How Smart Home Service Owners Should Invest (P&L, EBITDA, and Enterprise Value)

Summary

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Podcast Summary: How Smart Home Service Owners Should Invest (P&L, EBITDA, and Enterprise Value)

Podcast: Owned and Operated: A Plumbing, Electrical, and HVAC Business Growth Podcast
Hosts: John Wilson & Jack Carr
Date: December 18, 2025

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Overview

This episode dives deep into the mindset and practical frameworks home service business owners should use when deciding how to invest in and outside their business. Hosts John Wilson and Jack Carr explore how to think about ROI, resource allocation, enterprise value, and the critical role of operating expenses in maximizing both profit and long-term valuation. They candidly discuss personal experiences with growth, mistakes, experiments, and the nuanced decision to diversify business returns into other investments.

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Main Discussion Themes

1. You Are an Investor—Even If You Don’t Realize It

• John Wilson: Stresses that every home service owner functions as an investor, even if they don’t identify as one. Owners are constantly investing resources, attention, and people. (00:00, 37:24)
• Quote:

  "Whether or not you think of yourself as an investor, as the owner of a small plumbing company like you are, you're investing resources, you're investing attention and people." – John Wilson (00:00, 37:24)

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2. Growth Patterns & Easy Levers for Smaller Companies

• Jack Carr: Shares that smaller businesses can often leverage simple tactics (“easy buttons”) for rapid growth, like turning on LSAs (Local Services Ads) or answering phones during weekends.
• John: Notes that as a business scales, those easy buttons become exhausted, requiring more sophisticated growth strategies like optimization and acquisitions. (02:14–05:21)
• Quote:

  "We're seeing companies in the $1-3 million range still growing 50% year over year just by turning on LSAs or picking up the phone on weekends." – John Wilson (02:43)

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3. Investing Inside vs. Outside the Business

A. Why Focus Inside First

• Reinvesting in your own business yields the fastest and highest returns, especially early on.
• Jack: Owning a business is attractive because of the “asymmetrical returns” when reinvesting in yourself. (07:54–08:28)
• John: The core business tends to offer better ROI than external investments, especially in the early growth years.

B. Capital Allocation Framework

• John shares his decision-making lens for expenses: Always ask, “Will this expense yield a return at least equal to your business’s multiple?”

  • E.g., If your company sells at a 3x multiple, every recurring $1 expense should return $3 in enterprise value. (10:58–12:29, 14:58)

• Example: Spending $3,000 per month on a software like Price Book Pro should deliver enough value to justify its impact on EBITDA and, thus, company valuation.

• Quote:

  "If you're bringing on an expense, what should the ROI be? Is the expense you're going to bring in, will you get a three times return? Because if you don't, should you do it?" – John Wilson (00:16, 11:54)

C. Balance Sheet vs. P&L Investments

• P&L (Profit & Loss) investments: People, software, marketing—impact EBITDA and therefore the enterprise value directly.
• Balance sheet investments: Tools, facilities, vehicles—often easier to track direct revenue impact but less influence on valuation at sale or bank financing.

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4. Running Profitable Growth: Discipline Over “Pedal to the Metal”

• John: Explains how their company shifted from relentless spending for growth to being disciplined about profitable months and smart evaluation of every investment.
• No unprofitable months for almost two years—focus on sustainability over vanity metrics. (10:58–12:29)

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5. Managing Attention & Leadership Bandwidth

• Jack: Introduces “Return on Attention” (ROA)—some investments (like a GM) don’t just impact P&L, but free up owner’s time for high-value activities. (15:46–16:27)

• John: Emphasizes the danger of spreading leadership too thin with too many initiatives. Two to three major projects per year is optimal, even for companies with a substantial leadership team. (22:33–23:51)

• Quote:

  "We have three priorities next year. Like really two. As we've gotten bigger, we've focused on less because we used to be all over the place." – John Wilson (23:58)

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6. Enterprise Value: Build Always Like You Might Sell

• Both hosts stress: Always maintain a “somewhat saleable” business—keep financial discipline, clean P&L, and a focus on EBITDA, because this is what lenders and potential buyers care about.
• Building a sellable company benefits growth, bank credit, and exits. (15:06, 26:52)

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7. When and How to Diversify Beyond Your Core Business

• Early diversification (real estate, side projects) can be a mistake, diluting focus and returns.
• John: Changed course—sold off side ventures to reinvest in main business, arguing, “focus gets you rich, diversification keeps you rich.” (28:25–29:54)
• Once the business is throwing off reliable profits (millions in EBITDA), consider separating cashflow (“A bucket”) versus enterprise value (“B bucket”) investments—referencing a Warren Buffett model. (33:09)
• Quote:

  "Focus gets you rich, diversification keeps you rich... I learned how multiples worked, and suddenly it became way easier because it was like any dollar that I spend outside the core business, for a while, I was just choosing to lose money." – John Wilson (29:54–31:05)

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8. Personal Cash Flow Strategies for Founders & Growth

• Fastest growers often have a separate cash flow source (e.g., spouse's income, side businesses) to personally support themselves, allowing them to reinvest nearly all business earnings into growth and enterprise value. (35:44–36:19)
• Quote:

  "Some of the guys growing the fastest I know—they have an external source paying for their life, and they're just reinvesting 100%." – John Wilson (33:09–35:44)

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9. Final Thoughts: Your Real Job is Resource Allocation

• John’s closing advice: Business owners are ultimately investors—allocating not just capital, but people, attention, and resources. If you’re not comfortable with that, you’re in the wrong seat. (37:24)
• Jack: Making smart investment choices is the quickest way to move from “owning a job” to owning a valuable business. (38:28)
• Quote:

  "Your entire job is resource allocation. Whether it's people, capital, or attention—that's the job." – John Wilson (37:24)

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Notable Quotes & Memorable Moments

• ROI Rule of Thumb – "Is the expense you're going to bring in, will you get a three times return? Because if you don't, should you do it?"
  (John Wilson, 00:16, 11:54)

• Easy Levers for Small Companies – "We're seeing companies in the $1-3 million range still growing 50% year over year just by turning on LSAs or picking up the phone on weekends."
  (John Wilson, 02:43)

• Leadership Focus – "Even with a big leadership team, two to three projects at the same time is a lot. Any more than that is just burning cash."
  (John Wilson, 22:33)

• On Diversification – "Focus gets you rich, diversification keeps you rich."
  (John Wilson, 29:54)

• Resource Allocation – "Your entire job is resource allocation... that's the job."
  (John Wilson, 37:24)

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Key Timestamps

• 00:00 – Framing owners as investors
• 02:14–05:21 – Growth opportunities for small vs. large businesses
• 07:24–08:52 – Discussing types of investments inside your business
• 10:58–12:29 – Framework: ROI tied to your business’s sales multiple
• 14:58–15:46 – Expense examples and responsible investment
• 15:46–16:27 – Return on Attention (ROA): Investing in leadership
• 22:33–23:51 – Leadership bandwidth and managing simultaneous projects
• 23:58–25:49 – Narrowing priorities as you scale
• 26:52–27:44 – Why EBITDA is all lenders and buyers care about
• 28:25–29:54 – Diversification: pros, cons, and timing
• 33:09–35:44 – Warren Buffett’s A/B bucket for cash flow vs. enterprise value
• 37:24–38:36 – The owner’s job: resource allocation and the path out of “owning a job”

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Conclusion

This episode provides a practical yet thought-provoking masterclass in smart investing for home service business owners. John and Jack demystify how to grow responsibly, how to evaluate every investment or expense, when it's time to diversify, and—most importantly—how crucial focus and discipline are for long-term business value. Their candid stories, frameworks, and quotable insights are invaluable for owners at any stage wanting to build a thriving, sellable company.

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Transcript

[John Wilson]

Whether or not you think of yourself as an investor, as the owner of a small plumbing company like you are, you're investing resources, you're investing attention and people.

[Jack]

That's the reason that a lot of us got into owning a business in the first place.

[John Wilson]

If you're bringing on an expense, what should the ROI be?

[Jack]

I have no idea.

[John Wilson]

Well, I'm going to give you a framework. I don't know if this is right or wrong. Is the expense you're going to bring in, will you get a three times return? Because if you don't, should you do it?

[Jack]

You should be starting this on your first dollar, not on your millionth dollar. Right.

[John Wilson]

Your company should always be in a somewhat saleable position. It with the P and L. Welcome back.

[Jack]

Welcome back to Owned and Operated. Today we have operated your awesome host, John Wilson. I feel like I haven't done one of those intros in a long time. Feels good.

[John Wilson]

Y welcome back. How's December?

[Jack]

Dude, this year has been extremely good. We hit our best month ever followed by a decent month and now I think we're gonna break our best month ever with another best month ever, all within three months.

[John Wilson]

So our December, our December's good. November was really weak. We had, we've had like a week. I'm sure I've said this on here before, but we had a really weak end of summer with H Vac. So September was weak, October was amazing. November was weak. So yeah, the way we're thinking about it is like focusing on the, the tight, like tightening up process and then finding opportunity inside the departments that are growing because H Vac is not growing right now. Now we are sort of blessed I guess because H Vac is like flat. But dude, there's companies around us. It's kind of crazy. I. I think I've said this on here but like private equity went from being like the most expensive in market to, to like the cheapest in Cleveland anyways. And like there's a lot of companies that like fully laid off all salespeople and I don't know, it feels like, it feels like just a lot of macro stuff hitting but it seems like you guys have been able to avoid it so far, so that's awesome.

[Jack]

Yeah, we've been able to avoid a good portion of it based on our size and just it's a lot easier to grow when you're smaller. Like the, you know, medium. Medium changes make huge outcomes.

[John Wilson]

Yeah.

[Jack]

And so.

[John Wilson]

Well, I'm seeing that a lot right now, which is kind of funny. Like there's you know, we're, we're in acquisition mode again and we're like we're going to close on one in a couple weeks and then we have a few we're talking to like for Q1 basically if the company's like under 10 million, they're growing.

[Jack]

Yeah.

[John Wilson]

And now granted there's some, there's some big companies too that are growing and I'm not saying that they're not, but like I'm seeing companies in the 1, 2, 3 million dollar range that are still like 50% year over year growth, which is freaking awesome.

[Jack]

Yeah.

[John Wilson]

And whereas I just feel like a lot of the companies that are larger, like they've maximized those easy buttons and there's just less of them, there's less easy buttons to pull. And like a bunch of these companies that are growing 50%. So when I'm asking them like what are they doing to grow 50, a lot of them. And this sort of drives me nuts, like in a good way, it's exciting. But they're just like, yeah, we turned on LSAs. Like we found out LSAs existed and we just turned it on. And I'm like, dude, that is amazing to be able to have that easy of a lever to be able to pull where like I don't have those levers anymore. A lot of our growth for next year is going to be like maximizing current relationships, acquiring so like inorganic and like that. That's where we see growth happening.

[Jack]

Yeah. Turning on LSA or turning on just any channel where they start to drive leads. They figured out this other channel can work and then they've started, you know, they hire one person and that can, that can change the entire makeup of.

[John Wilson]

A company or like literally pick up the phone. So I was talking to one the other day and he was like, yeah, so we actually just started picking up the phone on the weekends and we grew 30%. And I'm like, yeah, okay.

[Jack]

Right?

[John Wilson]

Yeah, it's kind of amazing. Yeah, it's kind of amazing.

[Jack]

I mean it makes sense because like you, the bigger companies, they already run weekends, they already have all these easy buttons pressed and so to actually grow that 20% they have to really move the needle with some kind of big initiative or big cost savings or you.

[John Wilson]

Know, I mean to me it's exciting. It's exciting that like as I think about multi location or, or if I was, which will be multi location in January, which is something we've been working towards for a while. But as I think about multi location or if I Was like an entrepreneur, like just starting off. The fact that you can just like turn on one of the easiest lead sources to turn on. You just like literally hit a switch and it sends you leads and grow 50% is kind of awesome. Like, it's like, okay, so like that's available. Or like you can find an AI call center to pick up phones on weekends or something, which is what this guy did. And like, yeah, boom. 30 growth. Like that's insane.

[Jack]

Yeah. I mean you add 52 weeks worth worth of two days and all you have to do is tell.

[John Wilson]

Yeah.

[Jack]

One of your people to be on call and you actually have to run those and you sell one unit a weekend.

[John Wilson]

Yeah.

[Jack]

It's not crazy. It's not rocket science. It's not crazy. It's a few simple processes that are not 100 dialed in and like that'll get you there. And so we're still in that mode, which is, which is nice because we can find things like that occasionally optimize.

[John Wilson]

Yeah.

[Jack]

Certain aspects of the business, optimize our marketing and get some pretty easy growth levers. But where we've seen like the biggest change in the business on the whole is actually going into is. Is our plumbing side. So our plumbing side has seen we got a new leader in the plumbing team and that change has grown the plumbing department over 100% this year, which is wild.

[John Wilson]

Yeah. That is crazy. Plumbing is a machine. When you do it, when you do it right, man, it's just crazy.

[Jack]

Yeah, I'm sure, like plumbing, electrical, like there's all these auxiliary ones that, that are there that can really drive the business. Not to say that I think it's always a good idea because it definitely is. Can be a distraction and it takes a long time to get it right. But like, that's one of our biggest levers that, that this year has driven a ton of growth.

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[Jack]

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[John Wilson]

All right, today we're talking about investing what smart investing looks like as a home service entrepreneur. So this one's kind of interesting. I feel like it's like open ended in that, like investing outside of the business. Investing in the business. I feel like we've got a lot of good stuff to cover here before we cover any of it. I have, I'm supposed to give the legal. This is not professional advice. I'm not an investment advisor. This is strictly for entertainment purposes.

[Jack]

Yes. I mean, you want to start off investing inside the business because I think that's where, I mean, my mind immediately goes 100%.

[John Wilson]

Well, I think like if investing, if investing, the goal behind investing is turning money into more money, right? Like, that's like, you know, it's as simple as that. And normally what most people have, like the fastest way to turn money into more money is, is just investing inside your own business. So like, obviously I think there's time and place to invest outside of it, which we'll talk about. But yeah, definitely starting off inside the business is like the easiest place to.

[Jack]

Start, which is, it's interesting because, I mean, that's the reason that a lot of us got into owning a business in the first place is that there's, you know, asymmetrical returns on investing in a business itself and then investing in your own business for growth purposes to generate evidence. Enterprise value is where and why a lot of us got into this in the first place. Right. So, yeah, I mean, it should make sense.

[John Wilson]

Yeah, I think so. You know, this year we've been really focusing a lot more. So we, you know, at the beginning of the year, our goal, I think I said it on here, but our goal was 5 million of EBITDA and a million distributed. We did not hit 5 million of EBITDA, but we still forex our EBITDA, which is really, really cool. So we got, we got close. We'll end up in the high threes and like for, you know, like in 2024, we did a million of EBITDA. So like, that's amazing. That was a huge improvement. And as the years gone on, I've started to think way more about roi, like ROI for like the capex, like vans. If I'm going to invest in a van, like, hey, is this actually the right decision? Like, is this, will this provide like greater revenue? Like, I'm trying to be more thoughtful because I know in our heavy growth years, we just weren't like, we were not thoughtful in any way and we were just sort of like, pedal to the metal. Like, whatever looks like it might grow us a little bit. Like, just do it. But what I've started to try to do is think about investing off our P. L in addition to our balance sheet. And that's like a new discipline I'm learning where, hey, like, if you're bringing on an expense, what should the ROI be? Like, what do you. What do you think it should be.

[Jack]

From an expense standpoint?

[John Wilson]

We're.

[Jack]

I have no idea.

[John Wilson]

Yeah. Well, I'm gonna give you a framework. I don't know if this is right or wrong, but it's how I'm thinking about it.

[Jack]

I think that, like, this is. This is something that, from an expense standpoint, we don't think about from a obviously a marketing standpoint. Something that we watch diligently.

[Quick Staffers Representative]

Totally.

[Jack]

And so it makes sense that you need to start looking at it. But we're also in that same pedal to the metal.

[John Wilson]

Yeah.

[Jack]

Growth phase where we're like, hey, if we need to grow 20, we're gonna hire somebody and put a truck in place. Like, let's get it going.

[John Wilson]

Mm. Yeah. And what we've been working on for really like 18 months is like, I don't want a single unprofitable month. Like, we want to be profitable no matter what. So we've just really been continuing to push that. And I haven't had an unprofitable month in like almost two years now. And it's like really diving into that. And so what we've been doing is as we think about investments off of our pnl. So PNL would be like people, software marketing. Like, it's an expense in the business versus the balance sheet is like tools, facilities. Now facilities might also be like rent. So maybe that's on the P and L2 vans. But with P and L, what. What is kind of an interesting framework is what. What is the multiple on your business? So if you're a business that would sell at a three times because of the size. So like, maybe you're, you know, 2,300,000 EBITDA business and like market is like three times EBITDA $900,000. Right. Is the expense you're going to bring in, will you get a three times return on that expense? Because if you don't, should you do it? And that, that's like the framework that we've started to use where, hey, like this is. This expense is going to go onto my panel which is going to reduce my ebitda. And how does that work into enterprise value?

[Jack]

So walk me through an example here. So if you were to undertake a new initiative to do packouts. Right. You guys do packouts. We've just started doing packouts. Walk me through then from your framework, what that looks like.

[John Wilson]

Well, that's mostly balance sheet.

[Jack]

So you're going to classify that as an asset.

[John Wilson]

Then, I mean, you're buying, like, furniture, which is the packout kits themselves, and then you're buying inventory. So all of that's balance sheet, but.

[Jack]

It'S under $1,000 for one pack out. So you're going to put that on your balance sheet.

[John Wilson]

You're bringing on like, 20 packouts.

[Jack]

But for the, for. I'm trying to, like, let's scale it down a little bit because that makes sense for you at your size. But for an operator who's at 5 million, who's going to start.

[John Wilson]

Well, how many packouts did you bring on?

[Jack]

Two. Or just ordered two more packouts.

[John Wilson]

Okay. You can make the rules whatever you want. The only thing you have to do is like, be consistent.

[Jack]

Yeah.

[John Wilson]

So if the rule is like, at a thousand dollars, I capitalize a tool or a furniture, then you just have to be consistent with that. Yeah. I mean, maybe 20 is too, like, drive a.

[Jack]

A pertinent example.

[John Wilson]

I think software is a really easy one. Honestly, something that's really easy is Price Book Pro. Like, I think that's a funny one because, like, yeah, if you're signed up for it, it's like, okay, we're signed up for it. So Price Book Pro, there's a company we're looking at. And, and Pricebook Pro cost them $3,000 a month. $3,000 a month times 12 months is $36,000. Apply the multiple of whatever that size of a company is.3 to 10 times. Is Pricebook Pro providing X amount of value? Is it providing. If it's a three times, is it providing $90,000 of value? If it's a 10 times, is it providing $360,000 value? But, like, is it providing that much value? Can you. If you went. If you got sick today with cancer and the business had to sell, would you be happy that you had Price Book Pro even though you had to take a dip on, like, value? So that, that's. This is how I'm trying to think about it, because I think, like, we're not selling tomorrow, but eventually you got to do something or you just need to optimize the value of the business. Like, the business is an asset you have to figure out like what do you do with it eventually. And responsible investing off the P. L I think is a really big part of that.

[Jack]

Yeah, I mean it's like what they say. You have to build the company like you are going to sell it whether you are or you aren't to be fiscally responsible.

[John Wilson]

I remember when I was, when I bought the company, I, my goal was at year five, I wanted to have the ability to sell it. Now I'm going on year 10. So obviously we didn't. But I, I wanted to, I wanted to have actually built something of value because I see a lot of guys just get stuck where they don't actually build something of value and I just didn't want to be that guy. So I think this is a good example of like your company should always be in a somewhat saleable position. And, and it starts, it's not just the vans and the balance sheet but like it starts with the P and L and like responsible investment off the P and L. Let's take a look.

[Jack]

At that with that, that framework. How are you, how are you judging that? Because my mind goes to right investment in terms of, sometimes in terms of roi, but also sometimes in return of roa. Return on attention. So for example, a great, great example to me is hiring a, a manager or GM, right? Not great from a P&L pers effective because it's going to hit below the line. It is, you know, absolutely against your EBITDA numbers. But in a growth phase, right. You, you do need the help on the return of attention to be able to focus as the owner on other things. How do you view that or do you view that exactly the same?

[John Wilson]

The same. I mean it'd be if you hire a gm, like what should happen? So revenue should rise by X, gross margin should rise by X because we're doing a better job. I think the math is complicated. It's not as straightforward as like oh, I bought this lead and I sold this dollar amount. But I think that that's an investment. And, and I think what I'm, what I'm not saying is don't ever do any expense. Like obviously it takes investment to continue to grow. I think it's be thoughtful about the expense. So hey, I'm gonna go Bring on a GM. I hope this GM with his experience or her experience will add $3 million to our business. And that $3 million is worth X. So I think be intentional because what I know that we weren't. So this isn't even Me throwing rocks at anybody else but me. I know that we weren't intentional. As we grew, we would just sort of like collect expenses and think we're doing this and think we're doing this and like a move fast break things which like it totally makes sense until hey, you're 30 million dollar business and like you have to be profitable, which a lot of I have a lot of friends and including myself, like we got up into the 20s at break even, like just running like break even companies. It's not hard to run break even or loss and grow. It's much harder to run very profitable and grow.

[Jack]

So where do you then it sounds like you're saying that you, you start this on your first dollar, not what you should be starting this on your first dollar, not on your millionth dollar. Right. Like this is something that you can start really early on. Focus.

[John Wilson]

I think people should be thoughtful about it and I think so. So this was a, I went to Pantheon this year and I, I, I attended one singular session. So if anyone from Pantheon's listening, it was too many pro products. I don't care. The, there was a couple value add sections. This one was valuable, the rest of them were really awful. So the, I went to a CFO section or like talk and it was the CFOs. I don't even remember which ones they were from, to be honest, but it was very helpful. And they brought up this concept of investing off your P and L, like OPEX investment. And like they sort of spent a few minutes on that. They didn't spend enough time because that was probably like the most valuable thing that I got was I think all the time about investing into trucks, investing into tools. What that's going to do for the business, oh, let's go buy lining, let's go buy X and that's going to turn into $2 million of revenue. Like that math makes sense. I wasn't thinking hardly at all, except for marketing about ROI of our SGA expenses. Like, all right, hey, does this software actually deliver what it's supposed to deliver? Whether it's cost savings or revenue, like is this an attributable cost to some gain? And if it's not, like what are we doing? And I think that software, especially in 2025 with like a new AI product coming out every other second. Yeah, like it's getting harder and harder to identify what's actually a high ROI project versus a low RRI project.

[Jack]

That's interesting. So how, how do you view that? Because I always try internally the, you know, as owners, you, you've said it the best is like, I've thought about this problem for 10 years every single day. And you know, I get stuck in those loops where you say something. I don't sleep for two days because I'm so busy thinking about it. And one of the big things when it comes to this specific topic is, and I think that your, your example right now touches perfectly on that is buying growth vers versus buying throughput. Right. It's like, how do you, how do you spend that capital and balance. Because there's a great bit of buying growth like you, you can buy the leads, you can hire the guy and just ram that growth through at very low. A very low. What am I looking.

[John Wilson]

Low margin. Yeah. I mean, I know most of my friends that are in the 20s or 30s, like, they got there on like 40 gross profit, including us, and then they're like, oh, we actually have to run a profitable business.

[Jack]

You have to build the, this, the systems, the efficiency and the capacity on the back end.

[John Wilson]

Yep.

[Jack]

So, I mean, do you think that you would have still been where you are today though, if you focused on those things and not on slamming growth through?

[John Wilson]

I think, I think I would have been a little bit farther, to be honest. Because as I think about, as I think about some of the investments we've made over the years, like, some of them just didn't work. And I bet if I would have. Now, this isn't say, don't experiment. Like, I'm all about experimenting, but I should have been faster to cut them when they didn't work. And I should have maybe even been more experimental or. Well, like, what are my best alternatives? This is something that I'm trying to nail down too. Like, hey, if I have to go do something, what's. What's the next best alternative? And what's kind of funny is some of these, like, very expensive, like, solutions. The next best alternative is just doing nothing at all.

[Jack]

Yeah, but I was gonna ask that. So like, when you think about these things and trying and modifying stuff, like, how do you view diversity of these? I mean, we're on talking about investing, right? So how do you view on this diversity of ideas? Back to the roa, is, are when you're running these projects, are you, do you, are you running like six of them, three of them? Like, how do you view the diversity aspect of how many things I'm going to experiment on versus again, building throughput of like, yeah, systems, processes, and not worrying about like, hyper growth.

[John Wilson]

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[Jack]

Yeah.

[John Wilson]

Now I think there's like, you know, it probably depends on the bandwidth of your leadership team. But you know, we have seven people on our senior leadership team and even it on one hand you could say like, oh, we could take seven high scope projects, but like, not really. Like really, it'd be much better if all seven of us focused on two because we'd probably get it done versus like we have gone fully separate directions and like, okay, you focus on this, I'm going to focus on this. And like someone's not getting something done. And then all we did was tread water and probably have like a just burning cash. So that's why I think if I would have been more thoughtful about like the focus and like, hey, this is a big project. The potential return for this project is $3 million of revenue. Let's get this right and like, let's just, yeah, fully focus and invest wisely. Like I think we would have been farther off and we would have been more profitable on the way up.

[Jack]

No, that's, that's super helpful because I mean I try to view that from my lens of how many projects that we undertake with our extremely small leadership team. And it's, it's usually too many at once. And so like sitting down probably with the, the key players and going through and yeah, like, hey, let's pick two big initiatives this year that we really want to crush. And how are they going to crush it? Let's put a number to it and let's plan out these projects and how much the investment is going to be.

[John Wilson]

Because this is something, it took us a long time to learn this. Like I remember 10 million.

[Jack]

If we need to get it, we need to cut it.

[John Wilson]

Yeah. I mean we used to focus like all over the place. You had these priorities and like there's just so many conflicting things and like if this helps anybody, we're going on 30 million. And like, we have three priorities next year. Like three and like, really two. Because the third priority is just like, buy businesses, which doesn't. Which doesn't impact most of our operations. But, like, the two are like, we, like, we just brought on the Home Depot retail relationship, which is going to be pretty sweet. We're excited to, like, deliver there. And then the second is we're quadrupling down on our excavation. And those are the literal two priorities, like, for the business next year. So all of our stuff is going to steer towards that. But, you know, as we've gotten bigger, we focused on less because I remember we used to. We, you know, our rocks were like, it was hard to. There was so many different projects and things broken in our mind that we had to do all of it. But then we would assign these rocks or we would have set these, like, goals and like, we didn't achieve a bunch of them.

[Jack]

I'm trying to balance in my mind the idea of, like, when you're smaller too. I don't think that what we're trying to say, and I could be wrong for putting words in your mouth, but I'm not saying, like, don't go out there and like, fix things and build systems, but I am saying that, like, there's. In terms of the big projects and the big focus, like, yeah. That that's where the, the scale needs to be reduced to be able to handle like, these big initiatives, like the real big ROI movers of the year. Like you said quadruple down on. On excavation.

[John Wilson]

Yeah.

[Jack]

And so I don't think that it's a competing thought with like, oh, hey, I need to build out service titan. Because, like, that really is, you know, service titan is a big rock, but it's not a competition in terms of bandwidth to quadruple down excavation. I think that's a overarching thing that everybody can help focus on.

[John Wilson]

Yeah, yeah. The. A phrase that might help is put all of your eggs in one basket and watch that basket closely.

[Jack]

That makes sense. And so to change subjects a little bit here, not to.

[John Wilson]

So that's investing inside your business. There's balance sheets. And balance sheet is like equipment. And like, it's very easy. Like, hey, I'm gonna go buy this septic truck and it'll add a million dollars of revenue. Or I'm gonna go get this excavation equipment and it'll add a million dollars of reven. Easy is much more complicated to handle. Pnl like SG and a OPEX investments, but that's actually the entire like, that's the much more important one because when you go to sell your business, they don't really give a shit. Like the value of your business actually even scrap the value. I'm right now like working through a conventional debt process. And like, so we're going to go refire SBA notes and we're going to like go get an acquisition line of credit and ebitda. Like literally all they gave a shit about is ebitda. They don't care how many vehicles I own. They don't care about freaking anything at all. The only thing that they want to know is our ebitda.

[Jack]

You mean that makes sense. You're an asset business though, like, or a no asset business. Right. You have a bunch of depreciating assets and vehicles. So all they care about is your ability to generate.

[John Wilson]

It's cash flow lending. So like the. Yeah, so I, I think whether the goal is sell or the goal is to grow, like regardless you, like this is investing off your P and L is probably the most important skill that you can have because either a buyer or a bank is going to look at that and determine what the next step looks like. So we're able to approach this conventional process like really strong. Like our ebitda is like 14, 15% this year. And that's good. Like we're excited about that. And so we get to present like a strong set of financials to go. Like they want to give us like a 10 million dollar acquisition line, which is a lot of money. Like, that's crazy.

[Jack]

Yeah, it, you know, send them my way. I'll take a $10 million acquisition line.

[John Wilson]

It does sound fun.

[Jack]

Okay. But throughout this process, I think you're a great example of someone who, who to talk to about this just because we know each other. I know that you've also diversified some of the business capital into outside investments.

[John Wilson]

Yeah, yeah, 100%.

[Jack]

So I mean.

[John Wilson]

Yeah.

[Jack]

What's your view on that? What does that look like for you or in your belief. Yeah, beliefs surrounding that we are not big enough to do so. But I mean, I've heard some crazy stuff out there about people diversifying into crypto and all this kind of wild stuff.

[John Wilson]

Yeah.

[Jack]

What, what have you diversified into and what's your view on it?

[John Wilson]

So it's changed a lot over the years. When I first started, I think I diversified too early, so the business was like a few million bucks and like I bought a bunch of real estate and I had these like, I don't know, little projects basically. And then I Sold.

[Jack]

The gurus on the Internet say, yeah.

[John Wilson]

I think that was it. It was like I need to have seven streams of whatever.

[Jack]

Yeah, you buy real estate and then that's what you do with your, your extra capital from your business. That's what you're supposed. And then you do a cost segregation or something like that.

[John Wilson]

Yeah, yeah. So what I ended up backing into was I sold most of it off and like focused up because I, I like this idea and, and I have since diversified, but I like this idea of focus because I think that like focus gets you rich, diversify, diversification keeps you rich. And so like our business is, you know, not 5 million of EBITDA yet, but like big, you know. So I'm, we're at the point where we're starting to think about diversification again. But from like literally 200,000 of earnings to like millions in EBITDA, like single digit millions, but millions. I've really been like focused the way. So if, if that helps, I think like you can diversify too early and it doesn't really do you much good. I think it just adds like headache. When you should be focusing, it also.

[Jack]

Depends on your goal. Right. If your goal is to grow a large business, then great. Yeah, don't diversify. You want to put that money back in. But if your goal is not to grow a business, I don't know if it's wrong. Right. If you go buy the building, like we've talked about it before. Yeah, we always say don't, don't. Generally I'd rather use my cash flow to not buy the building that I'm in. I'll rent it at a cheaper cash flow rate and then. Yeah, but like don't buy the business, don't buy the building you're in because that money is better spent going back into the business for growth perspective. But if you're fine running a smaller business and don't want higher growth rates, like you could diversify early into real estate and not worry about growth, just worry about again, safety. Okay, I want to own this building, I want to own a few houses.

[John Wilson]

And then I mean to me that sounds like a bad capital allocation decision. So I think that is the wrong answer actually. But I think that like, if that's your lifestyle, but like it, I think that that is wrong. Like, I think that that's probably wrong.

[Jack]

I think if people out here, John, that they don't has to want to grow $100 million business. That's all I know there's a lot of your friends Listening, that'd be like Jack's wrong on this one. As they're all running their 30 and 40 million dollars businesses.

[John Wilson]

Well, it's just the highest and best use because I think like, if you have a dollar, like, where is the best use of that dollar? And so this is what ended up happening for me. So I bought the business and I immediately, I bought some real estate. And so we sort of like branched out and did all this stuff. And then I learned how multiples worked and it was, oh, if I jump to this next threshold of business earnings inside Wilson, the business isn't worth three times, it's worth four or five or six or like 10 or 12 now. Right. So I learned how that actually works and suddenly it became way easier because it was like any dollar that I spend outside of the core business. For a while I was losing, I was, I was just choosing to lose money. I was like, hey, instead of making the business more valuable by acquiring another business, I'm going to go buy a property and that hundred thousand dollars that could have gone towards a down payment on a business that would have put us from a five times to a six or seven or whatever. I would rather own this warehouse that does nothing and doesn't increase my net worth and doesn't increase the multiple. So like, I think from like purely enterprise value, I think there is a wrong decision. Now whether or not that's your lifestyle, I guess pop off. But like my preference, some people, your lifestyle should be determined by the best truck.

[Jack]

We've all seen it. They'll never go past a million dollars.

[John Wilson]

But if you could just sell me your business at the cheap multiple because I'm choosing to invest wisely.

[Jack]

I agree though. No, I mean, I'm playing devil's advocate here, but I definitely agree. I mean, I, I, we've talked about, we've hit this subject really hard. From how you pay yourself on these ones, it's like, hey, I'm not going to take money out of the business because that money that it's better I would be paying myself. The 10k a year out of 6x multiple is worth 60. So like, focus on building the business, not diversifying into other regions.

[John Wilson]

What I've started to work on over the past year, the podcast is a great example. But what I've started to work on over the last year is separating into two buckets. This was in one of Warren Buffett's letters, like in the 70s. But he's got this A, A and B bucket model. So the A bucket is I'm going to wholly buy an enterprise and like take cash flow and B is enterprise value. So hit his example is like I'm gonna go buy Geico and I'm gonna use Geico's cash flow to buy Apple stock. Right? So enterprise value from Apple stock, like yes, you get some dividends but like, you know, it's really like we're here to rise in value and Geico is just gonna give us like free distributed cash to go reinvest. So I've taken kind of the same model in my life over the last year because we're really emphasizing growth in the business because we're really emphasizing ev. Like we want to, to build a big business. So we're starting to like, okay, how do I find sources of cash flow by like investing into minority positions and companies that I can then put into the thing that I own that raises an EV and I don't need as much cash flow from. So I don't know if that helps anybody, but that's helped. I've explained that to a few people because they're in like heavy acquisition mode or like you know, had big capex reinvestment. Like I need to buy excavators or lightning trailers or whatever. And so this is how I think about it is I don't really rely on like our core business at all for personal cash flow. We like really hone in on enterprise value. And some of the guys that are growing the fastest that I know, that's their story too. So like there's a couple companies in the 30, 40, $50 million range and like they have an external like source that is like paying for their life, their mortgage, their groceries, whatever. And they're, they're just like reinvesting 100% and that's how they're going from 30 to 40 million and you know, very short amounts of time. Are you tired of paying money on leads that don't convert with Pay Per Call IO you only pay for a lead when your phone rings. No junk leads, no bots and no guesswork, just real calls from real customers. Papercall IO helped our company achieve a 5 times ROI in just 60 days. If you're ready for marketing that actually delivers, head to Pay Per Call IO and book a free demo today. That's Pay per call IO get more calls, not excuses. Click the link in the description to get started.

[Jack]

So what you're telling me is I should have, my wife should have kept working?

[John Wilson]

Yeah.

[Jack]

And she could be my external cash flow source?

[John Wilson]

That's right. I mean spouse's income is fair game. I think a lot of people do that. I was listening to Acquiring Minds and the host, Will Smith, he's like, that's actually one of the most common stories out there is that this spouse is like making a large income that supports that, that entrepreneur to go start and like figure it out. Which is kind of funny.

[Jack]

No, I love that because I've seen that on Shark Tank too. It's like, hey, how'd you guys start this? Well, my wife kept working and I when changed this 100.

[John Wilson]

I mean it can be external to, to anything. I mean I know there's two people that, that, well, I got to get them on the show here. But yeah, they're running like 40 to 50 million dollar businesses and on other multimillion dollar businesses that they, that they're like a 10% owner of or 20% owner of or whatever. And like one of them is a dog salon and one of them was like cell phone, like those T mobile cell phone store things. And like they're, they're just producing cash and like you could call that a hack, you could call that a cheat, you can call that whatever. But like it's allowing them to focus on the enterprise value play.

[Jack]

Yeah.

[John Wilson]

So if you're thinking about reinvesting, I'd probably emphasize something in cash flow. Whereas like real estate is probably not cash flow. Real estate is also enterprise value. So I would just be cautious like where you put those dollars outside to make sure that it does give you cash so that you can continue building enterprise value. That A bucket. B bucket.

[Jack]

Sweet. Any last thoughts?

[John Wilson]

I think that running a business and like being the CEO of a business is the most like you're an investor, you're a lot of things. Like you're the driver of culture, you're probably a driver of sales. Like there's a lot going on inside that bucket. But at the end of the day, you are an investor and you're investing your resources into people. You're investing your resources into the business, the balance sheet, the P L softwares. And if you don't like the idea of that, then you're probably in the wrong seat because like your entire job is resource allocation. Whether it's people resource allocation or capital allocation or attention allocation, like that's the job. So whether or not you think of yourself as an investor, as the owner of a small plumbing company, like you are, you're investing resources, you're investing attention and people. So I think that's the final one is like this is relevant.

[Jack]

Yeah, I think it's relevant at any size too, because all this.

[John Wilson]

Yeah.

[Jack]

As much as you think that you're. Even if it's still a job for you, this is still the path out of that job is making sure those investment choices are made correctly.

[John Wilson]

Thanks everyone for tuning in. Make sure you hit like and subscribe and give us a five star review wherever it is that you listen to podcasts.