#251 He Built a $40M Home Service Business (Here’s How)

Summary

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Podcast Summary: Owned and Operated #251

He Built a $40M Home Service Business (Here’s How) – October 16, 2025

Overview

In this episode, John Wilson sits down with Christian Ratten, CEO of Five Star Home Services, to unpack how Christian helped scale the business from a small, family-owned operation to a $40M powerhouse in the home services sector (HVAC, plumbing, electrical). They dive into the pivotal decisions and philosophies behind their growth, the process of professionalizing operations post-boom, leadership development, the Profit on Purpose model, challenges of scaling multi-location operations, and the future of home services organizations.

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Five Star’s Origin and Lightning Growth

• Family Business Roots: Started as Eastland Heating and Cooling (1972) in Columbus, OH, rebranded to Pickerington Heating & Cooling, operated as a classic mom-and-pop for decades. ([01:40])
• Struggles Post-2008: After 2008–09, business faltered; family members (the “boys”) returned at a challenging time, leading to a major strategic pivot. ([01:40])
• Digital Marketing Shift: “Caught lightning in a bottle” around 2015–16, moving marketing from Yellow Pages to digital just as homeowners also shifted their search habits. Mastering local SEO and online ads became a turbocharged differentiator. ([01:40])
• Strategic Acquisitions & Aggressive Scaling: Grew through small acquisitions and greenfield openings—hit ~$10M revenue and 50 employees by the time Christian joined.
• Explosive Expansion: Added ServiceTitan, acquired major plumbing and electrical businesses; headcount and revenue doubled (“We added 200 employees, kept 100.”) ([04:00])
• Chaotic But Successful: “We went from about $20M in sales to about $40M... the most chaotic 18 months where the business was doing great—my marriage, maybe not so much, but we all survived it.” —Christian Ratten ([04:53])
• Professionalization Era: Last two years have been about organizing processes and strengthening the foundation post-hypergrowth to enable future, sustainable scaling. ([05:17])

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The Shift: From Rocket Growth to Professionalization

Cleaning Up After the Growth Spurt

• Step Back for Stability: “We got to the fifth floor and looked down and realized we forgot to tie anything together in the fourth.” —Christian Ratten ([06:27])
• Retooled Priorities: Reduced home service focus, zoomed in on core business practices, brought in a business (EOS-type) coach rather than home service consultants. Focused on quarterly objectives (“13-week races”), foundational team and systems fix. ([06:27])
• Leadership Development: Recognized that many leaders had little formal business training—even simple skills like email management and time allocation needed to be taught. Aimed to create career pathways for field staff elevated into management. ([08:31])

Slowing Down to Speed Up

• Organizational Reflection: “We can get to $100M, but I don’t know what shape we’d be in when we get there.”
• Example of industry failures: businesses that hit big numbers unsustainably, then collapse. ([08:46])
• Intentional, Repeatable Growth: Shifted focus to onboarding, leader training, and operational repeatability over raw top-line expansion.
• Challenging Vanity Metrics: “Revenue is vanity, profit is sanity, and cash is king. And when it comes to customer counts: ‘How many customers could you text right now without fearing mass unsubscribes?’” —Christian Ratten ([10:06], [11:37])

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Management, Transparency, and People Development

KPI Sharing and Manager Meetings

• Monthly Managers Forum: Pulls 30 people off the frontline every month. Morning: pass down executive team “wisdom”; afternoon: group-problem solve. Tangible outcomes and new engagement across levels, creating “light bulb” moments and real buy-in. ([13:38])
• Open Reporting: Each department now reports on KPIs at these meetings; top performers get exampled, strugglers get collective spotlighting and support. ([16:27])
• Leadership Retreats: Inspired by challenging industry peers, embraces the idea that if pulling leaders out is hard, it’s proof it needs to happen. (e.g., “middle of July, whole team leaves—departments should run on their own”) ([17:06])

Culture, Alignment, and Hiring

• Onboarding for Fit: Five-day process is designed to “weed out or create fanatics”—not just skill but genuine buy-in to company culture and goals. Early attrition (pre-employment) is celebrated if it preserves culture. ([22:02])
• Performance Reviews: Quarterly staff rating system to identify A-players and “A-potential.” “Our goal is 37% A-players; currently at 26.5%, but C-players are nearly eliminated.” ([22:02])
• Not Everyone Should Be an A: “A-players are annoying to most people! You need a mix: core team with some drivers to push growth.” —Christian Ratten ([22:02])

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Multi-Location Scaling and Market Strategy

Expansion Tactics & Market Realities

• Current Structure: Three main markets—Columbus (largest), Dayton, and emerging Cincinnati. Columbus = 65% of org revenue. ([23:38])
• Platform vs. Branch Growth: HVAC install is mostly saturated; focus for growth is plumbing (from $3M to $15M+ two years post-acquisition) and electrical (recently found the right leader for expansion). ([23:38], [27:58])
• Driving Density not Geography: Next expansion isn’t about proximity but population density and market opportunity (“Population density trumps proximity when building next branch.”) ([54:52])
• Centralized vs. Decentralized Leadership: Tried both; unequivocal conclusion: “Complete in-market leadership”—each branch needs its own boots-on-the-ground GM and management. Split bonuses and P&L by local performance. Centralized support (corporate functions) will be increasingly separated. ([43:17])

Building Leadership Pipelines

• Bench Strength: Systematically identifying high-potential supervisors and future managers—dedicated leadership cohort (“shooting stars”) that meets monthly for peer and upper management mentorship. Both engagement and succession planning. ([47:39])
• Assistant GMs & Internal Promotions: New location managers often promoted from within, after proving themselves, to preserve company ethos and performance. ([47:01])

Market Fluidity Tactics

• Shared Capacity: Will send field staff between branches in acute need, but see cross-market help as a sign of misplanning. “If you’re regularly shuffling staff, you’re not forecasting or staffing right.” Aim for self-sufficient branches. ([51:20])

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Profit on Purpose: Social Mission as Growth Engine

What Is Profit on Purpose?

• Giving as Core Business Value: 10% of all revenue is given away (mainly to recovery, addiction, and second-chance initiatives; $4M+ over four years). “Profit is not a dirty word. What matters is what you do with it.” —Christian Ratten ([55:47])
• Walking the Talk: Gave away even when cash was tight, and “were blessed in return in ways we can’t explain.”
• Internal Wellbeing First: Learned the hard way that announcing external giving before ensuring the team feels cared for can backfire. Adopted the “put your own mask on first” (airplane) philosophy—ensure equitable employee wealth and performance-based opportunity. Only then, outside giving can be celebrated. ([58:24])
• Discreet Generosity: Community hardship giving (e.g., free services for foster families) is never publicized; only partner charity donations are used for marketing purposes (“the right hand doesn’t know what the left is doing”). ([58:24])

Practicalities of Giving at Scale

• Financial Discipline Required: “First, know your numbers—most owners want to give but can’t on a 7% margin.” ([62:16])
• Bring in Help Where Needed: “Never just give consultants $50K. Tie their pay to actual improvements.” ([62:42])
• Giving is “baked into our margin; it’s just there.” Sometimes business decisions require faith and long-term perspective, not just short-term logic.

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Professionalizing Operations: EOS & Scaling Up

Outside Consulting

• EOS vs. Scaling Up: Both similar frameworks; Five Star chose Scaling Up for flexibility and the specific, humble, practical coach they found. ([35:59], [37:40])
  • “Scaling Up is a box with stretch. Traction [EOS] is a box; you do it their way.”
  • Key: Find a coach who complements your leadership style (ideally, if you’re visionary, coach should be operational/integrator type).

Implementation Insights

• Coach Engagement: Start heavy (weekly), taper off (biweekly, then monthly) as value shifts. Expect diminishing returns as “they become too familiar—fresh eyes are eventually good.” ([40:18])
• Quarterly Strategic Planning: Use one-page strategic plans outlining annual, quarterly goals, core values, catalytic mechanisms (like Domino’s “30 min or free”). The team must understand and buy in at every level. ([31:04])
• Transparency: Share detailed P&L, gross margin, and dashboard KPIs every month with all management, educating them on actionable levers for improvement. ([11:51], [13:38])

Accounting, Controls & Tough Decisions

• CFO & Controller: Brought on with scaling; both fired over major accounting concerns after external CPA warning—personal review, signed every check, scrutinized every expense. ([66:11])
• Lesson: “You won’t know your numbers better than when you’re personally signing every check.” ([68:33])

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Leadership, Culture, & Advice for Entrepreneurs

Keys to Sustainable Success

• Align Hiring to Core Values: “We’re a relentless group of passionate experts who always do it right and give more than is expected.” Once hiring/acquisitions aligned, the culture transformed. ([69:11])

• Empower & Trust Leaders: “Don’t punish every mistake. Let your people learn from them.” ([69:42])

• Difference-Makers in Leadership: People who can self-reflect, admit mistakes, live in the “gray” instead of seeking black-and-white decisions. ([69:45])

• Recommended Books:

  • The Art of War by Sun Tzu (read quarterly)
  • The Almanac of Naval Ravikant
  • Barbarians at the Gate (for understanding acquisitions and PE motives) ([71:42])

• Final Thought: “Find people who match your energy, but cover up your blind spots and be honest with yourself and your team.” —Christian Ratten ([69:45])

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NOTABLE QUOTES & MOMENTS

• “Revenue is vanity, profit is sanity, and cash is king.” —Christian Ratten ([00:00], [10:06])
• “We got to $40M because a bunch of things aligned and we took advantage of opportunities.” —Christian Ratten ([00:05], [20:52])
• “You have to be adaptable to work in this business. One day we’ll go this way, next day, a completely different way.” —Christian Ratten ([00:18], [31:04])
• “The goal of our onboarding process is to either weed you out or create a fanatic.” —Christian Ratten ([22:02])
• “Our hiring goal: 37% A-players companywide. You can’t have all A’s—you need a mix.” —Christian Ratten ([22:02])
• “If pulling managers out of the business is really hard, you probably need to do it.” —John Wilson ([17:06])
• “Profit is not a dirty word at Five Star. What matters is what you do with it.” —Christian Ratten ([55:47])
• “If you know your numbers, you can build margin for giving right into your operations.”
• “Find a coach who isn’t like you; visionary leaders need practical, grounded coaches.” —Christian Ratten ([37:40])
• “I intentionally want my team out in front. Our market research told us: everyone talks about themselves. We put the homeowner in every photo.” —Christian Ratten ([39:32])
• “If you’re constantly having to shift capacity between branches, you didn’t staff or forecast right.” —Christian Ratten ([51:20])
• “You won’t know your numbers better than when you’re personally signing every check.” —Christian Ratten ([68:33])
• “The difference-maker between manager and exec: people who self-reflect, admit mistakes, live in the gray.” —Christian Ratten ([69:45])

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Timestamps for Key Segments

• [01:40] – Five Star origins/history
• [04:53] – Growth explosion, personal toll, shift to professionalization
• [06:27] – Reinforcing the foundation after fast growth, quarterly priorities
• [10:06] – Culture shift, questioning industry vanity metrics
• [13:38] – Monthly manager meetings, leadership engagement tactics
• [22:02] – Onboarding for culture, A-players, quarterly reviews
• [23:38] – Geographic/market strategy, plumbing growth focus
• [31:04] – Consulting, EOS vs. Scaling Up, quarterly strategic planning
• [43:17] – Multi-location leadership: centralized vs. local GMs
• [55:47] – Profit on Purpose: defining and operationalizing charitable giving
• [69:11] – Culture, hiring to values, advice for sustainable growth & recommended books

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Conclusion

This episode provides a rare "playbook" on growing from mom-and-pop to modern $40M regional powerhouse—by leveraging market timing, intentional operational structure, people-first philosophy, and a genuinely lived social mission. For anyone in, or eyeing, exponential growth in home service businesses, this conversation delivers actionable insights, honesty about pitfalls, and inspiration for building a business that lasts and gives back.

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Transcript

[Christian Ratten]

What I believe is, is revenue is vanity, profit is sanity, and cash is king.

[John Wilson]

It is a good thing.

[Christian Ratten]

So, yeah, I would love to say that we got to 40 million because, like, we did it on purpose. But, like, the reality is we got to 40 million because, like, a bunch of things aligned and we took advantage of opportunities that were presented to us.

[John Wilson]

What were the big moments that helped get you to where you are now?

[Christian Ratten]

You have to be adaptable to work in this business because one day we're going to go this way and the next day we might shift and go a completely different way. It's also like, sometimes you have to do things on faith.

[John Wilson]

Can you walk me through profit on purpose?

[Christian Ratten]

We would like to give away $15 million of our profit. For us to do that, we probably have to be like a six or $700 million company.

[John Wilson]

Welcome back to Owned and Operated. I'm your host, John Wilson. During the day, I run a $30 million home service company in Akron, Cleveland, and for fun, I run a podcast talking about how to do the same thing. It's today on the show I have Christian Ratten from Five Star Home Services. Welcome to the show.

[Christian Ratten]

What's up, man?

[John Wilson]

This is great to have you here, dude. I've been admiring your LinkedIn content for years. So I'm like, yeah, I'm like, let's, let's do this. I'm excited to talk to the man himself.

[Christian Ratten]

Feel like unless you're like a big guru in LinkedIn, it's like, feels like a little bit like throwing something into an empty cave and you're not sure if anybody actually heard what you said.

[John Wilson]

You know, I heard it, I heard it.

[Christian Ratten]

Well, appreciate that.

[John Wilson]

This is, this is going to be fun. You guys have had a heck of a story. You now run a multi market business with 200 or over 200 employees and plumbing, H vac and electrical. And I'm excited to unpack sort of the story there. So could you give us sort of like, how did Five Star start? When did it start? And let's start unpacking this.

[Christian Ratten]

Sure. So, you know, Five Star started in 1972 actually as Eastland Heating and Cooling on the east side of Columbus. It was quickly rebranded to Pickerington Heating Cooling, which is a suburb of the east side of Columbus, just a little better area. And it was, it was ran just like that for about 45 years. Most prototypical, like mom and pop. It raised a family, it supported a community and, and, and did exactly what these businesses did through the 80s and the 90s and then in the, in the kind of 2010s, you know, through a crazy set of circumstances, two of the boys had left the business and gone off and done other things. And then they both came back into the business as their dad was kind of getting ready to maybe start to think about retiring. But also at a time when the business was, was maybe kind of going through some struggles coming out of 2008, 2009 era. And you know, again, a business that was built on, didn't have any sort of credit lines, just use their suppliers as their, as their credit line really. And, and got to a point where it was like, you know, it got to September and there wasn't that much money in the bank, which is not a great place to be when you're just an H Vac business. Right. And so that's when you're supposed to have the most money in the bank. And so, and so the boys came in and started to kind of work on it. And they kind of caught, around 2015, 2016, they kind of caught lightning in a bottle with just a very aggressive growth strategy. And at the same time that they were moving their marketing efforts and dollars away from the yellow pages and into digital, I think aligned with a time when the homeowner was switching that same time. Right. And so they were able to capture and they really became students of the Google algorithm and really leverage digital ads and being found locally here as a strategy. Built that off of acquisitions, very small acquisitions, as well as greenfielding, and took it to about a $10 million business with 50ish employees or so. That's when I met them. And then we started to kind of scale and professionalize at the time. Same, same time. So we, we had a crazy big year right around 22 into 23, where we added service titan, bought two big companies, a plumbing electrical business, added about, well, I like to joke, we added 200 employees, we kept about 100 of them.

[John Wilson]

And I've had, I've had years like that too, right.

[Christian Ratten]

So yeah, sometimes you just got to hire a bunch of people and see what happens.

[John Wilson]

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[Christian Ratten]

And we went from about 20 million in sales to about 40 million in sales and just had the most chaotic 18 months where the business was doing great. My, my marriage, maybe not so much, but, but we all survived it. And, and, and then really the last couple years has been a real focus on professionalizing the business and, and, and getting it to a place where we can really scale it to a, you know, to a national level even.

[John Wilson]

Can you, can you give me some. A little bit more of the years? I think I caught a few of them, But I think 2015 is when the brothers came back in. Right?

[Christian Ratten]

Yeah. So 2012 they really caught, they really started driving the business in 2015.

[John Wilson]

We.

[Christian Ratten]

2015-2018 was kind of them growing from like a million up to that 10 million mark. Right around 2020 we were doing about 17 million in sales. And then I joined the organization and between like right around 17 million and then that's when we scaled up to the. And you know, these, I'm sure you can relate to this. Like it all kind of blends together. So, you know, you kind of forget the years. But yeah, 21, 22, 23 were our big, big and where we expanded into new markets and added different vertical offerings.

[John Wilson]

Yeah. How has 24, 25 felt like those were the big growth years? 24, 25 has been your words, professionalizing. Right. So I assume cleaning up after the big growth years, probably focusing on like earnings or sort of what's that been like.

[Christian Ratten]

So I think, I think for me personally, as I took the leadership role, I was looking at the landscape and you know, that's, I believe my job is to like kind of look ahead. And what I was seeing is we were, we were coming out of a Covid boom time time customers were treating their cash a little bit differently. Banks were treating their money very differently. And then also we had this political landscape that was very kind of influx. And I think people were really kind of waiting to see what was going to happen in the election year. And so we really took that as a sign of, hey, maybe this would be a great time for us to shore up, kind of make sure. And what we figured out too is like we scaled up to. And we're on our way to 50 million and we got on. I like to think of our business as like $10 million floors. And so like we got to the fifth floor and we looked down, we were like, oh no, like we forgot to actually tie anything together in the fourth floor. And so we actually felt like maybe the best thing to do is kind of like go backwards a little bit and kind of look at, hey, what's happening on the foundational levels of this business and make sure that they're dialed in. And so less focused on the home service element of the business and more focused on just the business element of the business, we brought in a EOS type coach and, and instead of focusing on going the, you know, the, the kind of, I don't want to use a specific term or company name, but like, instead of going the, the route of consulting for home services, we went for business consulting and, and, and just tried to find, you know, we just got, we just. You were just sharing like one of your rocks for this quarter. Right? So just kind of getting to that. Quarterly priorities, we call them 13 week races, same kind of concept. And, and really just 24 and 25 has been about a player development, targeting professional development within the organization. So finding those leaders that are sitting currently maybe not in a leadership role or how do we bring leadership development to the folks? Because the majority of our, I'm sure you can appreciate this, the majority of our management team did not go to college. I didn't go to college. You know, they were great at doing something in a van, or they were great at being good on the phone, or they were great at whatever they were great at. And so we handed them more and they took more and more and they were that kind of driver.

[John Wilson]

And.

[Christian Ratten]

But maybe they had never learned how to properly sort their email, how to properly manage their day, how to make sure that they focus just as much time on fire preventing as they do on firefighting. And so just trying to bring some of those leadership development opportunities into the organization.

[John Wilson]

Yeah, I think that's great. We, I was, I was talking with my director of sales. It's a, it's a conversation that like sticks with me. And I feel like this will resonate after what you just said. But we were, we were talking about exactly this concept of like slowing down to speed up. And like our big, our big hairy goal is 100 million by 2030. And he's like, Look, John, we can do two things here. Like we can go get 100. Like I can get you to 100 million, like, we can go do that. I don't know what condition we would be in when we get there. Like, we might go to 100 million and back down to 50. And like the industry has seen some of those stories just in the past 18 months of just like, yeah, they got there, but then what? Like, was it sustainable? Was the platform good? Was the training good? Was this repeatable? No. Like, turns out, no. And then, yeah. And, and that really stuck with me. So it really, like, it did change how we thought a lot about the last year for us has been de emphasizing growth. I think we're up like 20%, but DE emphasizing growth and really like, hey, can we even onboard people successfully? Like, really, like, can we, like. And the answer was no. Yeah, yeah, it's, it's kind of funny.

[Christian Ratten]

So I would, I would say, like, you know, there was a, there was a period of time where people were really focused on this idea of building a great organization that could last. And I think our, the types of businesses we build are traditionally community based. I liken them to like community pharmacies. And there's this kind of new drive in our industry right now. It's build it fast, sell it fast. I'm not saying that's right or wrong. I'm just asking the question as like, why is that the answer to all of our problems other than one single person getting super wealthy or the promise of getting super wealthy, you know, whatever happened, like, build a great company and then let it continue to serve a community for years to come. And I personally believe that there are two numbers that people in our industry love to talk about more than anything. Top line revenue and the number of customers I have in my database. I like to challenge both of those numbers because what I believe is, is revenue is vanity, profit is sanity, and cash is king. And then on the other side, it's like, okay, tell me how many customers you have in your database now. Tell me how many of those customers could I send a text message to today where you wouldn't be freaked out that they were going to hit that unsubscribe button. And so I like to believe like we had 100,000 customers in our database. And I told our marketing team, keep sending them text messages until you get to the point where you have the right number of customers in the database. And if we lose 50,000 of at least we know those 50,000 are engaged and they're the fanatics that we're looking for who are going to stick with us, you know, and so we Try to challenge our data all the time to say is it real or are we just making ourselves feel better?

[John Wilson]

Yeah, yeah, yeah. I, I think that, I think that tracks. We. Were you guys focusing on earnings during those high growth years or just in the past like 18 months we've honed in because that's been our story.

[Christian Ratten]

So yeah, I'd say, I'd say when I, before I got here, I'm the first person non family member to run the business and the owners preview or the owners, we still, some of them are still a part of the business. They you know, they will tell you like they only looked at two numbers. Top line revenue and how much money was in the bank. That was. And that was it like there was they had else. Do you need to know exactly? Yeah, just run it like that. Don't worry about it. So, so no. And so yes. In the last 18 to 24 months our focus has been on how do we get to a P and L. How do we get to a P and L? We can share to the management team how do we get to a gross margin number that we can share in a short amount of time to where the managers can actually make effective decisions around that and also educating them around how gross margin works and how what are the levers they can pull to impact it and then how do we pay them accordingly so that they're impacting it and how do we align pay across the organization so that everybody walking or rowing in the same direction and, and we try as best we can to be hyper transparent and you know there's times when it feels like maybe we share too much and there's times when people would tell you we don't share enough and it's just, you're never going to find that right balance. But we, you know, we just try to overshare as much as possible and see you know what, what, what the team thinks and then we keep moving.

[John Wilson]

Yeah, I mean we, I would say we're identical. The, the area that like I'm trying to imagine like yours is more challenging. So like we take the same philosophy. That's how we run it as well. You have more locations and like that sounds more complicated because there's just more going on. So how do you think about that level of transparency and leadership training across like three market three locations or how many locations? Physical locations?

[Christian Ratten]

Three, three. Three primary locations. We have some satellite locations for like part pickup but primarily three locations. You know what it is is we, we were partnered with a consulting group for about a year that was an industry based consulting group and they were great. They brought some incredible insights into the business. But after the third quarter of, of working with them, what, what stuck out to me was less about the value they were bringing in, the suggestions they were making, and it was more about that when they got on site for their one or two day visit, everybody stopped working in or working in the business because we knew we were paying them to be there. So we maximized the time that we had with them because we were paying real money for that. And so what I figured out was it's more about giving us permission to stop working in the business and actually work on the business than it is about necessarily the consultant or the person. Because really most of the ideas were coming from our team. It was just we needed that permission to stay, to stop and go away from the business for a day or two or whatever. So the way we try to do it is, is we, we force ourselves to have a monthly manager meeting, as inconvenient as it is to pull 30 people out of the business. Eight hours every single month. And we focus on learning. In the morning, we try to pass, it's all about passing wisdom to the leadership team, to the management team from the executive level down, and then we solve a problem in the afternoon as a group. And what has been incredible through that process is that there have been times where I've been sitting in this room with these 30 people and I've watched 30 people all have a light bulb moment at the exact same time and everybody goes, oh my gosh, there's the solution right there. And because they were all a part of the solution, they were all bought into the solution and we're able to get traction with it that much better. And so it was, it was difficult the first three or four months. It, it was, should we keep doing this the, the next three or four months? And now it's like everybody looks forward to it, it's energetic people. We're getting new engagement from different levels of the organization. Um, and typically what ends up happening is we can't solve every problem in that month. So what ends up happening is we create like a group of people who are passionate about that. They go away for that next month and then they come back and usually make a presentation on their suggestions for the solution. And we usually kind of close the loop. So it's been a really impactful thing. We're, we're coming up on our full first year of staying consistent every single month.

[John Wilson]

Yeah, that's amazing. I'm just going to ask some tactical stuff about that because I'm going to basically rip and do that immediately. Are you also reviewing, like, you know, you talked about the monthly financial trend. Like, is that on that day as well? Like, hey, here's what happened type.

[Christian Ratten]

We just added that in actually last month, where each department now reports out on a few specific KPIs that we're looking for. And they're either reporting on why, how it went and they beat it, or if they didn't beat it. Everybody's allowed to ask, like, why? And maybe poke some holes in it a little bit. And if you're kind of, if you get up and your team's like, hey, my average ticket is here. My, you know, my conversion rate is here and my net billable efficiency is here, and you're hitting every metric. It's like, a, okay, let's move the needle a little bit and see if we can make this a little more challenging for you. B.

[John Wilson]

Cool.

[Christian Ratten]

Good enough. Sit down, let's get somebody up there who's maybe not hitting their targets and let's put the smartest people in the room on that problem and see if we can't help.

[John Wilson]

Yeah, yeah. I was challenged by this recently. Matt Pazda from Kaldad. Do you get. Have you talked with him before? Yeah, he's. He's awesome. But I was in Charleston and we were spending some time together and he does. I don't know if he does this, but he, he does a. He intentionally does leadership retreats at the, at the worst times. Like, and it's very, like, intentional, like, okay, it's the middle of July. The entire leadership team is going to leave for a week and it's like, it's on purpose. And the idea is you should be running your department in such a way that you could leave during peak season and your team thrive, which is good. Like, right? Like, I can't even argue with that. That's a good mindset. And I, it was the first time I'd really, like, thought about, like, sort of being intentionally, like, terrible. But this reminds me a little bit of this because I think, you know, the first thing that crossed my mind, which is probably all the more reason we should be doing this, is, man, that sounds really hard to pull those, like, managers out. So, like, immediately I was like, hold on. That means I should be doing this because if it's that hard to do it, then we probably need it more than. Than I think we do.

[Christian Ratten]

Well, and what you see too is like, they're allowed to have their laptops out in the morning, like before we get started. But at some point, I get up and I say, all right, put your laptops away. And now listen. We say, listen, if you got something you got to take care of, just quietly step out and take the call. But what I've noticed is, is that if we see one person consistently stepping out throughout the day, it's like I can go to their GM and I can say, hey, you might want to circle up, because why is that one guy having. Or that person having to step out so frequently? What's broken in their department? Do we not have the right field supervisors in place? Do those field supervisors not feel like they have the right ability to make decisions without this person? And, you know, that's been one of the challenges as we've grown is you, you get a leadership person. You get a person in a leadership role, and you, you know, you. They're doing a good job and so you kind of leave them there. And then, and then it's only after they've left that you figure out how much of a dumpster fire actually was being hidden on that side of the world. Or what we've had not, I wouldn't say a lot of, but it's happened a few times is you have that manager who will tell you everything you want to hear in the room. And as soon as they step out of the room and get in front of their team, it's a completely different message that's being shared. And so then you get this, this thing between the leadership and the frontline staff, where the frontline staff's going, well, my manager doesn't agree with anything you guys are doing. And, but behind the scenes, I'm being told they love everything we're doing. And that has caused some. Some strides and we've had some challenges over that. But when, when so often that type of behavior can actually demonstrate what that is, you know, is that is that cult of personality, person building a little department that's subset from five star and takes on its own set of core values separate from ours, you know, and we want, we want our leadership team to be so bought into our core values that their team automatically picks all that up.

[John Wilson]

Yeah, yeah, that, that makes sense when you think about what you got to 40 without this. Because, like, my question was going to be, do you think this is the difference maker? Because I think this is the long term difference maker, right. That we'll hit 30 this year. And the biggest difference from 20 to 30 to me has been the investment into leadership. Like hands down, it's been a wild difference how much more intentional we have to be about it, but also how much our leaders move the needle versus when we were a smaller organization.

[Christian Ratten]

So yeah, I would love to say that we got to 40 million because we did it on purpose, but the reality is we got to 40 million because a bunch of things aligned and we took advantage of opportunities that were presented to us. I think the next jump for us though has to be a little bit more intentional. Of course the economy has to stay on our side. It always helps when the weather gets on our side does help. We, you know, we're weather enhanced. We try not to be weather dependent. But I do think that from a growth standpoint, what, what matters in my opinion is alignment from the top down. Buy in hiring and onboarding. So we have a really intense onboarding process. It's a five day onboarding process. And the goal of it, we stand up in front of the room every time we do it, which is usually about every two weeks, and we say the goal of this onboarding process is to either weed you out or create a fanatic. And the first time we did it, we had a guy come to us because we have a graduation ceremony at the end. And he came and he said, I can't do the graduation. And we thought like, oh, is, are you, is it like an anxiety thing is you get up in front of a room full of people, he's like, no, I, I don't fit here. And I was like, it worked.

[John Wilson]

Hell yeah.

[Christian Ratten]

Because if, if we hadn't done that, that guy would have worked here for 90. He's gonna be an installer. He'd been here 90 days before he even figured out who our culture was. Then he would have poisoned it for 90 days until we figured it out. If we were lucky, we might have got him out in six months. He could have been here for a year before we even realized how toxic he could he was to this organization. And so hiring and then every quarter we review and rate every single employee on a scale and it's to target a player development. We have a goal of having 37% of all staff be A players. We aren't there, we're at 20. Well, we just finished it yesterday actually for last quarter we had a manager who was out on paternity leave, so we couldn't do his until yesterday. And so he, we ended up at 26.5% A players. But what was really encouraging is our C player count went down and we're almost to zero. And our A potential grew. So. So we're moving people in the right direction. And you don't want. You actually can't have a. A company full of a players. A players are annoying to a lot of people. So you have to have that right balance of, like, you need those core employees who just show up, punch a clock, and go home. Those are great employees. I actually think you need about 60 to 65% of your business to just be core, but you still need those drivers who. Who push the business forward.

[John Wilson]

Yeah. Yeah. That's interesting. What, what do you think growth looks like next for you guys? Like, you're at three locations. What was the size per location? Or do you guys think about it like that? Because it's kind of transient.

[Christian Ratten]

Yeah. So Columbus is a little bigger than Dayton. And then Cincinnati is the new emerging market. We. We think. We think. Yeah. So Cincinnati, we think, is to be the. Could be as big as Columbus. Columbus owns about 65% of the total market share inside of our organization. But then H Vac Install still owns a large portion. So our next growth strategy is not really developing H vac much more than it is today. Small, you know, 3 to 5% year over year growth. We feel like we have a pretty decent amount of market share. We also compete in one of the hardest markets. Columbus, Ohio, is a. Is a fantastic market. We have incredible, incredible competitors in this market. We have three or four massive companies and very little PE money here yet. So it's like this really kind of like, grindy, you know, willing to do the hard things, kind of group of people that compete against us every single day, which I love. It makes us better. Dayton is. Is just an interesting area. I just don't know how much you can squeeze out of that market. It's a. It's. It's. It's kind of not growing like Columbus is. And then Cincinnati again has a huge opportunity. The big opportunity we see is on the plumbing side. We bought a $3 million plumbing company two and a half years ago. This year, our plumbing division will do about 15 million in sales. And so we think that plumbing can be as big as H Vac. So we really aren't looking to expand beyond Columbus, Dayton, or Cincinnati. Right this second, 2026 is about establishing Cincinnati and really driving a lot of our effort towards the plumbing division. So you can go to any single person in this organization and ask them what's the best call on the dispatch board for H Vac? And everybody will tell you, right? It's a 15 year old down system on a hot or cold day. We don't have that same buy in from the plumbing side yet. We don't know. We don't have that thing of like what's the best call in the plumbing board. Everybody's some people odd water heater or leaky water or whatever, you know, I mean like oh, a drain that's two drains that are clogged with poop coming out of one of them is like we just don't have alignment yet. And I think it's partly because plumbing is a little bit of a different animal, but I also think it's partly we just haven't fully established what that is for us yet and what we're going to chase. And so that is a huge opportunity for us. And then after that like we actually are looking at some partnership models. I'm a big believer that I would like Five Star to, to, to offer everything to the homeowner inside of the fence and be the, the company that installed the fence. And so why can't a group of people go and do the mulching and drop the AC tune up coupon off at the same time? Like why can't we offer landscaping and pest control? And once we have this customer and they trust us, why wouldn't they call us for their other services? And so, but I don't necessarily want us to own or buy all those companies and I also love the idea of helping other small home service companies to scale. And so what if there was just a partnership opportunity with Five Star where you could join the five Star group and you know, get all the shared services but retain ownership or a large percentage of ownership. So this is still something we're talking about internally and I, my team would probably be mad at me for even sharing it, but I'm a big believer that like knowing what we do and doing what we do are two very different things. And so I don't mind talking about.

[John Wilson]

What I think that would be complicated to pull off. So I don't think there's much risk in talking about it. And I think there's, I can think of a couple examples of people that milestone maybe what's the place down in Nashville? They, they basically do this. It's the governor's company. I don't, it's not Hiller. Maybe this Hiller, but yeah, I think.

[Christian Ratten]

Does Hiller do that? Who knows?

[John Wilson]

I don't think they do that.

[Christian Ratten]

I'm so bad at knowing our industry like so I don't go to any of the events, I like, don't really leave five star. And that's why, like, you asked me, like, do you know this person? I don't usually know anybody and I just, we. I just stay so focused on us and I love, like, I read and listen to all the podcasts and I, you know, I try to stay up on the industry, but when at the end of the day, like, I just, I get kind of obsessive about five star.

[John Wilson]

Yeah, no, I think that's great. That sounds like you're doing the right thing. So most of your growth over the next couple of years, or at least year, sounds like it's going to be really like driving density into your existing locations, adding plumbing. You guys are doing electric. So that's already a big part of.

[Christian Ratten]

Okay, it's not. I wouldn't say it's a big part. We finally found the right person to run that business unit. We had the wrong person in the seat for a while and that really just hampered growth. This guy's a driver and what I loved about him was when we announced him in front of the leadership team and the management team and I said what percentage each vertical was going to own over the next couple years, he was like, nah, screw that, we're going to be the number one. And I was like, that's what I'm looking for. Like, you know, and so he's excited to develop it. I think electrical has a huge, really interesting opportunity. I just don't think anybody's quite captured it. And it's like, we think of H Vac as like that one call close. Right? You go in, the home, customer has a demand need and you can solve that demand need. So it's a bit of a shift for some of my people. Like when you go and talk about a generator, it's, yeah, maybe you get lucky. But like, that's something that the homeowner's probably thinking about. They got to talk about it. It's more of like a long term. You got to put people in your pipeline and let them work their down through and so. But I see generators and car chargers and all these other things as such a massive opportunity. We just didn't have the right person driving it. So I'm really excited to see where electrical gets to in the next couple years.

[John Wilson]

Yeah, electrical, it's a. It is a good thing. So we're. Yeah, we're three trade and electrical. I think we'll do six and a half or something this year. And it really, like it was zero, 24 months ago. So it can become something pretty quick. And yeah, it's been a great, it's a great business. So I'm sure you'll find a bunch of success with it. And I think the, the, you do have a lot of competition in well, both Columbus and Cincinnati, but Cincinnati seems more like private equity, like really a lot of pe, whereas Columbus is like just some really great operators. Yeah, you have some really great operators down there.

[Christian Ratten]

Yeah, I compete with them every single day.

[John Wilson]

Yeah, yeah.

[Christian Ratten]

Both for talent and customers.

[John Wilson]

Yes. Yeah, yeah. No, there's, Columbus is a, it's a funny market. I would love to talk a little bit about like we, we've been sort of talking about people, we've been talking a lot about leadership. I want to talk about, you know, building this team to scale. And this is going to be coming from like me, I'm. You're a couple steps ahead of me, like how do I do this? So that's going to be the, the framework that I'm coming from here. You were able to reference pretty quickly and I think it's a good like canary in the coal mine of Hey 37. We want 37% of our staff to be a players. So I don't know how many, how what percentage of my staff I want to be a players and even if I did, I don't know that I would have like top of mind access to the data. So like canary in the coal mine, you're running a good people business. Right? Like that one little insight. Great. We're more than a few steps ahead of John. So how like how did you begin the process of really professionalizing your employee retention, your onboarding? I know this is like years of work. I'm going to ask you to distill into like five minutes. But could you give us the where it began and like what were the big moments that helped get you to where you are now?

[Christian Ratten]

Yeah, I'd say again we brought in an outside consulting group at one point that's an industry based consulting group. You know, it's BDR is who we work with and, and they were incredible at helping us really professionalize on the home services side of the business. And then after that it was bringing in a scaling up coach. And so we actually interviewed EOS coaches on both sides of eo. So EOS was in is an idea that was formed by two gentlemen. One went off and started traction and the other started scaling up. And so we looked at both and the only reason we went with scaling up over traction was because of the relationship we have with the coach and we felt like that relationship was critical to our business. Scaling up also for me is just it allows for a little bit more freedom, traction. You fit inside their box, you will do it their way. Scaling up is a little, it's a box but the box has stretch, has some stretch to it and that worked better for us because that's how I operate and I need that kind of flexibility. We joke everything at five star is five. So we have five core values. It's like we have five levels of technician. Everything is five. And so you know. But we joke that our sixth core value is adaptability. You have to be adaptable to work in this business because one day we're going to go this way and the next day we might shift and go a completely different way. I would say scaling up has really been a huge boon to our business in that a it forced us to stop for a minute. The leadership team gets together quarterly and we do what's called an OPSP one page strategic plan where you write down for the quarter for the well starts with annually. What's the goal? Revenue, cash, profit, how much debt do you willing to carry? You have to reestablish all your core values. You have to reestablish your mission statement. You have to have one thing that we have is called a catalytic mechanism. A catalytic mechanism is like the dominoes. 30 minutes or it's free. You have to have so what's your promise to the customer and then what holds you accountable to the promise? So for us it's if you call us by 7pm today with a demand service call, we guarantee that we'll be there today. If we're not there today, it's free tomorrow. And so that's our catalytic mechanism. Now we expect a failure rate. We have a percentage failure rate that we're willing to live with. But when it gets beyond that it starts to, we start to ask the question are we putting marketing dollars behind leads we can't run? Are we not booking the right call? Is the dispatcher not moving the calls off the board fast enough to make room for the demand calls that we should have? Did we not anticipate the weather inflection or whatever point we knew was going to happen that was going to tip the scales in our favor? You know from a, from a calls perspective. And so all of that work that we did over the last two years has led us to really having a singular focus. I'm a big believer in a North Star. You have to have a North Star, everybody has one whether they define it or not. You have it. And what that North Star is defines how you walk the path. Right. So you are being informed by the goal. And so for us the goal is so you have a bhag of getting to 100 million by 2030. We have a bhag of both giving away but also inspiring the giving through our profit on purpose model of $25 million. And we estimate now bhags don't necessarily have to have a time limit to them. Our bhag, we haven't put a time limit to it, but we would like to give away $15 million of our profit. For us to do that, we probably have to be like a six or $700 million company. So when will that happen? I don't know. We didn't put a time to it. But that's what we walk towards is that goal of both making as much money as we can so we can give it back, but also inspiring other businesses to give back money as well.

[Jack]

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[John Wilson]

Okay. I think as, as I'm transitioning from, I want to dive into the scaling up a little bit deeper. Yeah, we did choose EOS first. I don't, I, I'm sure I knew scaling up was an option, but it seemed like it was an option for larger organizations which maybe yes, maybe no. Were.

[Christian Ratten]

They're remarkably similar to me. It's all about the coaches to me.

[John Wilson]

They're not some. Like they're similar in that they're a business process but as I'm, I. I think the rigidity of EOs, like, you're absolutely right, it's rigid and in all the wrong ways. And we're, We're. Yeah, and so we're like, you know, we're. We're sort of coming up against it here. And I, I sit down with a friend of mine three months ago, and, And I think I asked him, like, what his plan was next year. You know, I don't even remember what the, what the catalyst question was. And he just like, sends over this PowerPoint and this PowerPoint in like a total of six. And I've been on EOS for like five years, right? So, like, we're. Adherence to all the stuff. And in a total of six sentence, he was, he was more able to I, like, lay out his plan for the next couple years than I could with, like, pages and like a day or two of meetings. Right. Like, it was just so concise and so clear. And I looked at that and my response was, this has to be so amazing for your leadership team that they have this level of clarity into what you're doing over the next 24 months. Like, I cannot give my leadership team the level of clarity that you just gave me in 10 seconds. Like, I just, I can't do that. And I was like, wait, walk me through this. And he's like, oh, yeah, I was scaling up. So someone's like, okay, got it. So we start looking a little bit deeper into. Does seem like the right. It does seem just like the right answer. But the, the coaching quality. Yeah. Probably matters a lot. So we're getting ready to interview coaches. What do you. How do you think I should go about this?

[Christian Ratten]

So I think one, it's. It's got to be kind of like, okay, it's two, it's a twofold thing for me. So one, you got to get along with them, obviously. That's. You have to have that. Like, it's like dating you. You got to have some spark there a little bit, you know? But what I actually look for in a scaling up coach is somebody who's actually not like me. So I'm. I'm a visionary. Like, if that doesn't come through, I love talking about this business, I love thinking about this business. I love creating ideas for this business. So a scaling up coach who's a visionary is probably not going to do great for us because that's. That's too much. That's too much vision. You know, I like scaling up. My scaling up coach is like a He's so quiet and, like, practical, and, like, when we start getting off track, he's the kind of guy who'll be like, hey, guys, I love this conversation, but, like, let's bring it back to the topic. And that's what we need. Because my mind fires off in fireworks, you know, it's just, like, shoots off any which direction. And. And so for me, it was about finding a person who. Who. Who kind of matched my energy, but on the opposite side. If you've ever read Rocket Fuel. Right. It's like, visionary and integrator. It's that same concept. And then the other thing that I loved about that, I love about our scaling up coach, he's extremely humble. He aligns with us from a. From a core values perspective. And we interviewed some other coaches, and they came in with, like, this, like, not humble attitude. This kind of like, I wrote three books and look how great I am. And I was like, yeah, that. That's not gonna fit with who we are. Like, that's not who. We're a one team, one goal, everybody matters kind of company. Nobody's, you know, like, I intentionally want my team out in front. We took the stance when we kind of did, like, a soft rebrand last year. We. We did a bunch of market research. We figured out that what companies in our space love talking about more than anything is themselves.

[John Wilson]

Yeah.

[Christian Ratten]

And so how do we flip that on its head? And so we always make sure that there's a homeowner in every photo. You know, it's a little thing, but it's like, we want to make sure people know we're customer first. And so we needed. We needed somebody who fit our core values. I would say. We went through four or five interviews of coaches, and it was a willingness to say, I'm not going to finish this process until I find the right person. I'm not just going to sign up with somebody just because, like, it's more important that we find the right fit.

[John Wilson]

I don't think we've talked, not you and I, but on this show very often about, like, external coaching. So I'm just going to ask a couple tactical questions about that relationship. How often do you meet? What do the meetings look like? Are they sitting in the quarterlies? Like, can you walk me through that?

[Christian Ratten]

Yeah. So I'm a big believer that consultants and any type of coaching, it has always is going to have diminishing return because they're going to become too familiar with the business at some point, and they're too much like an employee at some point. So at the front end of this I met with him personally by myself once a week. We do a, so we do an annual two day off site, we do a quarterly one day off site and we do a monthly manager meeting. He's in every single one of those meetings. For the first six months he and I met by ourselves and then after six, for every week. Then after six months it went to every two weeks and then it went to every month and now like I might see him, I might catch up with him for 15 minutes before or after a meeting, but we don't. He and I no longer have formal meetings anymore. And then next year we will diminish his interaction even more within the organization where and he knows like this was a two year deal and we won't continue with him after the second year. Not a personal thing, just I, I know at some point he's going to become too familiar with us and that we are going to need new life, new blood, new people looking at our problems with a new set of eyes. But he is involved in every single. And so the, the weekly meeting we do is probably similar to what you guys do with your L10s. It's the same concept. It's a 90 minute meeting. We're looking at where is everybody on their 13 week race. And if you're good, you don't have to do anything. You just let us know you're good. And then there's some other things that we've added into the agenda that are important to us. Like we review a scorecard and a dashboard that we look at for our own internal, you know, KPIs that we've decided are, are what are going to drive our business both on a leading and lagging indicator.

[John Wilson]

That's great, that's really helpful. Can you. We're about to go multi location in like 30 days, 40 days. We're excited, we're nervous. We ran, we ran multi location in 2021. So our growth story sounded a little bit like what five stars was. We acquired a bunch of companies, we grew organically, but in 2021 we bought three companies and we basically tripled that year and we ran four locations for like two years. It was a very messy four locations because it was like bought businesses so like bought cultures, bought customers, bought managers, bought techs. It was messy. It was very messy. So I think we have like these sort of war wounds from something that probably won't be as messy again this time just because most of the problems that we had back then running multi location were like from the fact that they were acquired small businesses. When you, you have three now, can you walk me through like early stages of launching that second or third, like bought or. Or greenfielded? Like what were the challenges? How'd you overcome them?

[Christian Ratten]

Yeah, I'd say the number one challenge that we faced was the decision back and forth of how do you. Do you centralize leadership or do you.

[John Wilson]

That's a complicated decision. It is a lot.

[Christian Ratten]

We have tried it both ways.

[John Wilson]

Where did you land.

[Christian Ratten]

Complete in market leadership?

[John Wilson]

That, that feels like the correct but.

[Christian Ratten]

Harder answer to the point where I'm like, I'm like, we're probably one year away from. I would love to pull the corporate functionality away from all of the actual in market locations. And the example I always give is like, so Wendy's corporate is in Columbus, Ohio. No Wendy's corporate employee shows up at a restaurant ever unless they're doing a visit. You know what I mean? It's like the CFO doesn't have an office in the back of the Wendy's off of, you know, whatever boulevard, you know. And so just by my leadership team having a presence in the Columbus market, it changes the dynamic of the Columbus market and it also changes the annexed now Dayton market and how they feel about Columbus. Because. And so I'm a big believer that everybody needs to have something to fight against. It's hu. Okay, let me back up a step. I'm a big believer and you can't fight human nature and so you might as well lean into human nature. And one of my favorite books is Art of War by Sun Tzu. And so I'm like, okay, we got to give these people an enemy. I want their enemy to be the. To be corporate, not to be the markets. I want them to compete against the market as a team, against corporate. And so I want to actually even take corporate away. But that's getting a little further down the line than you asked. I'm a. So we made the mistake of trying to have one install manager over both markets, one service manager, both, and then put like a field supervisor in the other market. It just never works. It's just like what you talked about. So you buy a business and. And you think, oh well, our culture is really good. I figured out after we bought a business, it's not the better culture, it's the stronger culture. Even if the stronger culture is worse, I think that will eat the other culture right. Every single time. And so what we found is whichever leader was stronger and whichever market they Resided in that was where the, the market succeeded and then the other market would fail. And so we have gone to a GM model. The GM is held accountable to their market fully. They have total control over their market. But they, and they have an ability to make a lot of money based off of that or not. And then each of their managers also is held accountable to the gross margin of their department, which they have the ability to make a lot of money off that or not if they're not good at managing overtime or labor or making sure their guys don't leave sheets faster and use the app to order their breakfast sandwich or whatever little thing you have to do to keep these guys moving. And so I would highly encourage, you know, a centralized each individual market. And then it also now kind of forms the leadership team to where you can bring the GMs together. And when one GM is thriving in one area, maybe their retention rate is 97% over the course of a 12 month period where the other one is at 60%. We can start to share some information. And if they have a healthy respect for each other, it can be a really beautiful thing to watch.

[John Wilson]

Who do the GMs report to? Like do they report direct to you? Do they report to a, like a coo or how does that work?

[Christian Ratten]

Yeah, so in a perfect world they report to the CEO. Right now we're in a transitionary period where my CEO is acting as a gm. But, but, so he reports to me. But, but generally yes.

[John Wilson]

When you had the, like the GM in the largest Columbus, is that where he's currently GMing?

[Christian Ratten]

No, no, we have a GM in Columbus and he's in our Dayton market.

[John Wilson]

Okay, so the GM for Columbus, were they promoted or hired?

[Christian Ratten]

Kind of both. He was hired at a lower position knowing that he was going to have that position. But yeah, I needed to bring him in and let him earn a little bit of respect because he's not from the industry.

[John Wilson]

Okay. Yeah, because that feels like that's one of the challenges that I see with our upcoming like multi location is my COO Brandon. Like if we launched a second market, he's, he's basically GMing and just like thinking through like well how do you bring in a GM into that seat?

[Christian Ratten]

And.

[John Wilson]

Yeah, it's a little complicated.

[Christian Ratten]

Generally we have a person targeted as the assistant gm so that anytime the GM is out of the market, that person is stepping into the role anytime. So these people are responsible to run standups every single day and literally they stand up every single day with their team. They're reporting back on KPIs and metrics. And so anytime the GM is out of the market, whether it be for a meeting or you know, they're on PTO or whatever, that assistant is taking that responsibility. I also push the GMs to again, you know, we're looking at human nature. So you always, sometimes it's helpful to have a good cop, bad cop relationship. So hey, don't always be the one to deliver the message. Let you, or you go in and be the guy to kind of shake the cake. We, I call it kicking buckets. But you go in and kick the buckets. Let him come back and soothe everybody after. So he starts to establish that rapport. Um, but you know we actually, so this morning I was having a multi hour meeting with my leadership team and one of the things we talked about was bench strength and, and hiring for bench strength specifically. And that's going to be a big focus for us through the end of the year. You know, as we've started to get into this kind of cyclical nature of seeing how the business works over the course of a 12 month period of time, we're coming into that time period where a lot of companies are laying people off, we're trying to hire to get ready for the upper tick in business. You know, that's going to happen, you know, as we leave Q Q1 into Q2 of next year. And so how do we start building that bench strength across the service teams? How do we start targeting people? And so we have something called the shooting star. So the managers get together every month for one whole day. We've then got a targeted group of people that managers can nominate. These are people who are either in a current like supervisory type role, field supervisor or CSR supervisor or warehouse supervisor, who aren't in a traditional management track just yet but are getting there. Or people who have either raised their hand to say they're interested in management or people we just think have leadership capability. They get together once a month for four hours for a half day. No leaders. So there is no C level executives in that meeting except to stop by to give a presentation. And we do it on a rotation area basis. So the CFO come and talk about what is a cfo, what does that person do, you know, what does their team look like, etc. But it's like a 30 minute thing. The rest of the time is actually driven by managers and they're doing the same thing. They're passing wisdom down to that next level below. And we're trying to target people in that room to say, who's the next person in this room who's ready to take the step up? And it's also just an engagement. These are traditionally a, or a potential people. You have to keep these people engaged so that when the LinkedIn recruiter comes knocking, they are like, well, my company's investing in me in leadership development. I don't want to just like leave. So it's a, it's kind of a multi pronged reason that we do it. But one of the reasons is to target people that can take spots because people leave, right? It's that they used to call it the hit by the bus thing. That's a little morbid. So now we call it the powerball. Right? If 10 people in your company joined together and won the Powerball next week, what would you do? Right? And so we just want to have a group of people ready to take.

[John Wilson]

Those spots on a tactical level with localized leadership. And you're close, right? So for people listening, Columbus, Dayton is what, an hour, 45 minutes, something like that, or 15. Dayton, Cincinnati is 45 minutes. Usually when I see businesses that are multi, location and close, one of the biggest benefits is like a shared pool of capacity. Are you able to do that with localized leadership or do you have to like, keep it tight so that that local GM can get his bonus?

[Christian Ratten]

So yes and no. Of course, if one market is popping off, we are not going to restrict the ability to send our best, our, our most important assets, our people to that market. But the challenge that I would put back to the leadership team, if it's happening on a regular basis, is why aren't you staffed correctly to take on the additional calls that you're getting? And why wouldn't, why weren't you prepared for that? Unless it's like some. Because again, we're not, we're not a restoration company. We don't have a hurricane come through and I got to get 30 guys working tomorrow. You know what I mean? Like, these are pretty common cyclical things. Like the rain is coming, our plumbers are getting busy, it's hot, the H Vac guys are busy. Like, this isn't like rocket science. This is just why, why, why didn't you predict that? Why weren't you looking ahead? You know, the GM shouldn't be thinking, I mean, they should be thinking about today, but they should be thinking about a week, 10 days from now. And so why weren't you out 10 days? And why didn't you predict that and then work with your other co GM to say, hey, let me do that. And now we could do some. And then let accounting know that, hey, we're going to divert some resources so that we're accounting that properly for everybody's, you know, you know, P L statements. But again, what I would come back to is like, why weren't you built for that and why weren't you planning for it? It.

[John Wilson]

All right, so you'll do it, but it's not like a part of the core operating model. Like there's some businesses until recently, but.

[Christian Ratten]

When we split the markets, it became that thing of like, when you have people getting paid on gross margin, you better be damn well sure you can track where that stuff is going. And so I, as much as humanly possible, I'd like to stay away from intercompany billing because it's just another level of complexity that I don't think is necessarily that needed for us. I think it could be depending on what your goals are in the next two to three years. And, and so for us it was just, that's, that's a decision we made, you know, internally. But historically we would drive people any which way. And it wasn't until we got our hands around the numbers and we got our hands around the P L statement, we could obviously see that when we sent a Columbus install crew to Dayton, we lost money every single time. Like we, it was very rare that we would win because it's not their market. So when, when even as little as when they need to get gas, they don't know where to go. When they need to go to a supply house, they're not familiar. That's. It's, it's foreign territory. They don't move as fast. And now you got to pay them to drive home. And so it just, it was just, we saw that it wasn't benefiting us as much as you. It's like, oh, we got the revenue. It's like, yeah, but did you. Was that even worth it?

[John Wilson]

We've had a few people on the show and their whole philosophy is like hour away, hour away our way. That's how I define it anyways, where, hey, I'm going to launch my next branch an hour away. I'm going to feed capacity off that branch A to branch B. Branch B will build up and then I'm going to launch a branch an hour away from branch B and that will feed branch C and just sort of on and on and on. It sounds like that's how you guys got from one to three, but now you're, you're, you're here to be efficient.

[Christian Ratten]

Yeah, I'd say we got to, we got to Dayton because one of my owners moved to Dayton. Like, yeah, it wasn't like, it wasn't like we thought, oh, let's go to Dayton. Like, yeah, if we were thinking we would have gone to Cincinnati first. Not. It just worked out. Yeah, Cincinnati was the, Was the most logical place. And for us, I would actually argue that the next place we would consider to go would be one of, you know, throw a dart. But, you know, Nashville, Indianapolis or Pittsburgh, you know, because.

[John Wilson]

Well, yeah, that was my next question. Like, if you're running these localized things, then there's no benefit to being an hour apart other than, like, you can visit them if you want to, but, like, you probably shouldn't need to.

[Christian Ratten]

I would, I would pick my location based on population density and the ability, and my ability to capture market share, not just because it's one hour for me. If. What if one hour for me is an area, I don't want to sell anything. Like, we have, we have a partnership with, with a big box store, and they asked me all the time to go to such, such a place, and I'm like, yeah, but there's no business there. Why would I do that? It doesn't make any sense. Like, it's a depressed area of people who, you know, like. And there's already three people who've been doing business there for 40 years. Like, why would anybody have a reason to call me? As opposed to moving to, like, a metro market where customers are a little less loyal and you can capture it simply by being available when they need you.

[John Wilson]

Can you walk me through profit on purpose? You've said it a few times here, and I just want to understand what you mean by that.

[Christian Ratten]

Yeah, so profit on purpose is a really simple idea. It's something that the business has been doing for a long, long time, even from our founder, Howard Morris, and all the way back 1972. But profit on purpose was a way that we actually were able to kind of trademark it and, and, and explain what it means. So profit on purpose is we seek profit with a purpose. We're a profitable company. Profit's not a dirty word at five star. We talk about it all the time. I think what separates us and what separates profit on purpose is what we do with that profit once we have it. And so for us, what that looks like is we are going to talk about the same things that any other home service business in this country are talking about. Today we're going to talk about be more efficient, offer those accessories, get to your next job faster, less drive time to maximize that profitability so that we can give more money away. So we're a Christian based company. We always say, you don't have to be a Christian to work here, but we're not going to shy away from it. And we're also a company that believes in tithing. And so we give away 10% of every dollar that comes into five star. So in the last four years, that has equated to somewhere around like four to four and a half million dollars, which sounds great and is, unless you're the guy responsible for the P and L. And then you're like, maybe we could give away just like a little less money. But what we've found is, is that it's a universal law. The more you give, the more you receive. And we've seen that like, as we give money away even at a time when it's inconvenient, or even better said, like, mostly when it's inconvenient for us, when cash is maybe not as strong as we would like it to be, and we still say yes every time we are blessed with gifts back in ways that we can't explain. And so profit on purpose is something we talk about, it's something we seek. And, and, and the majority of the giving for us is in the recovery community. Myself and a few of the key leaders here are all come from that life. And so it's important to us that we give back to that life, to the recovery community. And then also a lot of our employees, because of our relationship to that community, are what we would call second chance or fair chance employees. People who didn't necessarily have the classic path of, you know, go to trade school and get in the trades. These people maybe went to prison or were homeless drug addicts like myself and, you know, found their way to five star and we taught them the trade and now they're living incredible lives, able to serve their communities.

[John Wilson]

I think you just sort of did. But could you define recovery community a little bit? That's. I've never heard that term before.

[Christian Ratten]

Struggling with drug and alcohol addiction primarily. Yeah. So people who, you know, or what we think of as second chance employees could also be people who emancipated out of foster care, maybe had prison time or just, you know, never had a, never had a fair shot to begin with. You know, maybe their parents were drug addicts and they just never really had a chance. And as a result of that our team bonds together on this idea that the more we can do, the more we can give away. Now here's one. You know, one thing that I, you know, that I loved about your podcast is also when you ask, what's the mistakes you made? So here's a big mistake we made when we talked about giving a ton of money away. We got. I got up in front of the entire organization like three years ago and I told him how much money we gave away. And I looked around the room and there were some people who were not happy about that. And I realized it was because they didn't feel well taken care of. And so we had to go with that AIRPLANE methodology of you got to put your mask on first before you put the mask on to the person next to you, right? And so, yeah, we shifted our focus a little bit and we said, okay, the first thing we have to do is we have to build equitable wealth inside of five star. So what's that look like? Not everybody's getting rich off this company, but also not one person is getting rich off this company. And so we don't have this single point owner, you know, three houses and two boats and seven cars and everybody else just trying to live barely above the poverty line. What we try to talk about is how do we help each employee find that next place, whatever is important to them. Some of the employees, it might be moving out of their parents house, other employees buying their first house, you know, whatever that looks like. Once every single employee is well taken care of, caveat, they also have to do their job well. You don't get to just come in and ask for more money. You have to pay a. It's a performance based business. But if you come in, I get up in front of every all employees every quarter and I say, if there's a single person in here who doesn't feel well taken care of, come to my office right now and we'll talk about it. And I've had people come in and I've said, cool, let's look at your numbers. All right, well, first you're you. Let's help. Let's figure out how we get you to the place where you can make more money and then I'll happily pay you more money, right? And so once we had everybody feeling like they were well taken care of, then we can go out and serve in the community and then we give away the money. And so that money is given away in a couple different buckets. We like to think of it in two buckets primarily nonprofit giving. We partner with nonprofits that align with us. But there is a second secondary bucket. We call that the hardship bucket. Every manager has a budget all year long and they can just give services away as they deem fit. So their service technician walks into a home. It's a foster family fostering six children, doing the right things for the community. Need a furnace, don't have the funds, we just give it to them. Now here's the trick. We'll never. You'll never hear about that. It will never be put on Facebook. We will never shout it from the rooftops. We'll never talk about it. The only people who know about it are people who work here. And the people we did that service for, the nonprofit giving, we will shout that from the rooftops. And that's our way of respecting kind of the biblical principle of giving in a way that the right hand doesn't know what the left hand is doing.

[John Wilson]

You know, one thing I like about this industry, and I've always liked about this industry, is that it, it is community focused. Like, you know, people have, they built their families, they put their kids through school, and it's a very like, I work for my neighbors type thing. And most owners that I've talked to or bought their businesses have wanted to do something like this. Right? They've wanted to do it. Now you guys are doing it. And I think I want to ask about the difference because people listening to this are probably going to listen to this and be like, well, hell yeah, like, sign me up. Like, how do I give away $1 for every 10 that walks in? And like, so financially, how do you do that? How do you drive the margin in order to be able to do that?

[Christian Ratten]

So the first thing you have to know is what are your, how much money are you making? And so, yeah, the, this is where financial literacy and accurate accounting is so critical. You know, closing your monthly books quickly is so critical because I agree with you. I think the majority of people running these businesses are great people and they're community focused people and they want to give back to the community.

[John Wilson]

But they're running 7% margins. So like, you know, how do they, how would they do that?

[Christian Ratten]

So first you have to figure out where's the money going.

[John Wilson]

Yeah.

[Christian Ratten]

And then you have to shore that up a little bit. And that's operational. That's operational excellence. Right. And that might mean. It also might mean doing the hardest thing that I think is for people running these businesses, which is to occasionally be like, oh, no, I don't know the answer to that question. And then maybe bring in somebody who can help you. And so just always tie your consulting relationships to improvement in your business. Never just hand somebody $50,000 with the promise of improving your business. Tell them when the business improves, you can get paid, right? I mean, like, that's. That's how we build our consulting relationships. Because I'm unwilling to pay somebody for mediocrity. I'm unwilling to pay somebody just simply so they can continue to try to get more money from us, you know? And so when a consultant becomes a person who only wants to. Whose only job is to prove their worth, they're no longer valuable, you know, how do we align their pay with my business's improvement when we have that? Now you got something. Okay, so bring the people in who can help you do it. I'd also say maybe stay away from, like, the Internet gurus. They don't. I don't know that. That's just my opinion. And then figure out where the money's going and then just build it into your margin. I mean, it's built into ours. It's just there, you know? And so it's also, like, sometimes you have to do things on faith, you know, Sometimes you have to do things that don't make sense but will work in the end and trust that it's going to work. And that's what's happened for us. Like, I'm not saying we didn't. I don't know. Anybody who built a business is, like, went straight like this. You know what I mean? Like, business. Business growth is a lot like the stock market, right? If you zoom in on any one perspective, you could see a massive decline and be like, oh, my gosh. That's why I tell my team, like, never bring me a single data point. Single data points are worthless to me. You could tell me, oh, John runs a 50 million or a $30 million business. I'm like, wow, that's amazing. Hey, great job. You go, yeah, last year they did 40 million. Oh, not so great. Well, yeah, but last year they made no money, and this year they had 20% net. Oh, okay, great. It's like, what's the. Give me some context around it, you know, a little bit. And so I think understanding your numbers, understanding and becoming a student of your P and L and then leveraging that to grow it and. And be intentional about giving back. It's. It's possible it's there.

[John Wilson]

Are you still missing calls after hours or losing leads while your team sleeps? That's why we work with Avoca, AI owned and operated's exclusive call center partner. They answer 24, 7, sound like a real human, and plug straight into your CRM to book jobs, send quotes, and even revive old leads. There are plenty of AI call centers out there, but we trust Avoca because we've seen the results firsthand. More booked jobs, less wasted spend, and no more missed revenue. See it in action at the link below. Start winning more jobs today with Avoca. Thank you for sharing. Sharing that. I mean, that sounds cool. I. I know we've bought nine or ten businesses now, and a number of them have had somewhat established giving and I. It's something that comes up a lot, but I think the actual ability. There's wanting it and there's the ability to cut the check. And I think that. I think that's pretty cool on knowing your numbers and like, getting that level of analysis. At what point did you bring on a cfo?

[Christian Ratten]

This is tactful. Yeah. So the cfo. The CFO was actually hired just a few months before I was here and it was probably late.

[John Wilson]

And we've had like CFO or controller?

[Christian Ratten]

No, we had both.

[John Wilson]

Okay. Do you still have both?

[Christian Ratten]

So not those two. Those two were let go on the same day, but.

[John Wilson]

But those two, like, roles. Yeah, that does give you some hints. But those. You still have those two titles inside the organization.

[Christian Ratten]

We have the best two right now. Yeah.

[John Wilson]

Yeah. Okay. Yeah.

[Christian Ratten]

Yeah.

[John Wilson]

That sounds like a tough day.

[Christian Ratten]

That was my worst day.

[John Wilson]

Yes. Sounds like a tough day. Oh, my God.

[Christian Ratten]

Another podcast.

[John Wilson]

Yeah, I've, you know, there was a couple years there because. And I think five Star had like a similar growth trajectory, but we, we just kept growing and. And I think there were three instances. I'm gonna have to check my, like, memory at some point, but it was either two or three. But I had to fire the entire accounting team. Like, it was ridiculous. For all the reasons you think, hey, we misplaced $700,000. What happened? Yeah, absolutely crazy.

[Christian Ratten]

I took over as CEO in. In January of 2023, and the outside accounting firm that we use for like, taxes kept reaching out to me and being like, yeah, but I thought they just wanted to make sure I didn't fire them and hire a different accounting firm. So I kicking the meeting until finally they were like, no, we have to meet with him. And so then it got put on my calendar. I went and met them as a Friday and they. We did like at 45 minutes of, you know, whatever, just chit chat. And then they finally were like, no, we have something actually we want to talk to you about. We're actually really concerned about your CFO and controller. So I came back and I went to my business intelligence guy and I said, get into netsuite and just look around, see if you see anything. He called me two hours later and he's like. Like, there's some. I don't know what it is, but something's wrong. And we had. I met with my COO until about 10 o' clock that night. I met with ownership in the morning on Saturday, spent the rest of the weekend working through it, and came in Monday morning and fired them both.

[John Wilson]

Yeah, it. I'm sure it'll happen again. To me, probably not to you. You probably run a tighter process now. But it. It's something that seemingly everybody has to deal with at least. At least once.

[Christian Ratten]

Unfortunately, it was a learning experience. I'm glad. In hindsight, I would never say I'm glad it happened, but, I mean, good can come from everything.

[John Wilson]

Like, yeah, I was going to happen no matter what. So, like, might as well happen when you're smaller and you're dialed in on it and.

[Christian Ratten]

Right.

[John Wilson]

Yeah.

[Christian Ratten]

I mean, we.

[John Wilson]

We.

[Christian Ratten]

You. You will not know your numbers better than if you have to. If you're the one. Literally. I mean, I. Literally, no dollar left this company unless I signed the check personally.

[John Wilson]

Yeah.

[Christian Ratten]

You know.

[John Wilson]

Yeah.

[Christian Ratten]

And so it did force us to look at every single thing. We were spending money on an app. Ask why, which was a great exercise.

[John Wilson]

This was an awesome conversation. I feel like I got a ton from it. I learned a lot. I hopefully brought some good questions to the table. If you were gonna sort of share any closing thoughts on entrepreneurs and how to survive in home service and how to build a business that lasts, like, what would you do? What would you say?

[Christian Ratten]

You know, there's that. There's that idea of, like, hire the. If you find. If you're the smartest person in the room, like, you're in the wrong room or whatever. I don't know exactly how that works. Cause. But I will say so. Our five core values are relentless, passionate experts. Integrity. Generosity. We put it in a sentence because it's easier to remember. So we're a relentless group of passionate experts who always do it right and give more than is expected. When we started to align our hiring process with our core values. Yeah. Something changed.

[John Wilson]

Yeah. And.

[Christian Ratten]

When. When we started to give those people the freedom to make decisions inside this business and not hold them accountable every single time to making the wrong decision, but let them Learn from it. Something changed. I would say find, you know, people who match your energy, but cover up your blind spots and have honest. You know, I personally think that the, the difference between being at a management level and a director, CEO, vp, whatever like C suite level is twofold. It's the people who I see rising have an incredible ability to self reflect and an incredible ability to admit when they make mistakes and own it. Combined with a kind of voracious learning and a willingness to live in the gray. Everybody wants to make black and white decisions, but when you get to a certain level, very rare do you get to make black and white decisions because every decision has so many impacts on so many different people. I'm. I've become extremely comfortable living in the gray area. I don't know how you do that. I just think, you know, when I find myself with yes or no, black and white, red or green, you know, I, I try to challenge myself to find seven other possible solutions to this problem before I just, am willing to just rubber stamp it, you know, that's a long way. As a lot of answering. I would also just say like I have two, three books that really changed my life. Art of War by Sun Tzu. I read it every single quarter. It's super short book. The Almanac of Naval Ravikant is like one of the most incredible books I've ever read. And then only because of the position that we're in our industry right now, because of the amount of noise around acquisition and targeting and all these different things. Barbarians at the Gate.

[John Wilson]

That's a good one. Yeah.

[Christian Ratten]

Is an incredible book for a business owner to really understand why these guys want to own your business, how they make their money, and why they might be coming after you so hard.

[John Wilson]

Because.

[Christian Ratten]

There'S a lot of money in a deal, you know, and, and they want to make those deals as many times as they can, so. So yeah, good shares too.

[John Wilson]

I don't think I've had anybody bring up Almanac. Have you met Eric before? The author?

[Christian Ratten]

I have not.

[John Wilson]

Yeah, he's. He's awesome. He's a friend of mine and we met like five years ago at a conference. We met a few times since and I don't know if he finished his Elon book or not, but yeah, Naval, It's a great book. It's an incredible book.

[Christian Ratten]

I recommend everybody at five star. Many of them have read it.

[John Wilson]

So yeah, strong recommend. Well, thank you very much for coming on today. This was a ton of fun. I'm glad I got to learn more about you and the five star story. This was really cool.

[Christian Ratten]

Yeah, man. Thank you.