Our Biggest Business Failures (And What They Cost Us)

Summary

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Podcast Summary: Owned and Operated – "Our Biggest Business Failures (And What They Cost Us)"

Hosts: John Wilson (A), Jack Carr (B)
Date: February 26, 2026

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Episode Overview

In this candid episode, John Wilson and Jack Carr dive deep into the most significant business failures they’ve experienced in their plumbing, HVAC, and electrical companies. With an open, conversational tone, they dissect hard-won lessons around cash flow missteps, data problems, process gaps, bad vendor relationships, and the pitfalls of scaling through acquisition. Their transparent storytelling not only uncovers the real costs of these mistakes but highlights how each paved the way to better systems and smarter growth.

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Key Discussion Points & Insights

1. Reflecting on Growth and Challenging Market Conditions

• Company Milestones

  • John reflects on expanding from Ohio into Indiana, achieving his long-held goal of running a multi-state operation ([01:14]).
    • "There was something when I, when I was like early 20s, I told my dad ... I want to be the biggest company in Akron." — John ([01:17])
  • Recent acquisitions: Added two companies in 40 days; looking at two more ([02:07], [02:31]).

• Industry-Wide Headwinds in 2025

  • Both acknowledge 2025 was tough for manufacturers, vendors, and contractors, especially with supply chain issues and layoffs ([03:50]).
    • "The back half of 25 was like a tough time that everybody went through together." — John ([04:33])

• Weather Impacts

  • Anomalous weather (warm winter, major storms) has created unpredictable demand ([05:07]-[06:43]).

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2. “Biggest Failures” — Theme: Data and Process Are King

Cash Flow and Lack of Visibility ([09:55]–[12:22])

• Early Accounting Blind Spots
  • Not hiring a financial controller soon enough was a critical oversight; led to making decisions “in a vacuum,” without considering ripple effects ([11:36], [12:22]).
    • "Everything was tied to not having clear visibility into my numbers... Maybe that's the issue is... we didn't prioritize a clean accounting system. And because of that we didn't know what we didn't know inside our own business." — John ([11:45])

Failure Example: The Marketing Overspend Disaster

• The $13,000 Ad Spend Weekend
  • Jack details how a single winter weekend’s unchecked LSA (Local Service Ads) spend racked up a $13,000 bill, producing only $7,000 in revenue ([12:47]–[13:21]).
    • "We ran all weekend and paid. We paid $4,000 to run calls all weekend. But the issue was that there was a, there was a giant miss in our kind of in our back of office..." — Jack ([13:21])
  • The root: Focusing on volume over capacity, lack of process for monitoring spend in real time.

Purchasing & Vendor Management Nightmares

• Credit Card and Purchasing Abuse ([15:09]):

  • Allowing field team members to buy on cards without approval led to $80K/mo in frivolous spend ([15:48]–[16:25]).
    • "The first time we tightened up purchasing ever, we saved $80,000 a month just from like literally having to have people approve POs." — John ([15:09],[15:48])
  • Major savings came from implementing controls on material purchasing and software licenses ([16:25]–[17:36]).

• Vendor Pricing Mistakes

  • Jack shares how working with a single vendor for a year without renegotiating meant massively overpaying—simply because he didn’t realize you could or should regularly rebid ([17:36]–[18:49]).
    • "I didn't understand the ability of negotiations of material pricing ... I do not let their salespeople in my office. I do not talk to them. And that is because they let me run a year with them ... at full retail price, like the worst pricing, even though I was spending $400,000 with this, they never offered to renegotiate." — Jack ([17:36])
  • Vendors will rarely offer better deals without prompting; friendships can obscure necessary cost controls ([20:25]–[22:48]).

• Industry-wide Process Gaps

  • Many operators are not sophisticated about checking vendor performance; overwhelmed by hundreds of invoices per day and lack of tech to analyze them ([22:55]).

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3. Data as the Underlying Theme

• Both hosts repeatedly identify lack of—or misinterpretation of—good data as the root cause in most failures.

  • "Not having good data has seemed to put yourself in bad situations... that's why ServiceTitan ... they have the ability to drive a lot of that good data, but you have to be able to have the time and patience to input it." — Jack ([23:48])

• On the necessity of strong financial controls, John reflects:

  • "The biggest lack of understanding was how bad I needed a controller $30 million ago, right?... If I ever move on to another project, I'm hiring a controller at $0 of revenue." — John ([24:28])

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4. Acquisitions and the Construction Trap

• The Dangers of Mixing Trades and Construction:

  • Not understanding how construction cash cycles differ from service (delays in payments, exposure to debt risk) nearly killed both hosts’ businesses after acquisitions ([25:11]–[26:39]).
    • "...I didn't know how important cash conversion cycle was and I didn't understand the cyclicality of construction projects." — John ([25:30])
    • "...the end all be all resulted to be just shut it down. Like shut down the construction side. Don't even try. It's not worth it." — Jack ([26:39])
  • Some succeed at this, but they run construction-only businesses with lean overhead; those models don't translate to service-based company structures ([27:17]).

• Debt-Fueled Acquisitions

  • Buying construction businesses with debt is a recipe for disaster due to variable payment cycles ([28:15]–[29:42]).

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5. People, Recruiting & Scalability

• Don’t delay building a recruiting function; losing core team members in small ops can be catastrophic ([30:51]–[31:20]):
  • "Have a recruiter at 3 million or have some kind of recruiting function. That's always recruiting..." — Jack ([31:03])

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Notable Quotes & Memorable Moments

| Time | Quote & Attribution | |--------|--------------------| | [01:17] | "There was something when I, when I was like early 20s, I told my dad ... I want to be the biggest company in Akron. And even one day past that, I want to be in multiple states..." — John | | [13:21] | "We ran all weekend and paid. We paid $4,000 to run calls all weekend. But the issue was that there was a, there was a giant miss in our kind of in our back of office because I wasn the office..." — Jack | | [15:48] | "The first time we tightened up purchasing ever, we saved $80,000 a month just from like literally having to have people approve POs. It was outrageous." — John | | [17:36] | "I didn't understand the ability of negotiations of material pricing... they never offered to renegotiate..." — Jack | | [22:48] | "I think those three things make it very easy… make it very easy." — John, on why trades get hit with bad vendor deals | | [24:28] | "The biggest lack of understanding was how bad I needed a controller $30 million ago..." — John | | [26:39] | "...the end all be all resulted to be just shut it down. Like shut down the construction side. Don't even try. It's not worth it..." — Jack | | [31:03] | "Have a recruiter at 3 million or have some kind of recruiting function. That's always recruiting..." — Jack |

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Key Takeaways

• Every major failure traces back to gaps in process and poor data: cash flow crunches, wasted spend, and bad hires are all symptoms.
• Hire a financial controller early—don’t wait for scale to tighten your controls.
• Turn off marketing when at capacity—every call isn’t always worth paying for.
• Standardize approval processes for all purchasing, cut down field team and software license bloat rapidly.
• Negotiate with vendors regularly, regardless of relationship status.
• Know what you’re buying in an acquisition—especially if it involves construction or uneven pay cycles.
• Recruiting is non-negotiable after a certain size—losing people without a pipeline is dangerous for small- to mid-sized businesses.

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Timestamps for Major Topics

• [00:00–02:36] – Intro, recent growth, territory expansion
• [03:03–05:07] – State of the industry, post-2025 recovery
• [05:07–07:54] – Weather effects on business performance
• [09:18–15:09] – Opening up about business failures, marketing blunders, controller blind spots
• [15:09–17:36] – Tightening up purchasing, credit card/procurement problems
• [17:36–22:48] – Vendor pricing traps, the importance of rebidding & data
• [22:55–25:07] – Data, controller, accounting as lynchpins for success/failure
• [25:11–29:42] – M&A pitfalls: Construction payment/cash cycle traps, debt dangers
• [30:51–31:20] – Lessons on recruiting as you scale

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Final Thoughts

John and Jack’s stories are raw, practical, and universally relevant for any service business owner. Their transparency about failures, what it truly cost, and how they course-corrected offers a blueprint for avoiding the most expensive mistakes in trades entrepreneurship. The recurring theme? Invest in great data, rigorous process, and never stop tightening up your controls as you grow.

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Transcript

[A]

Today we're talking our biggest business failures.

[B]

That first Item is my $13,000 ad spend weekend. Oh, yeah, and we only made $7,000

[A]

the first time we tightened up purchasing. We saved $80,000 a month.

[B]

Ooh.

[A]

Any given month, we might accidentally overspend $10,000 from software licenses.

[B]

Any other big misses that have really been material to your business?

[A]

The mistake I think I made, and maybe this is the mistake. Welcome back to Owned and Operated, a podcast where we talk about growing home service companies. I'm your host, John Wilson. I'm the CEO of the Wilson Companies. We're a $40 million plumbing, H vac and electric business out of Ohio and Indiana. For fun, I run this podcast where I talk to my friends about how to grow their home service companies and the industry. Today I have my very good friend Jack Caron, the CEO of Rapid Plumbing, Heating Cooling and newly added electric down in Nashville, Tennessee. Welcome back to the show.

[B]

What's going on, John? I bet it feels good to say Ohio and Indiana. Now you are a two state company.

[A]

That feels really good. It does. You know, there was something when I, when I was like early 20s, I told my, I told my dad, I bought the business from my dad and I told my dad, like, hey, one day I want to have the biggest company in, you know, this part of the state. I want to be the biggest company in Akron. And even one day past that, I want to be in multiple states. And you know, my dad was just like, okay, like, whatever, buddy. How, you know, it's like three plumbers or whatever, like, walk me through it. So it has been kind of fun to like reflect back on that. Like John at 20, what his thoughts were on what he could do and seeing out that, hey, we actually could do that. So we did. We did, we did do that. We're now two state.

[B]

That's cool, man. That's. That's really big stepping stone too.

[A]

Like, yeah, it feels, it feels good. I think we've talked a little bit about it on the show. I think at some point we have to do like a debrief. But yeah, we've added two companies in the past 40 days and we're looking at two more right now. And it's a very active part of our business. In early 2026, we're actively acquiring, Actively bringing on new markets.

[B]

Yeah, man, that's awesome. You don't want to talk about today. We'll debrief another day.

[A]

I think we can debrief another day. I think we could do a whole episode on like, here's what we saw in this deal, here's what we did. And I think that would be, I think that would be kind of interesting because we made some like one of them we doubled. And I was telling you about this on the phone earlier today. Like, that's crazy. Like we literally doubled this business. The other one that we took, it was losing money when we got there. And EBITDA I think is like 40 to 50,000amonth now. And we did that in 30 days.

[B]

Yeah, yeah.

[A]

So yeah, it's, it's. Yeah. I mean, I'm a little tired, but like. Yes.

[B]

Yeah. I will say that our conversations have been a lot more business, straightforward, business oriented and less John just shooting the shit. So I do miss that he's in it, but I'm glad that he's in the mode. You are, you're doing well. And how's February been wrapping up for you then with the 33 business?

[A]

Yes, February is good. February is really good. So our core business, not a lot of growth, maybe 2 or 3%, but when we add in the other businesses, I think it's a plus 30% month, like year over year.

[B]

Wow, that's huge. Yeah. And just, I mean, February is like the worst month as well. Historically, I think for February, February is rough.

[A]

And then 2025 was rough for a lot. You know, we've done it. We did a deep dive on 2025. And I think, you know, from, from what I'm hearing, most people in early 26 are feeling good. And I mean like most people, the contractor, the homeowner, but even the vendors. So what I think is kind of interesting is just like the ripple effect that comes from a slow back half of 25. So slow back half of 25. Well, okay. Carrier, Lenox Train, all their earnings calls are like very depressing. Right. Lots of layoffs in manufacturing and in distribution. A lot of the service providers are like tightening the belt because they aren't, maybe they're churning more people who are trying to save money. So it's just, you know, the bigger our audience gets, the more conversations we're having. And it was, it, it felt, I don't know, it was just interesting. I remember having tough times in my business over my whole career. And the back half of 25 was like a tough time that everybody went through together. Like if you were a manufacturer, if you were a distributor, if you were a service provider, a software, a contractor, everybody was fighting in the back half of 25. So early 26, everyone seems to be Feeling pretty good, which is exciting.

[B]

Yeah. It's interesting. And I don't think the weather helped. I mean, obviously, we are not. We're a home service business. This is a home service podcast. But the big part of home services, definitely H Vac, and it's very strange. The weather this year has not been overly helpful, but we did get that one big storm through the south that was crazy. That helped out a lot of contractors. But I'm still talking to contractors out in Denver who, you know, crazy. Haven't had a winter. Like, they haven't had a winter.

[A]

Well, I was in Salt Lake City last week. I got off the plane, and it was. It was 40 degrees warmer in Salt Lake City than in Akron, Ohio. Like, it was ridiculous. I went from wearing a coat to a T shirt.

[B]

Yeah.

[A]

Like, it was crazy. And then we skied Snowbird that day, and I was literally on the top of that mountain in a T shirt.

[B]

Yeah. So we'll see how the. The end of the year shapes up, too, because I know.

[A]

Yeah.

[B]

Again, you and I are both big skiers, so I always watch the snow reports, and I just saw, like, Mammoth Mountains in California, and Tahoe just got absolutely dumped. Multiple feet of snow for multiple days. And so, like, maybe on the backhand half of February, March, they'll actually get a winter, and it'll kind of continue to pop, which I wouldn't be mad.

[A]

Our winter seems to be over here.

[B]

Yeah, it's 70 here. 70.

[A]

It's 60. 60 here today, 60 yesterday. Now, what's been really interesting, and maybe we do an episode on this, but just like, how to sell during the slow season. Actually, we should do an episode on that. Writing this down. So what's been really interesting is, hey, we're February back. Half of February is usually when we enter our slump. Shoulder season, dude. We're killing it this week.

[B]

Yeah.

[A]

And this is the warmest. This is like, 60 degrees. And we sold on Monday. We sold, like, 70 grand of H vac, which. Our daily budget's 35. So we sold double daily budget. Yesterday we sold 40 or 50. Today we sold 50. And I'm like, what the is going on? Like, this is, you know. Yeah, it was zero degrees three weeks ago, and we were struggling to sell equipment. And this week we're just like, you know, here we go. Maybe tax return money's coming in. We're seeing a lot more finance approvals. So I'm not sure what the macro is, but it's interesting.

[B]

My. My only wonder, my only fear about this is that on the back. You know, I'm just hoping that because we're seeing early spring, it feels like, like the weather based on weather performance that we're not seeing our normal, like April in February. And then we hit April and it's like, oh, it has been 70 for now, four months straight and 1775 and sunny. And like now it's hard. Like I just want to make sure that we're not hitting that is my hope. That being said, I mean, I still think we're getting through a lot of the last bit of that snowstorm, Snowmageddon and people are, people are fixing stuff. So that's my hope. But we shall see. It'll chalk up to what it is, what it is. We don't have control over it.

[A]

So if you're running a home service company with a fleet, here's a question for you. Do you actually know what's happening at the pumpkin? Not what you hope is happening, but what's actually happening. I'm talking shared pins, manual odometer entries, cards that still work even when the truck isn't there. That stuff adds up fast. And that's why a lot of operators that I know are switching to Coast. Coast is a smart fuel card built for the trades. It uses GPS and vehicle data to verify transactions in real time. So if the vehicle isn't present, then the card declines. If the fuel volume looks off, it flows, flags it and it's backed by a $25,000 fuel fraud guarantee. Some terms apply. It's also a Visa card, so your text can fuel wherever makes sense. No detours, no weird network limitations. And you can control exactly what each card is allowed to buy. One company. Milestone Home Services saved over 130,000 a year after switching. Plus cut down fraud and admin time. If you've got trucks on the road and fuel is a meaningful line item, this is worth five minutes. Go to coastpay.com owned and operated or click the link below and get a custom savings estimate and see where your leaks are coming from. Sweet. Well, today we're talking our surprising lessons from our biggest business failures. Bum, bum, bum.

[B]

Ooh. Are we talking business failures across all businesses that we've ever done or are we just going to stick to home service here?

[A]

I mean, I think we. You could do either. I'm going to stick to home service.

[B]

Okay. I'll stick to home service. It'll be more pertinent, I think, because failures in the wine industry.

[A]

Oh yeah.

[B]

Although fun to talk about. Don't necessarily. And consumer Packaging goods don't pertain to a lot of H vac stuff.

[A]

Yeah, yeah.

[B]

Oh my gosh. Do you should start this one, I think.

[A]

Wow.

[B]

Yeah, I'm going to just like way more can down the road.

[A]

Okay. So when I think of the biggest failures that we've had, I mean they've almost always been tied to like cash flow. Like every single one and not being dialed in, it's like process turns into cash flow. So maybe cash flow was the result. So I mean, God, dude, I could think of 20, right? Like where, hey, we, we took, we took on this project or we did this acquisition or we bought these vehicles or whatever because it looked like a P and L win, like it was more profitable but our processes weren't locked in. So we ended up not understanding the actual investment that we were making and the time to get a payback and like what the cash flow impact of that was going to be. And again, I could think of like 20 examples. Some of them were just like a big new construction project and some of them were like, I talked about this a lot at the end of last year, but we made a ton of capex decisions in early 25 that I should not have made. Like I wouldn't classify them as my biggest business failure, but they were definitely like a bad decision.

[B]

Before, before you go further with that, do you feel. So I'm trying to think, I'm kind of segmenting this though is do you feel like those decisions kind of around what, what you made and where you failed? Those, those feel like further down the road decisions, right? Like you couldn't have made those mistakes early on. Do you feel like that?

[A]

Well, the, the mistake made, and maybe this is the mistake is I didn't bring on a controller soon enough because everything was tied to not having clear visibility into my numbers where we would make a decision as if we were making it inside a vacuum and there was no ripple effects. But hey, there's a lot of second and third ripples that come from a half a million dollar new construction project or 200,000 of inventory or whatever it is. So maybe that's the issue is like, hey, we started acquiring companies really early and growing through acquisition and we didn't prioritize a clean accounting system. And because of that we didn't know what we didn't know inside our own business.

[B]

Okay, so then actually the opposite of what I was saying because that's actually my biggest failures I think in the business are all resolving around not having the correct data and then not making the right decision choices based on that data. So mine's my first one's super easy. And I think a lot of contractors do this at some point in their career. And that first Item is my $13,000 ad spend weekend.

[A]

Oh yeah.

[B]

So we've talked about this.

[A]

We have. It was 17 for us, but yeah, we've had that. We bring that up all the time.

[B]

Yeah. So it was winter two years ago where we. It was another Snowmageddon situation where I was running calls. I didn't have the time to turn off LSA ads. And by the end of a negative 2 degree week or weekend in, in Nashville, which is. Doesn't happen regularly, we had racked up a $13,000 bill.

[A]

Yeah.

[B]

And we only made. Drumroll $7,000.

[A]

Oh my gosh.

[B]

So we ran all weekend and paid. We paid $4,000 to run calls all weekend. But the issue was that there was a, there was a giant miss in our kind of in our back of office because I wasn the office. So between capacity, are we fill. Are we not full on capacity? What have we spent? What kind of stuff do we have turned on, turned off? So we didn't have the good data or we had the data, but we weren't processing it correctly to be able to make good decisions like, hey, we are full. All P1s. Turn it off.

[A]

Yeah.

[B]

We were more focused on like this idea of more calls the better because we can just continue to run calls and run calls and run calls and make money. But the reality of it when you're paying $100 per lead per call, is that at some point you do need to turn that off based on capacity. And that sounds like a no brainer, but I think that, I don't think

[A]

that's a no brainer at all. Everyone has done that.

[B]

Yeah. And I think that the good lesson is actually not in this like extreme scenario, but this good lesson actually flows over into regular like operations. Right. Because it became kind of fundamental post that point to like understand what our capacity was, our max capacity, and then understand when we turn on and off marketing as a whole, like as a company. Because there is a point where if you have three technicians and you have five calls on each technician and they're all P1s and you have the next two days booked like you should turn off marketing and if you don't, you're wasting money. And so we, we. It's an active drill that we do every single day now. So without that, like that's the big loss, but it's Also the long term win is like we paid a $4,000, 5, $7,000 lesson in capacity planning and marketing planning. So that was our big, big loss

[A]

where we learned like, I feel like mine is similar where like what I said was it's cash flow, but it's cash flow because of a process problem. Like that's a process problem. Another easy one would be like, hey, how do we approve field team members to buy on the credit card? Like that's a process. And when you tighten it up, you can probably save like 10 grand a month. I think I've said it on the show, but the first time we tightened up purchasing ever, we saved $80,000 a month just from like literally having to have people approve pos. It was outrageous.

[B]

That's where I was going next as well. Our second big loss was not. Was allowing technicians to buy on credit cards with no PO or process to.

[A]

Yeah.

[B]

Validate an approval.

[A]

Yeah. Hey, is this needed? Is this truck stock is, you know. Yeah, it's a lot. You know that the. We brought this up earlier on the show, but we had a company that we just took it over and we, we've done well with it so far. And the single biggest impact that we made was on day one, we turned off their purchasing and their purchasing for materials went from 65,000amonth on average to 17.

[B]

Yeah, ours dropped 30. I think it was 31, 37. It was like a 3 and then like a line. I forget which exact it was, but I do remember 30 plus thousand dollars a month in purchasing.

[A]

It's absolutely nauseating. But it's a process. It's a process and controls problem where, hey, if we have this control to prevent our Google Ads from overspending or we have this control before someone signs up for a new software. Like software licenses is a huge pain point where any given month we might accidentally overspend $10,000 from software licenses because frigging every software in the world charges by user. Like Gmail charged by user, Slack Service, Titan, Aircall, like all of them. Like we've had credit cards try to charge us by user. I think Ramp has a buy user fee. So yeah, just kind of, just kind of crazy. But yeah, all of it tied to the process of how you're functionally running the business. Which was something that I didn't take very seriously when we were smaller and then when turned into real money.

[B]

Yeah. And then going back another giant loss in the last four years was my first year of running business where I didn't realize and I think this actually ties into this vendor idea that you're working on, right? Is that I didn't understand the ability of negotiations of material pricing. And so I think I've told people there's a certain vendor here in Nashville who I will never work with and I refuse to work with ever. I do not let their salespeople in my office. I do not talk to them. And that is because they let me run a year with them, my first year with them at full retail price, like the worst pricing, even though I was spending $400,000 with this, they never offered to renegotiate, which, I mean, I don't blame them. They're saying, like, hey, I'm not going to give up a free discount to you. That being said, you know, as a new person in the industry, you know, it's my bonehead mistake. But I do think that, that the bigger idea is understanding that there's a vendor rebidding process that you should be doing with every vendor, regularly, quarterly sending out RFPs or at least discussing with them new pricing and new strategies to how you can reduce overall cogs. So that was a big one.

[A]

Customers today expect pricing online. And whether we like it or not, homeowners want transparency before they ever even pick up the phone. So we decided to lean into that. And that's why we use Contractor Commerce inside Wilson. It costs us about $1,600 a month. And we run it across H Vac, plumbing and electrical. We use it for things like generator install estimates, water heater estimates, full H Vac replacement estimates, and it's producing real revenue. There are months where we've driven 20,000, 30,000 and even 40,000 in book sales directly through the platform. We've had double digit jobs booked in strong months straight from our website. What this really does is it turns our website into a guided sales process. Customers can see their options, they can see pricing ranges, and when they contact us, they're way more educated. If you're trying to modernize your sales process and capture demands that would otherwise bounce, it's worth looking at. Go check out Contractor Commerce and book a demo at the link below. It always blows my mind. We're like heavy M and A mode right now. So we're talking to two or three owners a week, which for like a non pe fund, feels like a lot, right? But I'm continually finding that I'm like, hey, like Your materials are 47, 45% of your total income. Like that's a lot. When was the last time you talked Pricing never, you know, like I think like, you know, 95, and I'm like, my guy, like, you gotta do something here. You gotta have a conversation. You know, you're spending a million dollars with this person. You have, you do have to be able to have a conversation with them.

[B]

The interesting part that I keep running into because I've had this conversation now three or four times in the past couple months and the one kind of theme that seems to keep cropping up, which I always enjoy, is this, this theme that, like, oh no, these guys, these guys are my buddies. Like this vendor has done me well in the past or like they're a friend, they're going to treat me well. But ironically, like those seem to always be the people who are getting hit. The hardest is they, they get this personal relationship with some kind of vendor or distributor and then what ends up happening is because they're friends, they don't renegotiate as hard or they believe that the service and quality makes up for 10, 20, 30%. And in my opinion, it never does. But that theme keeps reoccurring is like, hey, no, no, they're, they're good. Like they're my good friend. Like, they wouldn't do me like that. And lo and behold, they did them like that.

[A]

Yeah, totally. Well, you know, I was, I was talking with someone, it was a tech, it was like a tech executive from Service Titan. This was maybe three or four months ago and we, we were just talking about the industry in general. Just like I, I think AI came up and like, you know, different services or whatever, but like primarily software based. And the conversation was interesting because he, he said it in a way that, like in instinctually you and I know, like the industry knows. I've just never heard it described quite like this. And it was, people love the trade, like software providers or wholesalers or whatever, love the trades because it's very, very easy to get a hold of the decision maker. Like the principal is you, the principal is me. It's not complicated, right? Like you're not going through Walmart. It's not some big bureaucratic thing. You can just call the guy you'll probably pick up. They also like, it's a high relationship, high trust, which is easy to drive additional margin. So exactly that it's easy to sort of, you know, not be a great partner. And I will argue that the best vendors are very thoughtful about like partnership and they are constantly helping you find ways to save money. So I would just like throw that out there for the world. Not not everybody's bad at it.

[B]

But don't disagree that it's more of a generalistic statement, though. Across the board, it's like, hey, my, my friends.

[A]

And that's the last one is they don't have the sophistication to check. They're not going to rebid. Even if they did rebid, they don't even know where to get the data. You know, we were in. The problem's kind of funny. We get 200 invoices a day from our vendors. That's a lot. That's a lot of volume. So there's just not many industries out there that get that much in invoice volume from their vendors tied to small jobs all over the place. And there's not a sophisticated tech stack to catch it. I think this is becoming more and more of a thing. I have a lot of friends that have, like, built their own tool to, like, catch problems and like, filter through it and like, find opportunity. But it is a challenge. So I go. I don't. I think those three things make it very easy. Make it very easy.

[B]

So those are some definitely big losses. That all seems to be around information and understanding, though. It's like, what's this theme here is. Yeah, not having good data has seemed to put yourself in bad situations. Whether that's not having good data to know what you. You know, who. How to get better pricing or where to get better pricing. Not having good data to make good decisions on your marketing. Not having good decisions on, you know, projects because you don't have the right controller. So it all comes down to this idea of, like, data. And ironically, I think that's why service titan, not to shout them out, but like, that's why they win, is they have the ability to drive a lot of that good data, but you have to be able to have the time and patience to input it and get that good data in.

[A]

Yeah, I do think it. I do think it's all data and it's finding like these different ways to plug the whole. Like, some of it's purely a talent problem. Like, hey, I need a controller and I need a good one. Right? And my, my biggest. If I was going to classify, like, really all of my big mistakes have been a lack of understanding. And the biggest lack of understanding was how bad I needed a controller $30 million ago, right? Like, I needed it. Like, if I ever move on to another project, I'm hiring a controller at $0 of revenue. We're handling that one right away. Um, because I think it's it's the most important thing.

[B]

Any other big misses that have really been material to your business?

[A]

I mean the. Yeah, the biggest ones were all cash.

[B]

I know that there's one for both of our businesses was not understanding during an acquisition the full extent of how much construction will. Will affect your business. I know you had that in electrical and I had that in plumbing when we, when we bought a plumbing company.

[A]

Yeah. And to me that's the same thing as like a controller. And like cash is like, hey, if I would have known better, how I think about like cash management is going to be very different with construction than a service business. And if you're used to running a service business, like, hey, I run a service business. I have a hundred grand show up in my bank account every day. Like that's what we got paid for from yesterday. Or like financing jobs or credit cards or checks or whatever. And like you're just used to that and to suddenly change and like, hey, you might not actually get paid for maybe a couple weeks, maybe a month. And like that's just a part of the deal is tough. So. Yeah, but I also think that's a process problem. That's a. We didn't. That's a data problem. Like I didn't know what I didn't know and I didn't know how important cash conversion cycle was and I didn't understand the cyclicality of construction projects. So I, I think it's all the same thing. But that's definitely another great example of like we got tripped up. And I see a lot of people get tripped up on these big construction things. If you're not built to run it, then you're not built to run it.

[B]

Yeah. And I mean, we've talked about this quite a few times before, but yeah, that one was a big hit for us just because it was a really difficult time where we lost money for a lot of months to try and figure that out for the end all be all resulted to be just shut it down. Like shut down the construction side. Don't even try. It's not worth it. It's $1 million top line a year. But it's going to cause you more headaches in the short term, long term, both terms, all term.

[A]

Yeah. I mean some people do amazing at it. Like we were at holcoconf last week and there were three people there that run incredible construction businesses.

[B]

Yeah, but they're only construction businesses.

[A]

I think they're only construction. And that is the key because they're running at like a 35% gross margin for a service business. That would kill you. You couldn't afford a csr. You couldn't afford marketing. Like, you couldn't afford the things that you need to run a service business for. Construction business. That's a gravy train because your overhead might be, like, 7%. Like, you've got, like, an estimator and you. And like. And that's it. And, like, it's a very lean structure. One of the guys there, his name is Chad. We're gonna have him on the show, but he runs. I want to say it was a 50 to 60 million dollars big construction plumber in DFW and average project size was like, 2 or 3 million bucks. Like, big projects. And I thought he said he had, like, 15 office employees. Fifteen for, like, 50 to 60 million dollars. It was, like, crazy. I was just like, who. Who are they? Like, what are those positions? But just totally different.

[B]

Yeah. And I think there's another big portion to that is. Is also how you're buying. Right. So you. You can't actually buy a business on debt. You can physically do it. Yes, it is physically possible.

[A]

Yeah.

[B]

But is it recommended? And the answer there is absolutely not, because any kind of fluctuation in either pay cycle or building cycle can destroy your business within a month. And. Yeah, and so, like, that's the other side to it, is understanding that, hey, well, we're buying businesses on debt. We have debt in the business. So, like, really having that construction arm just doesn't fit.

[A]

Yeah, no, it doesn't. Yeah. There was another guy, Adam, at whole co Comp, and he. He's bought, like, five or six construction businesses, Plumbing, I think. I want to say he's like 16 or 17 million of revenue now. Maybe 20. It's somewhere in that. It's somewhere in that range.

[B]

Adam in Utah.

[A]

Yeah. Yeah, yeah, yeah. He's a cool guy, but I want to say he pays, like, a one times or less.

[B]

He pays less than one, which, to

[A]

me, that makes a. That makes a lot of sense.

[B]

He does a lot of revenue share agreements, too. Yeah, we think we're known that you know the same people. Yeah.

[A]

Yeah.

[B]

But, yeah, he. He's the only one who I've seen buy multiple construction businesses. And actually, I know there's a few people. So, like, I know it's possible, but he's one of the few that I've seen actually, like, do it regularly and kind of roll them up in an area and do really, really well. Because the way he buys it makes sense, but it's not like heavy debt loads.

[A]

Yeah.

[B]

So like that's, that's one of the big keys. I just wanted to say, like, hey, you know, that's, that's a big portion of why ours didn't work is we can't get cash cycle. You can't wait 60 days to pay people and we can't buy nice trucks and then have them running and doing, you know, rough ins. It just doesn't make sense.

[A]

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[B]

Oh, thousands. There's some, there's some probably around recruiting and making sure that you actually listen to John Wilson when he says have a recruiter at 3 million.

[A]

That definitely helps.

[B]

But we talked about that one recently so I'm not going to beat that dead horse. Essentially the only key to that is have a recruiter at 3 million or have some kind of recruiting function. That's always recruiting because yeah, losing two, three people overnight is a very real possibility. And in a business that has 10 people.

[A]

We had a branch lose two people last week. It was like out of 10. It was a lot.

[B]

Yeah. I mean that's 20%. 20% of your revenue generation is gone.

[A]

Everybody. If you've got a huge mistake, we'd love to see in the comments below if you want to talk about it. Yeah, tell us what you messed up on. Make sure you like sub and give us a five star review. Wherever it is you listen to shows.