 30 days. I can't. I'm not going to float that. So I immediately changed a day, almost day one. And I said, for a change out, it's 50% due upon your acceptance of our estimate. So we can order your equipment and put you on the secure spot on the counter. Yeah, good. Once we have that, and then upon completion, the remaining 50 is due. And my guys looked at me like I told them to build a rocket to go to Mars. And I said, they're like, no, we've never done this before. It's not going to work. Yeah, customer's gonna throw up all over this. I said, okay, go ask a roofer to change out your roof and see what they say. Go ask a window and door guy and see what he says. I guarantee you they will not lift a finger unless you drop 50% as a deposit. I said, why are we treated any differently?

[Will]

Yep.

[John]

So as soon as I made that change, there was a lot of pushback internally. But now the guys see it and they're like, oh, wow, there's no pushback. They click, yeah, yeah, yeah. So there are things like that that you can change, but I wouldn't go like jack like we were talking about before. Like, like, do you switch from a dyke into carrier? Like, no, no, I wouldn't do that type of change. But there are certain things that you can. Certain levers that you can pull day one. But beyond little things, like, it's not little, but things like that, I wouldn't be too disruptive the first 90 days.

[Jack]

Yeah, yeah, that's really good advice because I fully agree with that statement is I've rich actually, and Jordan and I had this conversation pretty long ago for a decent amount of time. And change the obvious things. Don't. Don't sit on stuff that doesn't make sense. And that's ridiculous. Just because somebody arbitrarily told you on the Internet don't change anything. I mean go in and change things that need to be changed that are obvious and then on the non obvious things definitely sit it out and say, hey, I'm going to learn first. Like, hey, why should I not switch to Daikin or from Daikin? Because I don't know. And I think that you're handling that, you know, absolutely perfectly because that, that drives me up a wall.

[John]

Yeah, 100 and like same thing. So right now we're on house call Pro. I know we need to get to Service Titan. Like I know it has all the bells and whistles, but am I going to do that? It's mid April. Am I going to do that as we head into the busy season? Hell no. Like that's crazy. My team is going to be maxed out. I'm going to do that on the back end in December when it slows down and we have, you know, we can catch our breath.

[Will]

Yeah.

[John]

That's another good example of I know it needs to be done, but I'm not going to do it for the obvious reasons. Right. That'll come with time.

[Will]

Yeah. I think I'm adding a little bit more perspective. The small, like the common advice is don't change anything. And I think that makes sense if, if I was buying like a 5 million EBITDA business, that advice makes perfect sense. Even like 1 to 2 million EBITDA, like that makes total sense. They are doing something that you shouldn't disrupt. Maybe my personal opinion here, but if a company is doing one to $2 million or $3 million a year in revenue, like there are big things that are broken and if they weren't broken, it would be doing more than 1, 2, $3 million of revenue. So I feel like the, I feel like make a mess in a small company is like that's my perspective. Just because if it's a small company, that means it's broken. If it wasn't broken, it would be big. So to me it's just like, yeah, make a mess like pop off.

[Jack]

Yeah.

[Will]

I mean like obviously you don't want to lose people, but I think the don't, don't make big changes only makes sense when you're talking about like turning a cruise ship. But if you still have a rowboat turn who you call it rowboat. Like a jet ski. Like a jet Ski.

[Jack]

John.

[John]

Yeah.

[Jack]

Give us a little, Give me and Will here a little bit more credit than that.

[Will]

Like, like a no.

[John]

1.

[Jack]

There's a jet Ski.

[Will]

Like a Like a wave liner more.

[Jack]

Respectful than a rowboat. So.

[Will]

Yeah.

[John]

So it's got some speed to it.

[Will]

It's got something. Yeah. Brandon, Brandon calls them rowboats. I'll correct him on that. I'll be like. Jesse' I don't have to tell you this. This was.

[John]

No, I just. John, to your point, I mean that's, I mean I, I love it. I, I think I'll just speak for myself. But I think from where you sit and you knowing what you know, you'd be comfortable doing that. But I also think that a. Guys who are going from a W2 corporate 9 to 5.

[Will]

Yeah.

[John]

First time, that might be pretty scary, you know, to come in. I like, I know a guy right down the street. He's closing on his first business next month.

[Will]

Nice.

[John]

And I took, you know, and I told you probably know him. But I told him, you know, don't, don't change a lot. But I think change the obvious. Yeah, but, but, but you like you've been, you've been living it for years, so you probably comfortable like going in there and just break like, hey, let's.

[Will]

Yeah, I know what needs to be done.

[Jack]

Let's do it.

[John]

Let's do it now.

[Will]

I think there's definitely a component of that, but I was just more like reinforcing your point of like, hey, let's change the obvious. If it's obviously broken, like there's nothing to wait on. Like you're good to go. Yeah, nobody needs.

[John]

Yeah, yeah, like that's obvious. Like that should be done immediately.

[Will]

Yeah. 100%. This was good, man. This was a lot of fun. I appreciate, I appreciate you coming on and sharing your story and talking about it. If people can want to connect with you, how can they find you?

[John]

You. Well, obviously I'm on X so they can find me there LinkedIn or they can email me. I mean I'm pretty open, you know, I don't have a, a redacted account or anything or anonymous account. So they can, they know how to find me.

[Will]

Easy to find. Awesome. Well, thanks for coming on today. This was a bunch of fun. Will.

[John]

Well, thank you guys. I really appreciate it.

[Will]

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