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Owned and Operated - A Plumbing, Electrical, and HVAC Business Growth Podcast
Stop Losing Money in 2026: The Profit Plan for Higher EBITDA
00:45:01
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- [00:00]
A
2025 was a harder year for H VAC than it has been for the last 8 to 10 years.
- [00:06]
B
I always thought that EBITDA was like a light switch, and it turns out it's an on ramp. We're finishing up EBITDA this year at 13% and we want to finish EBITDA at 20 next year. So you just have to run a tight ship.
- [00:17]
A
I think that it matters in 2026 more than it has in any other year to slow down and make sure that your business is healthy because the market is changing.
- [00:25]
B
We just shut down stuff that was inconsistently performing. That was like a 30 to $40,000 a month savings. It's not always like pure savings. Every time it's like gonna be reinvested somewhere else.
- [00:36]
A
Where else did you pull to earn back ebitda?
- [00:39]
B
It all starts with your. Welcome back to Owned and Operated. I'm your host, John Wilson. Today I am rejoined with my host, co host Jack Carr. Welcome back.
- [00:59]
A
That is one of the weakest introductions with the do you want to be here today, John?
- [01:04]
B
Dude, I'm so ready to be here, it's ridiculous. It's Christmas Eve. I can't think of anything I would actually rather be doing.
- [01:11]
A
I don't know if that's sarcasm or not, but I actually was very excited for this today.
- [01:15]
B
No, no, it wasn't sarcasm. Skiing is the only thing I'd rather be doing.
- [01:18]
A
That's true. Again, we just need to mix our two passions, skiing and talking about business, and then call it a day.
- [01:25]
B
Yeah, skiing, scuba, and talking about business. Today we're talking about what we're stopping in 2026.
- [01:32]
A
This, this is a really easy one. I think we should just shut this podcast down after I give this answer and we're good to go. Just stop, stop losing. Just don't lose money in 2026 and you're good to go.
- [01:42]
B
Just 45 second podcast only make our best message that we've ever had.
- [01:48]
A
The nuance there, figure it out. But the rest just don't, don't lose money.
- [01:52]
B
Just don't lose money.
- [01:53]
A
Just don't lose money.
- [01:54]
B
Hey, guys, just don't, you know, it.
- [01:55]
A
Feels silly, but there, there it is a mindset that, you know, I joke about it as kind of like the singular answer, but you see it in a lot of business owners as we, as we kind of talk to them through the podcast and through the network. A lot of them actually do just refuse to lose money. Like it's a mindset, like, I am not going to lose I'm going to figure out any way possible to cut and it's, you know, I never, I didn't always have that mindset. Like I, it takes money to make business and to make growth and sometimes you lose and sometimes you win. But also like it's a change in mindset. Like I'm going to reduce all my vendor pricing. I'm going to not lose on this or no longer lose on that and just figure it out. So I sticking by that answer. That being said, I'm sure there's some more in the weeds things we can help people out with today.
- [02:44]
B
Yeah, I mean, I think, well, we talked about this last year or last week. We talked about this last week. But I always thought that EBITDA was like a light switch and it turns out it's an on ramp and taking a long time. Like to be good, not great, like just to be good. I don't think we're great. I think great is next year. I think this year was good. But yeah, it definitely takes a lot of time and you have to be really intentional and not lose money. Like that is like primary goal.
- [03:12]
A
So where are you starting in 2026 to kill things that are potentially going to cost you money?
- [03:19]
B
So did, did we talk about our, how we approached planning for 26?
- [03:23]
A
We did, we talked about profit planning on, profit planning on EBITDA planning off the P L versus planning from a revenue perspective. I mean we could do a real quick recap.
- [03:34]
B
I'll do, yeah, I'll do a quick recap. So we, we went through this process. We started setting like good operational budgets last year of like, hey, this is the revenue we think we can get to based on our number of calls, conversion rate and average ticket. Like, here's our data where, what can we actually do? So that felt really good. And like data driven budgeting, which was helpful. Whereas we used to just be, here's our vibe. Like I'm pretty sure we can do 40 million next year, you know, who knows? But like how do we get there? We'll figure it out. But data driven budgeting was really helpful. Obviously the thing that we really worked on this year that we did not do a good job of last year is we really focused on the inputs last year, how many calls, what's our conversion rate, what's our average ticket turns into X amount of revenue. But our, our profit targets and our gross profit targets were a vibe like, hey, I think we can get to 6 million of EBITDA. But like, didn't really have like A path or plan to get there. So the way we approach this year was we did all of the operational inputs, we got to our revenue, we felt comfortable with it by trade. We went even like a layer deeper, which I feel pretty good about. But we took a, we really picked apart our profit targets and hey, this is our profit target. It's ambitious. We want to double our EBITDA next year. Awesome. Outside of a vibe, how exactly are we going to get there? So a lot of what we're going to talk about today is stuff that like we've uncovered during that planning exercise. And okay, so how are we going to go from, you know, three and a half to 7 million of EBITDA? What acquisitions? How are we going to manage our opex? How are we going to invest new opex? How are we thinking about capex and how do we think about like general efficiency? So yeah, that's, that's my like roundup on how we planned for 26. It started with like a good revenue goal and then this year we really honed in on profit.
- [05:43]
A
So as you start to go through this, where, where do you find the biggest, like, where'd you guys start? You, you obviously knew your revenue. You obviously have a goal for next year based on those revenue numbers. But from, from the OPEX side and I guess the, the EBITDA side, like where are you starting? Where, where, what buckets are you starting? And how did you pick those buckets to start digging into and saying, hey, we're going to cut X from here and Y from here and we're going to optimize this?
- [06:13]
B
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- [09:06]
A
Sweet. Yeah. I mean, there's some more to dig into, but I think we'll hit it as we start to go through those specific buckets.
- [09:13]
B
Yeah.
- [09:13]
A
So where did you guys. I mean, what. What was the biggest bucket outside of probably acquisitions?
- [09:18]
B
Yeah, acquisitions was really big. So if we're at three and a half of ebitda, which I actually think we're going to be a little bit more, which is cool. But if we're at three and a half of ebitda, we. Let's say seven is target. Two million is going to come from acquisitions is, like, our rough goal. So we have a million and a half that we have to get from other sources. And it's. It's a lot of the stuff we're about to go through. It's like, hey, are we operationally efficient? Are we, do we have excess softwares we don't need? Do we, are we inefficient in marketing? Like are we really tracking ROI or like are we experimenting with 10 different things at the same time? Are we dispatching like effectively? Are we running effective meetings? Yeah, so we're finishing up EBITDA this year at 13 and we want to finish EBITDA at 20 next year. And like 20 is a big goal. So being able to actually deliver, that's a lot. So you just have to run a tight ship. So how do we get from where we are to a tight ship is the conversation.
- [10:17]
A
And I mean now is the time too. Like based on, you know what I always keep coming back to is the why, why now, John? Why does it matter now? Like continue running at 13%, running experiments and shooting long shots to try and get massive growth potential. But I think that now going into 2026 is the year where this is actually the most pertinent. And it's for a few. I think that it matters in 2026 more than it has in any other year that I've been running the last four years is because a we have massive amounts of AI. The industry has changed. Whether we like it or not. The industry has had a complete flip from csrs to dispatch to accounting to just across the, the back end of all of your, all of your ops side. That's not, I mean even, even tech driven, like all of the sillas and all the kind of listening applications and, and training applications. So like it is not Scylla. What's the one I'm thinking of?
- [11:25]
B
Craft is who we use craft.
- [11:27]
A
So yeah, craft is a great example. But yeah, like it has changed the, the industry and it is ramped so much faster than anybody thought. The beginning of this year we were like ah, you know, chat GPT kind of helps us re rewrite emails better. And now it's like no, this is industry changer. That's number one. And then number two is the industry has gotten significantly harder. 2025 was a harder year for H Vac than it has been for the last eight to 10 years. I'm saying that not based on my, I mean based on my specific.
- [12:02]
B
There's like public data, but the public data.
- [12:04]
A
Yeah, it has been a harder year.
- [12:07]
B
Yeah, I mean they're even, I think they're about to roll back the 410 ban because like hey, it didn't go well. People have a lot of inventory still sitting. So, like, they have to extend it.
- [12:18]
A
And so on the whole, it has been a hard year. So what do you do in the hard years? You pivot a little bit away from maybe growth, specific metrics into, hey, let's make sure this is a healthy business. Let's focus a little bit less on massive growth and focus a little bit more on making sure that we are actually cash flowing, we're filling the coffers, and that the business is going to be healthy. So I think it's super applicable going into 2026, more so than any time in the last four years for me.
- [12:47]
B
No, I think so, too. Yeah, I think so, too. And I think it just gives you Runway. I think it gives you the chance to experiment. I think it gives you optionality. And I don't know if I said this on. On the show or not, but something that was kind of funny was, I will. I'll know my EBITDA percentage, like, down to the, like, tenth decimal point. And. But. But this year, I had absolutely no idea what my net profit was because it's kind of, in my mind, almost irrelevant. Like, I don't really draw cash from the business, and so it just doesn't matter. So I've never really thought about it, honestly, which probably sounds, like, ridiculous to a lot of people, but, yeah, I've only cared about ebitda. So next year, one of our big targets is, like, okay, 20% EBIT, 10% net. Because it turns out my. My net was only, like, 3%, but the gap between my EBITDA net is 10%. That's going to be depreciation, amortization, interest for debt. So there's a lot going on in that bucket. But so, yeah, we want to hit 10% net, 20% EBITDA. So that was part of it, too, was just like, us learning, like, oh, okay, 13% EBITDA is actually not that good. Because if 13% EBITDA means 3% net, well, 3% net doesn't sound that inspiring to me. So some of this is just, like, us continuing to mature as an organization and figure out what good looks like.
- [14:13]
A
Yeah. For me, I'm just trying to draw parallels to why this is why this matters for somebody who isn't, you know, $40,000 or $40 million business. Right.
- [14:22]
B
So, like, if you're not $40 million business either, but, you know, or on.
- [14:26]
A
On budget for $40 million, I'm talking about, though, if you're like a 1 or 2 million, I think this is. This is equally as Important again. Yeah, you're still trying to grow. But I do think that 2026 is a. Not necessarily a year of reset, but a year that there is or should be focus not only on giant growth numbers to try and double or triple your business, but also to slow down and make sure that your business is healthy because the market is changing. That's all I was getting at.
- [14:54]
B
Yeah, I think that makes sense. When we first started really acquiring, we did it from a position of strength. We had almost no debt on the business and it was a 3 million dollar a year business. Like revenue net was probably like 2, 300,000. And that gave us a lot of room.
- [15:15]
A
Yeah.
- [15:17]
B
To do whatever. So I think, yeah, that's one of the benefits of a strong business. Like you know, if, if people have been following the journey. Like yeah, we've acquired a lot, we've grown a lot. A lot of stuff has happened in 10 years. But it started with we built a healthy debt free business first. We then indebted the hell out of it. But now we're like back to healthy. We're under one times debt, which is like really good. So. But you know, a couple years there we were like four times. Yeah, so that was less good. But yeah, I think my point is it's, this is important at any size. Like yes, it's important right now because 25, end of 25 was tough. Early 26 doesn't look much better. But I think at any point it's, it's important to like take a moment and get healthy and then invest from a position of strength.
- [16:07]
A
Sweet. So moving into 2026, where are your focuses? I mean if we want to start the obvious one or one of the more easy ones I think is marketing. What are you, how are you looking at marketing going into 2026?
- [16:23]
B
Yeah, Mark, marketing was interesting. We've experimented a lot over and like on, on one hand that's really good. We've been, and we've been tracking like crazy. So we've been tracking roi. So hey, here's how much we spent on this lead source. Here's how much money it produced. A new thing that we started tracking was cancellation rate, which we just hadn't really been looking at that previously. We were using ROI to drive the bus and ROI is good. Like that tells you most of the story. But cancellation rate added a little bit more flavor. So if we have like something that has like five times roi, five times is like a, like work is acceptable.
- [17:03]
A
I was just acceptable.
- [17:05]
B
Yeah, yeah, it's acceptable. Great. Like amazing. Never turn it off as a 10 times. So then anywhere in that, you know, five to 10 times is where most of our stuff lands. Obviously now we have a bunch of marketing efforts that have generated like a three times one month and an eight times the other month. And you know, we're just like, man, what, what's going on? Like, what's, what's the difference here? And the difference has been cancellation rate.
- [17:28]
A
Yep.
- [17:29]
B
So that has been really interesting. So as we've started shaving off, like we've started just like shaving off things that aren't as productive or don't feel as productive. I have not taken this to the extreme that some others have. Like, I have a friend that shut down $80,000 a month of Google Ads a month ago and had zero impact on leads.
- [17:52]
A
It wasn't, I mean, I think that that's public. It was on Twitter. Rich. Didn't Rich do that?
- [17:56]
B
It was Rich, yeah. Crazy.
- [17:59]
A
Because the, the theory was that Google isn't sending you as much as you think. They're sending you through paid there. Yeah, they're sending organic was where he was getting that. That value.
- [18:11]
B
Yeah, yeah.
- [18:13]
A
I mean I'm not, don't get wrong. I never run PPC, so I've tried like four times. It just doesn't work. We don't get ROI, etc. Etc. But we always leave LSA on just because it's pay as it comes through. So it's not, is.
- [18:26]
B
It's very, I mean even PPC aside, because I think that's market dependent. But like lead aggregators, like we shut down like four lead aggregators and it's like, okay, like one month, it was amazing. Like some of the swings were wild. Like one month we'd have a 12 times and one month we'd have a two times. Then you start unpacking a little bit more. It's like, okay, well the average ticket that one month we sold a huge job. Okay, that's how it got to 12 times. But it really like yo, yo, back and forth. So that's really the big thing we did is we just shut down stuff that was inconsistently performing. It was a, for helpful context for us. That was like a 30 to $40,000 a month savings.
- [19:05]
A
Are you quantifying the labor on the back end? It takes to manage those as well. So for example, right, if you had three people who ran your LSA PPC and you're like, hey, we're showing them PPC because it's on that margin, it's 3 to 4, maybe 5x. But it also takes two headcount to run. Like that's again, not your situation. That's extreme example to prove a point. But is that what you're looking at or are you just looking solely at the. The actual ROI and cancellation rate?
- [19:39]
B
We've been look, we've basically just added more stuff to it. So what's our book rate, what's our cancel rate, what's our demo rate? Like, how many times do we actually go, what's roi? What's number of sold jobs, which average ticket by lead source. So we've just been getting more and more and more data and it's just given us better perspective.
- [19:57]
A
So even if something is moneyballing, I'm calling moneyballing. Correct. You're still pulling it because of the swing nature. So a great example that I have is Facebook ads, right? So like you run Facebook ads, you might get three months of nothing followed by one month where you hit a $70,000 home run slam dunk. So on the year, right, that plays out consistently on the year, you might ROI at that 6x. But it is like nothing, nothing, nothing, boom. Nothing, nothing, nothing, boom. Does that mean that we would not pull that scenario?
- [20:37]
B
Because the idea is like, I can fill it with something more consistent. So can I pull this and then where can I put it? It's like not, not. It's not always like pure savings every time. It's like gonna be reinvested somewhere else.
- [20:50]
A
Yeah, that's interesting because I struggle with that one, right? It. We don't run Facebook ads anymore because of. We pulled it. It was very inconsistent. But that being said, like it is from. Again, I. I think it comes back to. For me, it's yes, it worked this year, but it was inconsistently worked. So that means that it doesn't work. Like we got. That's a lucky scenario, not a consist.
- [21:14]
B
That's how I would see that. Yeah, that's how I would see that is we lucked out. We didn't like do great.
- [21:18]
A
Okay, so you're going through moving, removing ROI or non roi, non consistent issue. Channels of marketing. Makes sense anywhere else in the marketing channels? Because I know you guys run different channels.
- [21:35]
B
Softwares. Yeah, excess softwares. Like we don't. Yeah, like. Yeah, basically that's it.
- [21:40]
A
But how are you. How are you looking at branded versus non branded? Like that's a great.
- [21:45]
B
Oh yeah, so we did that earlier this year. So that was. Yeah, I guess that that was like four or five months ago. So we missed budget in over the late summer. Like basically driven by H Vac. I think I explained this last time but if this is the first one you've listened to, H Vac was we're basically flat year to date. We didn't lose, but we didn't really win. But we did invest a ton of resources into it and branded marketing was a really big part of that. So we paused that in August or September and so I'm not really thinking about that for 2026.
- [22:21]
A
That was like you paused branded marketing and you're still a business that's running. That's such a surprise.
- [22:28]
B
Well, we paused most of it. But yeah.
- [22:30]
A
Yeah, interesting. I mean because you know we hear the antidote. I can never say this word antidotal evidence anecdote.
- [22:39]
B
I mean there's good and bad like there's good and bad like yes, it was a short term win. You know, long term. Is there going to be damage? I don't think so because we didn't have it on for very long. I think. Yeah. You know this year like again the, the back half was challenging. The industry had challenges. One thing that I am proud of is how we pivoted like there we set a plan at the beginning of the year and when the facts changed, we changed with them. And I don't think that everybody does that and I don't think everybody did that. And I thought that we, our team did a really good job being flexible and sort of rising to the occasion.
- [23:19]
A
Well, okay, so you cut branded.
- [23:21]
B
Yep.
- [23:22]
A
Any other specific channels? Because I know you run.
- [23:25]
B
That's, that's, those are the big ones. But like marketing spend from the whole budget went from 200,000amonth to like a.
- [23:31]
A
Hundred thirty while still keeping revenue relatively.
- [23:36]
B
Call board is full and. Yep.
- [23:39]
A
So that's, that's your plan to get couple hundred thousand in marketing or 100,000 in marketing back this year to the bottom line.
- [23:49]
B
Just efficient.
- [23:49]
A
Basically just being efficient marketing. Making sure that you're on roi. Making sure that you, you're not going off of. Off of the vibes and the feels that you're actually going off of that you're auditing every single channel that you're producing and that it is prod. I mean OPEX is another big one. Right. So like you're going to be running a certain amount of operations on your back end that in the office. Around, around the office that yeah. Are potentially inefficient. Where, where'd you start on that one?
- [24:20]
B
We pro. We might have different problems than like other companies. So like, fair warning, if you listen to this and you're like, oh, that's. That sounds stupid. It is first off, but a pain point that a lot of companies have that like, I. I texted one of these group chats, I. And I was like, hey, what are you guys doing about this? And everyone was like, oh yeah, we remember that. And I was like, like, everybody goes through it, but software licenses is a ridiculous pain point where like, you want to be able to delegate everything out and like make stuff frictionless and onboard employees and all this stuff. And then what'll happen is like, oh, that guy we fired a year ago still has a per month license on a software we use, whether it's Service Titan or our phone system or like pick a thing, we have like 40 software. Yeah, Adobe. Yeah, Adobe was an actual use case. Over, over the years we've had like loom beyond five different people's credit cards. Like, it's just absolutely crazy. So software licenses is like a very real and obnoxious pain point. That pain point alone is 10 to $12,000 a month of just burning money in a pile.
- [25:31]
A
I was just talking to another owner two days ago and he said he canceled every single subscription he had outside of his CRM. And I, I texted you right before this, there was a big update on Lovable and he physically built out 3 or 4 of his subscription softwares. He built them out on, on an AI system and he's like, I've been using them now for three weeks and they work.
- [25:56]
B
It's fine.
- [25:57]
A
Yes, they are perfectly applicable. And then so I went back in and I started messing around with it and I was like, oh, I can shave off 20 hours a week in what my arap person is doing by this lovable app I built in 15 seconds.
- [26:11]
B
No, it is wild. I mean, we built fleet apps, we've built internal tools. We've done a lot with that. Now granted, we slowed over the last couple of months. Another easy one was like price book. We were on the Price Book Pro product with Service Titan and we built our own. That's $7,000 a month, like for a spreadsheet. Right? Like, granted, it took a lot of work from us, but that was humongous. So all in all, I think it was 40 or 50 grand a month of just like, hey, do we now are. Granted our overhead budget is like it was 800,000amonth in peak. So, you know, 40 to 50 grand a month, it's a lot of money. But like, it's also only 5% of our total overhead budget. So it, it is surprisingly not hard to find. Yeah, that saving. So I'm not trying to be unrelatable, but it's not hard to find 5% savings. But yeah. And a lot of it's very low hanging fruit or like, hey, if I do this one time project of a price book, I don't have to pay 80 grand for a price book next year. Yeah, yeah, we should probably do that.
- [27:17]
A
The haters will say, how are you managing that price book? Because price book is an actively managed thing. So do you have somebody on the back end that is actively managing said price book?
- [27:26]
B
Yeah, but you know PriceBook Pro, their whole pitch used to be like, hey, pay us a ton of money and we'll actively manage your price book. And like big shock, it didn't do that. Like it was a, it was a non functional product. So someone's been managing the price book.
- [27:40]
A
Internally for allegedly two years for anybody who's listening. Allegedly.
- [27:44]
B
Yeah, allegedly. Yeah, I've given my feedback to them directly. But yeah, it's just annoying. Yeah, it's, it's an annoying problem.
- [27:52]
A
But so go through software, go through credit cards, cut the things you're no longer using because everybody's do, everybody has it. And I think that's a great advice for your personal life as well. For the, the Audible, the Audible subscription that sneaks through every month on mine still. And I have like 14 credits because I just never use it. So that's always a good one. Do it for business. And then I mean you'd be amazed.
- [28:16]
B
What you can find. Like that's a, those two things was like 5 to 10% of overhead budget, which, that's a lot. That's a million dollars a year for us. One of the tools I've personally seen make a huge difference for service business owners is Quo, formerly openphone. Because when you miss a call, you're not just missing a conversation, you're losing business. Quo is the modern business phone solution. Powered by AI that helps you stay relevant, responsive and connected. It logs calls, creates summaries and automates next steps. From drag and drop setup to AI powered call tags. Every detail is designed to make your phone system smarter, your customers happier, and your team more in sync. It's one of those tools that makes you wonder why you didn't already switch 90,000 businesses already have. Start your 7 day free trial at the link below and get 20% off your first 6 months just for being a part of the owner operated crew. Whoa. No missed calls, no miss customers.
- [29:08]
A
The Other big one for us has been. And we've. I mean I'll harp on this because I created a second business that only does this is like overseas as. As internal office staff has left, we've had turnover in our office. It's no surprise. Everybody has turnover at some point. We have not replaced with US citizens. Like it's just overseas hires for dispatch for csr for outbounding for the AR person is in the Philippines. Accounting reconciliation persons in the Philippines. Like just going overseas for the hiring has been huge. To keep our. Like we run a sub. I think it's sub 6%. Yeah. And it's all like managers. That's it. It's managers, managers, managers. So and. Or warehouse person. Because you can't, you can't sub that out. But that one's been big for us. Is that your only opex? Like that was your. That was your 5%. Was like, hey, we got rid of some subscriptions.
- [30:04]
B
Well, yeah, I mean there's a. Yeah. Like most of it. Like, we've tightened up. It's a lot of like tightening up. Like as an example, 90io for EOS. Like, why are we paying $8,000 a year for this spreadsheet? Like, like really, like, why are we actually paying $8,000 a year? And it could be a spreadsheet, you could make it unlovable. But like, regardless, it doesn't need to be 700 bucks a month. So it's been a bunch of just like random bullshit like that. But I mean 10 to 12,000 of it was tightening up users. And what we did is we intentionally made it very, very hard to onboard new users into softwares. We just like, we made it as frictionless as we could so we could have a smoother onboarding experience. And all that turned into was burning 100 grand a year. So now we're making it as hard as possible and I'm sure we'll land somewhere in the middle.
- [31:00]
A
I'm trying to think of other buckets that you'd pull from where. Where else did you pull to earn back ebitda. So we have acquisitions, which is not really. That's not this episode. We have marketing spend. We have opex. Where else are you looking to?
- [31:19]
B
There was like efficiencies. So hey, what's our, what's our drive time for the field? Are we like, how do you blend dispatching for profits plus number of calls per day? Like how much windshield time are we putting on? So that was a really big one. Like we think that that's 250,000 of EBITDA next year. Sorry, inside OPEX. Like, the conversations get interesting. So I'm going back one. But our credit card. We're negotiating our merchant fees. That's 11 or 12,000amonth. Like, that alone is 11 or 12,000amonth. And on top of that, we're considering charging for credit cards. So that would be 30 grand a month of, like, EBITDA change, which is obviously very significant.
- [32:05]
A
I think there's a bunch in that realm and we've talked about it before, so I don't want to beat the dead horse, but I always think a good one is going back to all your vendors. Every single one. We were just talking to one of our breaking 5 million.
- [32:19]
B
We renegotiated Service Titan a year early.
- [32:22]
A
Yeah.
- [32:22]
B
We've negotiated our phone system a year early. Like 100.
- [32:27]
A
Yeah, shout out. I'm not gonna shout him out because I don't know if he wants to be shouted out in this subject. But one of our recent breaking five grads took that home and he's like, jack, I just did it. I just did it. I was this kind of dealer, and I was a do or die, this kind of dealer forever. And we started running a BOGO deals and da, da, da, da. And he's like. And they wouldn't help us. We switched vendors and boom, not only were they going to help us with our BOGO deals and giving us a temporary discount to work with us on these deals.
- [32:53]
B
Yeah.
- [32:54]
A
They've cut spending or they've cut the cost across all of our H Vac lines. Yeah. And then I was like, oh, I got to do this for everyone. Then I went to Verizon and I talked to Verizon. They gave us a discount. And he said, just keep going.
- [33:05]
B
He's like, oh, that was another major thing we did. We switched from Verizon to T Mobile. 10,000amonth. Like, I know everything's 10,000amonth, but, like, that's actually what it was. We went from 14 to 4. Like, it was insane.
- [33:17]
A
And so he's like, I'm going into the new year with like 160,000 or 140,000 of bottom line that I'm expected into next year from just this. These, like, three or four vendors.
- [33:31]
B
Well, something that was really interesting for 2025 was we did a big, like, H Vac negotiation and software negotiation. At the end of 24, in early 26, we'll get our first rebate check. So, like, that's an 18 month time period from we did the work in August of 24. And our first rebate check is February of 26. That's a really long time. So we have a few decisions like that. T Mobile was a great example because we started working on that over the summer, but it kicked in in October. So like most of the year, like that's an action that we've already taken, but most of our year doesn't show that action. It's just, it's going to reflect on next year. So I think sooner the better, I guess is my point. Because a lot of this stuff takes a really long time to like work its way through the system. And this is back to my EBITDA is not a light switch, it's an on ramp. Yeah. The moment you start, focus. Like we did T Mobile, that took us three months to switch. It's going to take us a whole year to realize this. Actual like booked savings for that.
- [34:38]
A
Plus all these vendors have contracts, right? They make you sign. T Mobile or Verizon's gonna make you sign a contract for a year. Service time makes you sign contracts. They all make you sign contracts. So it's non renewal and then go ahead and start, start the process. So like it's not going to be an overnight. Hey, call, hey. It's like you have three more months on your contract, sir. Whether you cancel, you're going to have to pay. So but in three months, you need to be having that conversation and be ready.
- [35:05]
B
Yeah, yeah, I think start, start soon. But yeah, there's a bunch of like credit card merchant fees, software users type of financing. Verizon. Yeah, like all that stuff together was, yeah, 30 or 40 grand a month. It was a lot of money.
- [35:20]
A
Yeah, that's huge. I mean, I'd love 30, 40 grand a month to spend on other things.
- [35:25]
B
So. Yeah, so that's how we thought about opex. It was a bunch of these, like little wins, but they ended up being pretty big. And it also forced us to have some conversations like, should we charge for credit cards? Like, I had someone come out and fix my dryer the other day. They. And it was Mr. Appliance. Right. It was a franchise. They charged me for a credit card and I was like, when did you start doing this? Two months ago. What's the pushback, Ben? Almost none. And I'm like, all right, well, yeah, maybe we should be doing this.
- [35:50]
A
I mean, again, it's changing market, right? And, and also Mr. Dryer is probably a lower ticket. So my wonder is like, I know you different market.
- [35:59]
B
I pitched a couple friends on this that are in Pennsylvania and they said they only do it for service and not.
- [36:05]
A
There you go. That's what I was thinking like because on an $18,000 2 unit like 3% makes a difference versus yes, but I.
- [36:13]
B
Mean even that would save another 10 grand a month. So yeah, pretty significant. Another big one like our. I always remember this from that one book. I love that one book. Double your profit.
- [36:24]
A
Yeah.
- [36:25]
B
In six months or less by Bob Pfeiffer. It's like a favorite book of mine. The question is, hey, if you had to go get 10% savings today in your business, where is the easiest place to find it? Like the easiest you could just go do it in an hour. And it all starts with your materials. Like that is where you find it. How are we sourcing it? Are we negotiating those pricing? And even if you do negotiate it, like a fun surprise for us and we run kind of like a tight ship these days is we've been overbuild for water heaters for six months by a hundred dollars a unit for forty gallon shorts which was very annoying. And so yeah, so I mean even just like what are, are you negotiating then? Like what's your follow up process? Because now you know it's a $20,000 like cash out of my pocket that we're going to go get it. But it's annoying. I would have liked that two months ago. So yeah, I think that's the, that's the easiest way to find it. Can you centralize vendors? Can you negotiate pricing? Can you negotiate rebates? You know our rebates now for H Vac are in the low teens and it used to be 3% and that's a massive difference on millions of dollars of purchases a year. It's crazy. But rebates alone was a two hundred plus thousand dollar add back like this year it like that's, that's like wild to me because in 2024 it was 30 grand.
- [37:54]
A
Yeah, we just pushed up into this, this and I mean in negotiating those rebates too because those rebates aren't solid. Again, if you're not a great negotiator, you need to, to learn how because we ended up negotiating. I think John, you were pretty blown away. I mean I'm fine saying it. We just moved into the double digit rebates and it back, they back back, apply it to everything you spent this year. So even though we maybe started off at 7%, now we are getting double digit rebates that include that beginning spend and they're making that 7% move up.
- [38:30]
B
It's a huge difference. So, like, that's an example. Are we running a tight process on bidding materials? Are we. Do we have a software to find when you've been overbilled? Which, like, now it's almost becoming like the hot thing. If you're a vendor and you're listening to this fair warning. All of our, all of our group chats are like, everyone's actively finding or building tools to catch the like, frequency of overbilling.
- [38:59]
A
I think Ferguson gets picked out overbuild monthly.
- [39:03]
B
Yeah.
- [39:03]
A
Regularly.
- [39:05]
B
Yeah. It's crazy.
- [39:07]
A
Lack of credits that have actively returned items.
- [39:11]
B
Yeah.
- [39:12]
A
Double charges and over. Over billings on equipment and or parts or pieces. We found one the other day which was a full price equipment. I was like, how does that even happen? Like, everything else was our normal pricing, but one piece of a specific equipment was full price. I'm going, that's an extra thousand dollars that we're spending. Like, that's.
- [39:33]
B
It's a lot. Yeah. I mean, so you know, you know, one of the ways, you know, for our material next year we went from. In 2024, we had 27 material. In 2025, we're at 25. And next year we think we can be at 23. And blended. The blended. Yeah. And the path to get there is consolidate. Vendors negotiate, track like, that's it. I mean, even this water heater specific case, $20,000 essentially vanished into absolute nothingness for some mistake that they made in their computer. And if we hadn't caught it, we'd be out 20 grand.
- [40:15]
A
Yep. And to be clear, I love my distributor. I love my salesperson. I know it's not intentional, but they're Ferguson.
- [40:27]
B
It is intentional. Like the way their software works is like, if you go to the, like, I'll say this, but I, I'm like.
- [40:37]
A
Nice vendor, nice vendor. Give me more.
- [40:39]
B
And you're like, which. If I was Ferguson, I would too. So like, I'm not throwing any like rocks here, but the way it works is like they get like a touch charge or something if you go to their counter. So if you buy frequently from specifically Ferguson, you just want to like double check. Like, hey, if, if you order it and it's shipped or delivered, it might be a dollar. If you go in and they have to touch it, it might be $4. So just like, fair warning, I'm still.
- [41:05]
A
Being nice to the vendor. You could say whatever you want, John. You have much.
- [41:09]
B
I'm just like, I think, hey, there's a lot of softwares out there that catch this now. So, like, yeah, don't be surprised when you get caught, I guess. Yeah. So like, that's how we're approaching vendor purchases. And we think that the difference is hundreds of thousands of dollars. Rebates alone was. So if you can maximize your rebates, that's a few hundred grand.
- [41:29]
A
Do you find, here's a good question. Do you find that vendors are more willing to. Right. So you go to them. The process is you go to your vendor, you say, hey, I get better pricing from this person. Would you be interested? Or whatever the, the spiel may be. Like, yeah, we can match the pricing. And they say, well, can you do a rebate? Do you think that the rebate negotiation is easier than the pricing negotiation? What. How do you view that? Or.
- [41:53]
B
I think it's all part of the puzzle. Okay, yeah, like, what's, what's the rebate? What's the price lock? Like if, if we're signing up with a new vendor and you gave us pricing, how long is the pricing good for? If it's good for a week, like, okay, we're going to establish this new relationship and you'll just jack my pricing in a week. That's not really helpful.
- [42:12]
A
We always try to negotiate terms. That's a big one for us. I want net six.
- [42:15]
B
Yeah, terms is a big one. Like, we basically don't work. I don't think I've signed on with a new vendor for under 60 day terms in like five or six years now.
- [42:23]
A
And they always push back. That's the funny part is they actually.
- [42:26]
B
Don'T get any pushback at any point.
- [42:28]
A
Well, you're a lot bigger, but like, for our size, like, we, we're on that border where like, they, they see the growth. They want us as a, as their client, but they're also like, yeah, we've never done net 60 with any of our people before. I'm like, I know that's not true. Like, come on, don't, don't mess with me. And then they, you know, the being part of the podcast is nice because I can name drop and be like, I know this person who has net 16 or this person who's net 16, and they're like, okay, fine, Jack, shut, shut up. We'll work with you. But I always find it funny. I enjoy, I enjoyed the negotiation, so I always put push for necessity. I'm like, I know. I, I don't want your vacation. Give me better pricing. I don't want your. Yes, yeah, extra truck wraps. Give me better Pricing. And they all, they all know my spiel now, so it's not fun anymore.
- [43:12]
B
Yeah. But I think it's all part of the package. Like how long's the price lock? What are the terms? I think there's some things that are just non negotiable. So you know, we're finishing up a process right now on a part of our purchasing. And there were some things that weren't even like a conversation. And for example, 60 day terms weren't even a comm. Like they weren't even a. It was like this is what it is. If we just won't talk to you if that's not the case and everyone still came to play God. Yeah. I think if you run a deliberate process, I mean, you know, we're talking about millions of dollars, so we're talking a million dollars. You got to be flexible a little bit here. Yeah. Awesome.
- [43:52]
A
Well, were there any other big items.
- [43:54]
B
That you think those were probably the big ones. I mean acquisitions. Howard. Thinking about materials and purchasing. OPEX efficiency. I mean those were. And marketing efficiency. Those were our big ones.
- [44:08]
A
Sweet.
- [44:09]
B
But you know, 2 million of our gains going to come from acquisitions and a million and a half is going to come from operational efficiency, which is not that much money really. You know, it's just not. Which is crazy. Like can you get a 5% discount on equipment and like you're there.
- [44:28]
A
Yeah, exactly.
- [44:30]
B
Yeah.
- [44:30]
A
Awesome. I, I'm, I'm all for it. Good luck for a solid 2026 for everyone listening. Have a Merry Christmas. Happy Holidays. I don't.
- [44:40]
B
I think Merry Christmas.
- [44:41]
A
Shooting back until the new year. Possibly true. Also. I just show up when I'm told.
- [44:46]
B
Thanks everyone. Thanks for tuning in. We actually just hit like top 200 on Apple Podcasts, which was really cool. It was like 187. Love that for us. So make sure you're liking subscribing and giving us five stars. That was pretty cool.
- [45:00]
A
Appreciate guys.