← Owned and Operated - A Plumbing, Electrical, and HVAC Business Growth Podcast
Owned and Operated - A Plumbing, Electrical, and HVAC Business Growth Podcast
#246 From $700K to $30 Million With Multiple Locations!
00:23:25
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- [00:00]
A
Your life would be easier if you stayed one location. That said though, we're not 30 million today if we didn't go multi location.
- [00:06]
B
700,000 of revenue to 30 million in 5 years is kind of crazy.
- [00:10]
A
Some people when they're talking about doing an acquisition, they talk about don't touch anything for six months. We don't see it that way. There was one technician there that was a high producer. He ended up getting his head cut off 10 days in because he's a prick.
- [00:24]
B
But like, how are you thinking about driving culture in these new branches when.
- [00:27]
A
Guys who maybe haven't been listened to for many years, they float an idea and then they see rapid action on that idea. That's how you like turn someone on.
- [00:36]
C
Yeah.
- [00:37]
B
We're about to go multi location in like the next 30 days. What's your couple pieces of advice for me? I'm John Wilson. I run a podcast called Owned and operated. And during the day I run a 30ish million dollar plumbing H vac electric company up in Cleveland, Ohio. So that's who I am. I'm joined today on stage by one of my good friends, Rich Jordan. And Rich Jordan has grown a business from the last five years, from first acquiring in 2019 a small business in New Jersey. And I think unfortunately, after just relentlessly chasing me for five years has officially passed my revenue. So he's like low 30s now. Three branches across two states.
- [01:29]
A
Yeah, started at 1 million in 2020 and now, yeah, just, just about 30 million. Three, three branches, two states?
- [01:38]
C
Yeah.
- [01:38]
B
Yeah, that's awesome. All right, so today what we're going to be talking about is scaling through multi location and how Rich thought about that, how he approached it. And we're going to try to dive into this a little bit deeper. So I'm ready to rip it.
- [01:53]
D
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- [02:24]
A
Cool.
- [02:24]
B
Well, I would love to start off. 700,000 of revenue to 30 million in 5 years is kind of crazy, right? Like that's a crazy jump. And like not only that, like, but you also did it with multi location, Multi state So we're not going to focus on the first acquisition. We're just going to go straight to the second. If you could help walk us through. You've got this business in New Jersey. You're like, hey, I, I think I want to go buy something in a different state. Like, walk me through what you're thinking.
- [02:55]
A
Yeah, I wish I could sit here and say that this was like a strategic, you know, like, very measured decision at the time. The reality was, and some of you guys may empathize with this or have been here is, you know, we were very small. You know, we started at a million in 2020. By 2020, late late 2021, we had grown that company, you know, significantly at that small size to like two and a half million. And two and a half to five million is like a real dog fight.
- [03:27]
E
Right.
- [03:28]
A
You're starting to add, you know, add costs. You're not making any money. You're trying to push. And an opportunity came across our plate sort of serendipitously to purchase another business. It was a $3 million business in a different state.
- [03:43]
C
Yeah.
- [03:43]
A
We're like, well, this will take us to five and a half million. That sounds amazing. This will solve all of our problems. Yeah, for sure.
- [03:52]
B
Yeah, for sure.
- [03:54]
A
So that was, that was basically the strategy. And what we quickly found out was that running two businesses in two states, about five times harder than running one business in one state.
- [04:07]
C
Yeah.
- [04:09]
A
And took our lumps for a little while there, for sure. Yeah.
- [04:13]
B
What the first, like a couple of lessons in that first six months. Like what were the big ones?
- [04:19]
A
Yeah. So we, I think, I think anyone who's like multi business, multi location wrestles with this like, centralization of services and decentralization of services. It felt like at the time the right answer was, well, let's centralize. Let's, let's gain some synergies.
- [04:37]
E
Right.
- [04:38]
A
And, and, and the business that we bought, the second business that we bought, had call center issues. Like they had missed 12,000 phone calls the previous year at $3 million size, so.
- [04:48]
B
12,000.
- [04:49]
A
12,000, yeah. And so we, so we tackled that right away. And one of the reasons, one of the ways we tackled that was centralizing the call center. But the reality was like we were a small business with a, like a janky call center looking back. And then we tried to basically double the volume on the same team with, you know, the training that you would expect of a two and a half million dollar call center team, the dispatch training you'd expect at that size. I mean, like, we Just basically like did poorly. So about like six months into that, we. Or maybe nine months into that, we decentralized again and basically like split those two businesses completely at the time. Now, you know, three years later, we've recentralized everything, but we're a much more robust business and like, have our shit together a little bit more and we're actually doing a decent job of it this time around.
- [05:49]
B
Yeah, I think something to, to note because you're on your third location now and like thinking about fourth or fourth in the next six months.
- [05:58]
A
Yeah, yeah.
- [05:59]
B
The way that you've approached growth so far has been like, very high touch. Like you're going to walk in the door, sort of bang it down with a shotgun. Is that fair?
- [06:09]
A
Yeah, I would say that is a fair characterization. Yeah.
- [06:12]
B
Perfect. As you're thinking about that for like that specific deal, do you feel like that deal showed you how to do it and that's now the playbook or how do you think that changes from now on?
- [06:22]
A
Like the second deal or this third deal? We just did both. Yeah, certainly. I mean, we have our integration style and we're, we're a small team, we're, you know, bootstrapped. Our integration style is very high touch and very like force of will and cult of personality. You know, proximity is important. And so certainly in that, that second acquisition, we were very much, you know, dove right in, in the trucks, in the office. At one point in the first month, like, I had a headset and I was answering the phones myself, you know, and that's, I mean, that's kind of the character with which we've gone forward. Even this third acquisition that we just did two and a half months ago was very high touch from the executive leadership.
- [07:17]
E
Right.
- [07:20]
A
With great results. But at some point that is going to become difficult to do and certainly like the last, you know, so now we have three branches. And while we were doing this third deal, we were also recentralizing the call center, trying to help out our New Jersey business, get to where our New Hampshire business is. So I've spent a lot of days on the road the last 120 days. So I think at some point, like, we're going to have to assess, you know, either hiring for some of our like, frontline management and elevating leaders to help me do that or bringing in additional leaders to, to help me do that. Right now, Right now there's a lot, like integration is very much like my box.
- [08:05]
B
As you've thought about bringing these other branches into your culture, like how do you think about doing that? You talked about force of will. I'm going to use magnetic personality. I don't remember what you said.
- [08:14]
A
That's very nice of you.
- [08:15]
B
Yeah, thank you. Yeah, but like how are you thinking about driving culture in these new branches?
- [08:20]
A
Well, I think like the way you integrate is super important.
- [08:23]
E
Right.
- [08:24]
A
We tend to lean a little bit, you know, like some people when they're talking about doing an acquisition, they talk about, you know, don't touch anything for six months. You know, watch and observe. You know, keep your kid gloves on, be respectful of the seller's business, don't screw it up.
- [08:42]
E
Right.
- [08:42]
A
We, we don't see it that way. So we're a little bit more of like a smash and grab. Like get in there, get your arms around it, bear hug it and remain flexible. So like we don't. So like it is a bear hug and is a fast pace. However, it's not like a fixed a hundred day plan. It's like very flexible and adaptable. And we're really like trying to read the room on like, what is this team ready for? For us, like we, we have all these things holstered, chambered, and we're ready to execute them, not execute the team.
- [09:19]
E
Okay.
- [09:21]
A
I realized what I just did with my hand right there. So trying to think of maybe like some examples. Um, for instance, like, like things like price increases. Right. Or dispatch methodologies.
- [09:33]
C
Yeah.
- [09:34]
A
Like we know that the price needs to increase at this acquisition. You know, they're way below market, they're not making any money. Okay. Like we don't have to do that immediately. We can kind of like get some feedback from the team, get into the truck, talk to the technicians, hear the feedback. This recent acquisition, the feedback was we're charging too little from the text. Like, yeah, say less. Good feed. Yeah, good feedback. I'm ready. So like really trying to like solicit feedback from the team and then be ready to rapidly execute our plays relative to that feedback. Which gets you coming from a culture standpoint when guys who maybe haven't been listened to for many years and like now new ownership, new leadership is here and they float an idea in the cab of the truck, in the service meeting, whatever.
- [10:28]
C
Yeah.
- [10:28]
A
And then they see rapid action on that idea. That's like, that's how you like turn someone on.
- [10:34]
C
Yeah.
- [10:34]
A
You know what I mean? Like really like get them bought in.
- [10:37]
C
Yeah.
- [10:38]
A
And that's then that's basically how we operate.
- [10:40]
B
What's it look like? Like, how are you drunk? That makes sense for as you like Activate it six months later, a year later. Like, how do you keep people inside the fold?
- [10:52]
A
We're. Right now we're three branches across two states. We're also currently three brands across two states. And it is difficult to drive culture and values and like shared, shared mantras and like ways of operating across three different brands. Even something as different as, like, as, as little as like different colors, different hats, different names just makes it more difficult. So we're actually rebrand, like our three branches. We're rebranding right now. We're going to rebrand it all to a single name.
- [11:27]
C
Yeah.
- [11:29]
A
And that's going to happen here in the next 60 days. And it's like huge, a huge project of ours right now that I think will help. But really it's for us like our, we, we place enormous emphasis on the ability and the approach of our frontline leaders. So we do a lot of like, like we have very well, I would say well articulated, like leadership standards and we like coach on leadership and we really place a lot of training and effort into our frontline leaders.
- [12:08]
C
Yeah.
- [12:08]
A
And I think that's really like where culture like really hits the road. And so like certainly like this acquisition we just did, like we, you know, like, I spent a lot of my time like coaching that manager on how we lead and what expectations are of him and like how I can help him get there. Something that, and I think that's a good part of it.
- [12:29]
B
Yeah, that makes sense. And you've talked a few times now about leadership. How are we finding these leaders? Especially being remote, like leaders are hard enough to find when I'm recruiting outside of my headquarters. Like, how are they, how are you finding them states away.
- [12:43]
A
Yeah, so we basically, I mean really we have two, I would call like two channels for leadership primarily. The first is from the field, so especially like frontline leaders. Like I'm, I'm a believer that our frontline leaders ought to be from the trade. And if we can take a guy who we have operated with and we know, we know who he is, we know what makes him tick, he's seen us lead and then I can kind of shepherd him into a leadership role and like really put a lot of time and effort and development into, into that person's development. We've had like really great success with like taking people from the front line of like say the field and also like the front line of the office.
- [13:34]
E
Right.
- [13:35]
A
We've got two people here from Stanford today, former dispatcher, now customer experience manager, former technician, now service manager that are Both kicking ass and doing a great job and are like great examples of this. I'd say like the second channel that we're starting to tap more and more is my. And Connor, my number two, you know, our military background is starting to reach back into the military and pull guys out and pull them into the, into the team. And we've. So we've done that now with one and early, early innings with him. But it seems like we're going to have a good, good outcome there.
- [14:10]
B
How are you guys thinking about balancing speed and control as you're doing this? Like safety.
- [14:15]
A
We don't place a whole lot on safety. Safety of the business. I would say we definitely are risk on.
- [14:23]
C
Yeah.
- [14:25]
A
And like generally we lean towards a bias for action.
- [14:30]
B
Yeah.
- [14:30]
A
So if something needs to be done, like we will make it happen. We're going to attack that problem today and we will move with speed and sometimes we break things and sometimes we make the wrong decision, but again we will move with speed and pivot again. So generally we lean into like our. One of our like competitive advantages against problem sets, challenges, competitors, is that we move with a lot of speed.
- [14:53]
C
Yeah.
- [14:53]
B
You just took over a brand 75 days ago. Can you walk us through, like the wins the. The L's in this new acquisition?
- [15:02]
A
It was a small team. So it's a $3 million plumbing branch, Pure Plumbing. About 10 people. Small, but really easy to get our arms around.
- [15:11]
C
Yeah.
- [15:12]
A
So a lot of ride along time. The nice thing now is that we have, you know, with a little bit more infrastructure and some centralized services in previous integrations, dispatch, payroll, onboarding, like HR onboarding, payables, like I'd have to take care of all that. I might get suppressed with that and I can't do the leadership things that I want to do. Now we have the team, the process, the centralization where a lot of that stuff is happening in the background.
- [15:41]
E
Right.
- [15:41]
A
My HR guys taking care of stuff, call center's taking care of things. And I was, I was able to really just dive in, jump in the trucks, get with the managers and like really drive meaningful outcomes in the field. And like culture, Culture wins. So we really leaned into that. There was one technician there that was a high producer and kind of had everyone fooled that he was the right guy. He ended up getting his head cut off 10 days in because he's a prick.
- [16:13]
C
Yeah.
- [16:14]
A
To everybody.
- [16:15]
C
Yeah.
- [16:16]
A
So that was a huge, actually a huge cultural win. And that was some of my ride alongs in the trucks with the other plumbers kind of like made Me aware that like, hey, like we have a problem over here and this is actually a really systemic problem. So when we sort of made that seemingly difficult decision, we gained a lot of like credibility with the team immediately. And that was able to like push change faster, right. Like, we were able to really lean in after that. So like the following week we made price changes.
- [16:43]
E
Right.
- [16:43]
A
And in some cases they were drastic, but armed those technicians with like in the ride alongs, in the service meetings, with the training to kind of weather that, that price increase and they, they've nailed it. So like for instance, in June, we took over July 1st. In June these plumbers were like generally at like 20,000 or 19,000 to 25,000amonth of revenue, which, like, it's not great for a plumber in my opinion. In August, those same plumbers were doing 120,000 out of one truck, 76,000 out of the next truck, 56,000 out of the next truck. Price had to do with that, but also like conversion rate, close rate. These guys were getting told no a lot, even at a lower price. Now they're asking for a higher price and converting at a much higher clip. And so like, what does that mean, like say for the P and L is that we push the GROSS MARGIN up 10 points in 60 days and push, you know, EBITDA to like, you know, of course we have, we're assuming a lot of cost centralized, but for that branch level, even does like 28% at that branch today.
- [17:54]
B
Yeah, I would, I would take 28 all day. You're getting ready to start greenfielding. How are you thinking about that as a part of the whole, everything we've.
- [18:03]
A
Talked about so far? Yeah, so we, we have never greenfielded a location. We've only purchased in new locations. And our, and of course like, and we have done deals, we know how to do deals. We, we feel comfortable in our ability to integrate. We could just keep doing that. But it feels prudent to us that we ought to build a competency in greenfielding. Right. We, we, we should know how to start a new branch in the application. So that's kind of the bet that we're making right now. Yeah, you know, basically what we, what we determined, you know, almost a year ago was that the, some of the hurdles we had to clear that we hadn't cleared already was like leadership. So what is that? Like, how do we, what's the chicken or the egg on the leadership for that greenfield location if we're going to be hiring technicians in a new market that have never worked with us before. How do we get them trained up quickly onto our system while not necessarily having like ad hoc osmosis proximity that we really lean into now and then of course you know, the marketing and the leads and things like that. So we've basically and like recruiting. So how do we over the last like 10 months we really like try to like check those boxes. Hired a recruiter, built out a recruiting plan, brought on an ATS system, started, you know, building out, you know, more robust training that we can really like put a technician through and try to like slam them through in like three weeks to get them lethal in the field and like kind of like indoctrinate them into our values. Hired a leader, this is that military leader. Train him up, have him kind of like running point on the project of launching this greenfield. So these are some of the things that we're fighting through right now. But certainly I think it's going to be tough. The variable that is still unsolved is what is it going to look like from a marketing perspective. What can we expect? So we have a plan to go in and spend a certain amount of dollars in a certain way. But what is that going to bear as far as like lead volume and how fast is it going to come and what kind of staffing can we feasibly like be comfortable starting with.
- [20:22]
C
Yeah.
- [20:23]
A
And that's, that's still TBD right now. I think we're, we're budgeting for that. Like a lead is going to cost us about $400.
- [20:33]
C
Yeah.
- [20:34]
A
Not being known in the market and then try to try to fight that down over the course of 12 months.
- [20:39]
C
Yeah.
- [20:40]
D
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- [20:58]
B
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- [20:58]
D
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- [21:03]
B
Service killers. No bs, just leads. What's your advice for somebody wanting to get like me, you know me.
- [21:12]
C
Yeah.
- [21:12]
B
I want to go. We're about to go multi location in like the next 30 days. We close mid October. What's your couple pieces of advice for me? Keep me on the straight and narrow here.
- [21:21]
A
Yeah. I think you and this is an acquisition.
- [21:25]
C
Yeah.
- [21:25]
E
Correct.
- [21:26]
C
Yeah.
- [21:26]
A
I think you have to quickly assess what are the things that you can tolerate not changing and then what are the things that you really want to bring, like for strategic reason and also for like new wins with your new team and an assessment of the leadership on site and whether they're capable. And my understanding is that the leadership is capable at this one. Yeah, I think that's, that's like, like understanding what your non negotiables are, what you want to go in and like really, really push for. And then what are you willing to be flexible and adaptable? Like we were saying, like I was saying, you know, like you have the PlayBook 4, but you, you don't necessarily have to play it until the team's ready to receive it.
- [22:06]
C
Yeah.
- [22:07]
A
Or your team's ready to bring in.
- [22:09]
E
Right.
- [22:09]
C
Yeah.
- [22:10]
A
So that's what I would advise.
- [22:13]
C
Yeah. Yeah.
- [22:14]
B
That feels pretty good. What should everybody be taking home with them as we end this out? That's advice for me. Anybody else just like stay in one location, make your life easy or buy a small plane.
- [22:24]
E
Yeah.
- [22:25]
A
Your life would be easier if you stay at one location. Yeah, it is harder. That said though, like, we're not 30 million today if we didn't go multi location.
- [22:36]
C
Yeah.
- [22:36]
E
Period.
- [22:37]
C
Yeah.
- [22:37]
A
Actually, my second location is now my largest location and my most robust. And it's the reason that we're operating the way we are is that we've learned all those lessons in the second location. Yeah. I mean, I think multi, like understand that, you know, if you're like me in 2021 and you think like a second location in a new market is going to help you get over the hump. It's not. It's going to make the hump bigger for you to try to climb over, but certainly it can be done. And I think a mix, you know, a mix of competency and like Greenfield and like small tuck in M and A could be very powerful for, for bootstrap owners.
- [23:15]
B
Awesome. Well, thanks for jumping on tonight with me and thanks for like talking to everybody. I know it's late and I appreciate the story and 700 to 30 million and five years is nuts. So I appreciate you walking us through it.
- [23:28]
A
Cheers. Thanks, Rich.