← The Home Service Expert Podcast
The Home Service Expert Podcast
#411 Harnessing AI for Financial Insights with Mike Barnhart
01:09:24
In this conversation, Mike Barnhart, COO and CFO of Eco Plumbers, discusses the essential role of hope in leadership, financial growth strategies, and the importance of curiosity in business. The discussion also covers customer retention through...
Loading summary
Transcript194 lines
- [00:00]
A
As leaders, we are dealers of hope. And there's this phrase, without hope, the people will perish. And so we have to be providing hope for everybody. That's part of our team. And literally, like, I don't think a week goes by that I don't think about that is that we, as leaders are dealers of hope so that our people don't perish.
- [00:21]
B
Welcome to the Home Service Expert, where each week Tommy chats with world class entrepreneurs and experts in various fields like marketing, sales, hiring and leadership to find out what's really behind their success in business. Now your host, the home service millionaire, Tommy Mello. Before we get started, I wanted to share two important things with you. First, I want you to implement what you learned today. To do that, you'll have to take a lot of notes. But I also want you to fully concentrate on the interview. So I asked the team to take notes for you. Just text note N O t e s to 888-852-6-1299. That's 888-526-1299 and you'll receive a link to download the notes from today's episode. Also, if you haven't got your copy of my newest book, elevate, please go check it out. I'll share with you how I attracted and developed a winning team that helped me build a $200 million company in 22 states. Just go to elevateandwin.com podcast to get your copy. Now let's go back into the interview. All right, guys, welcome back to the Home Service Expert. Today is a special day. I've been trying to get Mike Barnhart here for three years.
- [01:34]
A
Three years.
- [01:35]
B
And we've been talking about just how to get him on the podcast. He's a busy guy. He is acting as the coo, the cfo, shared services within Eco Plumbers. You guys know I hang out with Aaron Gaynor quite a bit, but Mike started listening to the podcast originally turned Aaron onto me. And little did you know that Aaron's son Chase moved out here to go to asu. So Aaron's out here a lot. We share a lot of business advice on what's going on, good, bad and ugly. Mike's an expert in finance, strategic planning, performance management. He's located in Columbus, Ohio. He's worked quite a few places. I know Victoria's Secret is my favorite one. He met Eco's owner Aaron Gaynor in 2013 and officially joined the company in January 2015, helping Eco plumbers grow from 1.9 million to a projected 73 million. Mike is known for his strategic initiatives, financial acumen and emphasis on data driven decision making. What's up, brother?
- [02:35]
A
What's up? I gotta fix one of those numbers. We did 73 million last year. We're going for 91 this year.
- [02:41]
B
91. You see, you know, it's a CFO and they're like, so no, other people say 90 or 100. You say 91.
- [02:48]
A
91.
- [02:49]
B
So what's a healthy bottom line on 91? Usually people say 15%.
- [02:55]
A
Yeah, I mean, 15 is a good one. If you can get to 17 or 18, you're doing even better.
- [03:00]
B
That's true. What do you consider failing?
- [03:05]
A
Under 10?
- [03:06]
B
Under 10 in growth years? One of the things I've realized that I always used to tell myself before I got a great CFO is I keep put. I always used to say, I put the money back in. Hey, I put the money back in. I put the money back in. But I didn't realize unless it's going into marketing or strategic hiring or some type of like power BI analytics, I wasn't putting the money back in. I was actually wasting the money and I just lied to myself.
- [03:30]
A
You know, our strategy has always been greenfielding, but still our Cincinnati location, we still lose money in it today and we're a year and a half in, but our Advertising spend is 35% of revenue right now. So you're doing that because when you look at the success story of it, like our Dayton location, we opened up in 2021. This year we're doing $20 million in Dayton and it's super cash flow positive. It's actually the highest margin in location business right now in our business. So it's, it is a little bit different as you're scaling and how that changes.
- [04:02]
B
I got a business right now and I obviously under NDA, but it would cost us about $30 million to buy. And Cortech, our sponsor, said, would you rather put that money into marketing or buying this business? And I'm like, aha. I'm like, I'd rather put it into marketing. So you're going to give me that over and above what we spend today. It's, you know, me and Tom Howard are having a debate actually at Rhino about Greenfield versus or Greenfield versus Buy and build or, you know, buy and build or M and A. And he likes M and A way better. I, I feel like you gotta find the right company and then you gotta. There's a lot to be done on integrations, changing the culture. You lose a lot of the Employees, but you're buying the lead source. I don't know. You guys haven't done much acquisitions, but where's your. If you had to pick and choose, I think Greenfield allows you to take your own shot. Call your shotgirl whenever you want once you build that playbook. And I think it's worth more. If I'm going to buy your company, I'm going to say, man, these guys figured out Greenfield. Yeah, they could scale to any market at any time.
- [05:03]
A
It is. It is slower, for sure, you know, and you talk to Tom Howard. I remember I asked Tom one time. I was like, tell me about, you know, a tuck in that didn't go well. And he's like, they've all gone well, you know, so maybe some people are better than others. But, you know, with Greenfielding, it's kind of crazy because, yes, it does take three to four years to really adopt in the market, but once you've hit that kind of threshold, it's like you've always been there. It's like you've been there for 20 years, you know, even though, like, once people do pick up your name. And really, I mean, anything that we've ever. I don't know if you've seen this, but anytime I've ever, like, made a change or, you know, we used to just be plumbing only, and we added excavation, then we added H vac, we added electrical, we added other locations. Like, you have these, like, changing points within your business, and they all. From the minute you make them and you start to enact them, they all seem to take, like, 36 months to get some traction. Maybe you can make it a little faster than that with as many as good as you are, but it always has taken me three years to really build something.
- [05:59]
B
Yeah, that's the thing. People overestimate what they could do in one year, underestimate what they could do in five. Everybody wants it tomorrow. They're like, I look at people's budgets, and I'm like, wait, you're gonna 3x this year? But you never 3x'd why this year? And they're like, well, I'm focused now, and you've proven it's possible. And I think some people, unfortunately listen to this podcast, are trying to live my dream and do what I did, but they don't know the sacrifice it took. I don't have kids. I'm not married. Didn't spend enough time with my niece and nephews. I don't know what your thoughts are, but, you know, your goal should be to get to an exit that provides for you, your family and takes care of you, and hopefully get to roll equity and continue to. We like to grow things. I mean, as a COO and part owner of EcoPLumber, I'm sure you're. You're like, dude, you're enjoying the growth more than probably maybe trying to hit the finish line. What do you, what, mentally, how do you look at the growth of ego?
- [06:57]
A
So, yeah, I mean, you know, to look at it throughout the years, I've been doing it for 11 years now. We've gone from 1.9 million to 91 million this year. It's been a really rewarding journey, for sure. You know, you do have those kind of pressure points along the way where you do hit these parts of scalability that feels really rough and then you kind of push through them. And a lot of that really comes down to the infrastructure that you build within your company. You have good people, you've got the right meeting cadences, you've got the communication rhythms. And for me, it's, you know, I've never stopped being really curious about the business, you know, for any CFO out there. One of the things that I do every Sunday, and I've been doing it for 11 years now, I send out an email to the whole management side and leadership side of the company of, here's what I think about last week. And you know, I go through about 20 different reports that, you know, I've got kind of flagged on my side. And I look at them and I look at them every Sunday and I start to see trends. You start to understand that business and then you become a really good storyteller. And, you know, you're not going to do that if you're not curious. But once you get able to tell that story, like this year, I was actually, I went to the management team and I was like, hey, I think I'm going to stop doing this email. I'm still going to do it for myself. And they're like, no, you have to keep doing this email because it really does highlight out what is happening within the business, where we have areas for opportunity, where are there anomalies in the business? And then you can, you know, I'm not the one that's most of the time fixing them these days, but I'm helping people understand what's happening so they can address it.
- [08:27]
B
You know, Aaron was telling me, you guys are playing around with AI ChatGPT and you loaded stuff in and it said something like, renegotiate with your Vendors or something crazy like what exactly? How are you as from a CFO slash COO perspective using AI?
- [08:42]
A
Yeah, I mean, at the basic level, it's like why you don't have to. The nice thing about ChatGPT is how easy it is to use. I just load our PDF financial statements in each month and then I'll ask it questions about it. And I'm pretty good at understanding the business, but it will pull things up that I didn't actually see within the business because you can ask really specific questions. Like I could put January of 24 and January of 25, but it has every month in between. I say compare this against the last quarter and compare it against January of 25 by location. And I want to specifically look at the sewer department and it'll give you a really detailed answer on what's going on with that. I don't know why every CFO doesn't do this because the time it takes to do it is under a minute.
- [09:29]
B
I was screwing up with ChatGPT yesterday. You know, I got the app that goes online and you log in, but what's the easiest way to upload a document like a balance sheet income statement or P and L?
- [09:40]
A
Yeah, so, and that's, that's the really intuitive thing about ChatGPT. I do use the desktop version more than the app, but you can, you know, you just load it right in there. It doesn't have to be in any sort of format. Like it knows how to go read it and pick up the correct information and you can ask, you know, extremely detailed questions if you want to get in on it.
- [09:58]
B
So do you have your favorite. This is supposed to be a very helpful podcast to people out there, so maybe you'll share, maybe you won't. But do you have like certain prompts you use other than comparing year over year?
- [10:11]
A
A lot of times I'll look at location differences. So like I want to see how locations are scaling on margin. You know, as CFOs, we definitely care about margin. And you know, that's a nice thing as you, you know, when you're greenfielding a location, you can get to margin stability before you can get to cash flow stability. You want to keep focusing on how do I actually just make this a margin profitable business where some people have gross margin of 50%, some people are 55%. Really depends on what your trade is. If you're heavy H vac replacement, you're probably going to be lower than if you're an electric residential service. But trying to manage that 50 plus percent margin across your business is always going to keep you super healthy.
- [10:56]
B
You know I remember it wasn't that long ago, it feels like yesterday where Aaron came and he's like we finally hired a kick charge and it really was built out of the fact that you guys were going into so many other industries. It couldn't be eco plumbers. Eco the plumbers, you know.
- [11:11]
A
Yeah.
- [11:12]
B
So what was that like, you know, redoing your brand at how big were you guys? What was the revenue?
- [11:18]
A
So we did the brand started in 2022 so we were about 40 million.
- [11:23]
B
That's about when I did it with a one.
- [11:25]
A
Yeah. And oh yeah, he just showed me that your pickup truck wrap. That looks pretty good. I want one of those. But the yeah, we worked with them because we added H Vac and electric and we worked with wizard of ads on that. Adding electric was pretty last minute decision. But the brand is Eco plumbers, electricians and H Vac technicians. That's very intentional. It's not eco plumbing, it's not eco electric, it's eco plumbers, it's eco electricians. It's about the people, it's not about the service. And so we rebranded as that made it more focused on the eco. So it's very in your face even this year. We're almost up to 300 trucks now and we realized like we don't need billboards in Columbus, Ohio anymore. We have 250 of them going around. So let's put that money into a different part of marketing.
- [12:20]
B
That's interesting. You know, I didn't want to bring up Roy Williams, the Wizard of as based out of Austin, Texas. I wouldn't visit him for a day. Drank quite a bit of wine, learned a lot about Don Quixote and you know, a lot of people don't know this but if you want to go visit him, it's not easy to get the invitation but it's 10 grand. He'll take you out to the nicest dinner. Educate on his whole process of how he comes up with his ads. He was the original guy that really made Rolex take off in a lot of the jewelry stores. And then companies started using him for home service and home improvement. 1-800-got-JUNK I believe was one of the first ones and they're a monster. And you know, you guys started using him and it's one of those things where you got to trust the process because you might spend a fortune for the first 6, 912 months but you're trying to be able to Build this thing in like their hypothalamus, their memory bank to, like, when there's something happens with H vac, plumbing, electrical, they think of you, they remember your jingle, they like you, they trust you. And they'll wait a bit longer to book the call, they'll spend more money with you, they're going to smile more because they like your story. Aaron's been telling me about the hate email you guys have been getting. Like, you got sound like a smoker. Tell me about working with. With Roy.
- [13:37]
A
Yeah, so, I mean, you know, I'm the finance side of the business and I do some ops, but you know, I've always been super lucky. Like, Aaron's always handled marketing and sales strategy, but Roy seems to really like me. He calls me Bear. But, you know, the. We have a good relationship with them. And you know, I think the interesting thing is the way I look at marketing and the way that Aaron and him look at marketing are way different. So, like, every time I've had an idea, he's basically like, that's a terrible idea, Mike. Because I don't think that, like, I look at it like, you know, maybe connecting with the logic or the value of a customer. And he thinks about marketing more about storytelling and being an entertainer and really just like, you know, taking a minute to allow people to think about something else from their day other than, you know, what's actually happening in their lives. And for that, it's been a really good partnership. We've definitely created a storyline that happens within the business and he's done a great job for other companies as well.
- [14:34]
B
Yeah, we were out to visit Morris Jenkins about six months ago. And you know, the crazy thing about Roy Williams is he doesn't like working with anybody but the owner. Maybe like a cfo, coo. Because he hates pe.
- [14:49]
A
Yeah, him and Aaron still talk every week.
- [14:51]
B
Yeah, well, the problem with that is eventually, you know, if you're working on getting to a deal, which I think everybody should be if you're in business, I could say this because I've been through it and I've got. Well, I was missing a lot of hair because I got like. What is that called when you lose your hair?
- [15:09]
A
Alopecia.
- [15:10]
B
Alopecia. I got that through the process. It was like, that's stress. And it was super high stress. And now going into the next deal, I'm so excited. Like, everything's running towards the next deal. Like Built to Sell. Grow your ebitda. Like, find the not next best partner, but a partner that could Take you to the next level. And I'm super excited because for some reason I still feel like anything could happen. You know, anything could happen in the economy. Anything could happen within an industry. I know it was really hard for H Vac. You hear H Vac, plumbing, electrical companies. 2024 was a hard year. 2023 was a hard year.
- [15:41]
A
I don't know.
- [15:42]
B
Are you hearing that within the, just the echo chamber of like, I know you guys work with nexstar.
- [15:47]
A
You know, I've heard it from certain companies at the same time. We just didn't experience it much. Like we did 25% organic growth last year. We're doing on right now. I mean, yesterday we had our largest sales day in company history at almost $600,000. It's just, it seems to be moving in our direction the right way. But I have heard that some, even some of those PE groups have, you know, been down year over year. 4 to 5%.
- [16:10]
B
Yeah. So I've got a theory that we're going to be experimenting with that. We're going to pour whatever our marketing budget is now. We're, we're gonna, it'll be 250% of what it is today.
- [16:23]
A
Really?
- [16:23]
B
So like if 100% is called 12%, we're gonna be spending close to 30.
- [16:28]
A
Yeah.
- [16:29]
B
And the way that our CFO structuring that is more in a way that is considered greenfield, you know, it's considered an add back because that's what you spent to grow.
- [16:37]
A
I understand and I don't know exactly.
- [16:39]
B
I don't. But he does and you do.
- [16:41]
A
Well, your, your business is so different than, you know, mine in the fact that, you know, if you have a replacement, you're probably not going to see that customer for a long time or unless you have, I don't know if you have memberships. Do you?
- [16:52]
B
Yeah, we've got 50,000, so.
- [16:54]
A
50,000, wow. So last year we made a big push on memberships and we went out, we sold 10,000 memberships last year. So I heard like you talk about some of your core tenants this year, call center and marketing. One of ours is actually membership fulfillment. Like we have 30 students in our H Vac school right now to become clean, check, maintenance, tax.
- [17:13]
B
And they get good at the turnover.
- [17:15]
A
What's that?
- [17:16]
B
Getting turning over to new equipment right now.
- [17:18]
A
Well, these are green people that have no industry experience. We're teaching them and then we'll flip them to the LTO experience eventually. But for me, that's the biggest unknown part of our business. Right now our call volume is so high and historically we've always had about 70% of our customers would be net new customers. And that's becoming 60 and 50. And, you know, it's becoming more and more repeat customers. And I don't know what the impact of selling 10,000 memberships a year really does for your future call volume. And I think I have a different view on memberships than most people. Like, on average, we sell between or we create about 200, 250 new members a week. People are like, how do you do that many a week? And I sell. We sell for the discount and then we retain them because they offer a good level of service.
- [18:11]
B
You do? Yeah, you got to give a discount up front and then get them in for the reoccurring. But almost every thing is you're going to sell your other, like electric or, you know.
- [18:21]
A
Yeah, but all these best practice groups are always like, no, don't sell it on the discount, don't sell it on the discount. I'm like, why not? Like, if I'm. If I end up in three years with 50,000 members, do you know how strong that makes me as a company?
- [18:33]
B
Well, here's the deal that every PE company, including our partner Cortec, you gotta be able to prove. And a guy like you could prove this pretty simply. But he goes, very rarely have I seen throughout the last decade of looking at hi companies. This is coming from the PE companies. Have I seen them build a profitable model for service agreements. I have so many. And we collect this monthly fee, 13 bucks a month, per month membership. But we have a really hard time like here. Here's our biggest problem. Two things. Number one, you never. Keegan taught me this. Never pay commission to a maintenance tech. You do not want the client feeling like you're out there just to sell them shit when they just signed up. Because you'll, you'll burn them. You get bad reviews, number two, and your goal is just to build a fence around the client. And number two, we've taken technicians that can't make it in the real world and made a maintenance tech. I think that's a mistake. You got to teach them how to be lead setters. Just say, look, I'm just a maintenance tech. I'm going to take care of you. We learning this from Leland. I had a 29 point tune up. Now it's 151 point tune up. Make sure it's long and you take stuff apart and you send pictures to the client. And this takes time to learn this stuff because you guys are newer at this, I believe. So don't send commission. Take a long time to do it. Just have them be good at selling, setting leads. But do not, do not take your guys that don't make it in the real world will make a maintenance tax.
- [19:55]
A
Yeah.
- [19:56]
B
Because the maintenance tax can make the most money out of anybody in the company. Because this client already likes and trusts you. You know what I mean? Does that make sense?
- [20:02]
A
I do. I mean, and as CFO of the company, incentive plans have always been like one of my biggest things that I focus on. So you know, our strategy has always been why can't we pay the best and be the best company at the same time. Right. But you know, for anybody that's not using configurable payroll on Service Titan, like start using it. It creates visibility for your technicians to understand how they' get paid, when they're going to paid what they're going to get paid every single week. And you know, you can really design pretty good incentive plans through configurable payroll.
- [20:33]
B
Ryan from Chirp always brags about how he turned on a couple campaigns along with you and Aaron and, and just murdered it on, you know, calls that abandonment calls. And as much as you guys get, Aaron's like, look, we can't book out sometimes we're too busy.
- [20:47]
A
We are.
- [20:48]
B
And that's a good problem. And then I just got done showing Aaron Lace AI and I do believe, like I really don't think AI is in the call center. Like I don't want to talk to AI, not when I have something broken. I just don't.
- [21:01]
A
Yeah.
- [21:02]
B
So I do what I would want to do as a client. But Lace is built that just to train our call center to get to 90 plus percent and reduce our cancellations. And you know, we're going to do 300 million plus. So every percent we book and every percent we reduce cancellations is $3 million. And that's the way I look at it.
- [21:19]
A
We tested Lace AI and then we ended up adopting it in the entire call center because it is a really good coaching. You know, it teaches even the reps how to be better. I did just hear from Service Titan on Friday of last week that they used to have this feature called Second Chance Leads. Yeah, yeah, but there's only if you're on phones pro and they just opened it up to everybody.
- [21:39]
B
So what are, what are your favorite KPIs from your perspective? Gross profit, obviously. Bottom line, EBITDA. But what do you really, year over year comparing the Same month. What are some of the. What are some of the things you look at that are your favorite KPIs?
- [21:53]
A
Yeah. And some of them probably aren't financial, to be honest. Some of them weren't operational. But definitely, you know, always looking at the quality metrics. So we're looking at recall rates, we're looking at how many members are we rebooking or canceling? You know, how many canceled calls do we have? Those are what I call like the quality metrics. You're looking at your reviews every week. You know, every week we get about 360 reviews. Right now, on average, we have about 303 that are under four stars. You're addressing what those quality measures are up front. I heard you say you're going back to all your 1, 2 and 3 star reviews to try to fix them. I will say that some of them are more around our radio ads.
- [22:30]
B
Those do get removed.
- [22:31]
A
They do get removed. But definitely looking at quality metrics and then looking at, certainly in our business model, that turnover percentage is super important. So bring that up every week. The way that we actually sold 10,000 and created 10,000 new members last week, we talked about it every single week. So Aaron and I still get on a 7am call every Wednesday with the entire field staff across all locations. And we talk about certain things. And for 52 straight weeks last year, we brought up memberships. That was something we just weren't going to drop until it was really adopted within the business.
- [23:06]
B
Let me ask you, we go through this budget and I gotta tell you, budgeting for a guy like me used to be useless. I used to think it put me in a box. And you know, back in the day, we were on a cash versus accrual. We didn't know what like, look though, I've learned a lot. I think budget, like, first of all, I think everyone should have a budget. I think every single human being should have a personal budget. I think every single technician, installer, warehouse guy should have a budget, a personal budget. And I kind of talk about budgeting by just understanding how many calls do I need, what's my booking rate, what's my conversion rate, what's my average ticket? And when I understand that I could really build a really good budget of things to target. And I think Adrian thought I was nuts. He's like, that's not that simple. And then Cortech, without my guidance, said, this is how we build our budget through these KPIs. The exact same thing.
- [23:58]
A
Yeah.
- [23:59]
B
So when you're thinking about a Budget, what do you think about to put it together? Is it through lead gen and hiring and capacity planning? I mean, what are the things you're thinking about?
- [24:07]
A
Yeah, so I mean, I love budgeting. Actually. It's one of my favorite times of the year. And there's a couple things I always do. Is one, when you say everybody needs to have a budget, you're entirely right. If you ever look up, you know, the four steps of execution, we always call it the five steps to execution. You gotta have your mission statement, you gotta have your KPIs, you gotta have your visual scorecards of whether you're winning and losing. That creates accountability. And then you can celebrate it. If you don't have a budget, you can't literally do any of those things. So that's number one. Another thing that I always like to do with the budgeting cycle is reflection on the past year. You know, successful people, they do two things. One, they are, they reflect on what is happening in their lives and usually the readers. But one of the things that we do in our business is, you know, Jim Collins, he had a book called Great by Choice. Talk about bullets and cannonballs. And you know, you have, you've got your, I heard you on your podcast. You've got your four cannonballs, you know, you've got your call center, your marketing. We do the same thing as we look at throughout the past year. What are all these bullets that we fired and what are all the small things that we like tested out to see if they were going to work or not? And which one of those should we actually dedicate a lot more traction to within the budgeting process? Getting at the budgeting level, I actually work with the GMs to build each of their budgets in each location. And we start out at the department level. And your basic KPIs, how many texts do you have? How many calls per week are you going to run? What's your conversion rate? What's your average sale? And that should drive revenue. We do budget a lot of other metrics on that, but every time I do that with the GMs, we did that this year, our budget ended up at 91 million. This year they created a budget about 115 million. So you got to teach people like, hey, it's not so easy to drive these metrics up. You get something called budget euphoria where you start to, you know, I can just increase conversion rates by 3% and I can create an extra $80 on my average sale. But it's not that easy. Like you have to tie that back to behaviors.
- [26:10]
B
Well, it's interesting. I'll tell you. The behaviors are definitely true. But this idea of top grading, we've really, really taken this idea up of. Look, I'm gonna have a conversation with you and Mike. Here's, here's the two, here's the fork in the road. Either you're going to train really hard for the next 90 days and I'm pulling you off the schedule. A lot of ride alongs, go back to Phoenix, we're going to have to enhance your efficiency dramatically or I'm going to write you a letter of recommendation and I'm going to get, you know, I'm going to volunteer you to go work at our competition. My cfo, Adrian, amazing guy, started to top grade his team and he goes, oh my gosh. He came to me like a few months ago, goes, I cannot believe how much easier my life has gotten because he was micromanaging. One of the things Chad Peterman had said, if you find yourself micromanaging your direct reports, you got the wrong person. You shouldn't have to micromanage your direct reports. They should be able to report to you and get their tasks done and their projects done on time and on budget. What are your thoughts and top Grady?
- [27:13]
A
I mean when you, there's, there's two kind of areas of top grading. Like, especially what's happening our businesses right now is like, one is people like, you know, when you find the right person, it just all seems to work out. Like we just, we just found an HR person the past year that's really just clicked within the business and she's done a great job and you know, taking people to the next level and taking recruiting, taking onboarding, all that stuff to the next level so that, you know, investing in people ahead of where you need them is always the right move. Especially like when you think about top grading. Right now, at the size of our business, we're about 400 people. Data scientists can be very helpful and project managers can be very helpful for like. So, you know, very similar to you. We have our kind of six initiatives for the year and each one of those has to have a project team around them. Like this is a team that's going to solve this for the year and they're responsible for A, implementing that and then B, communicating that out to our teams. But you need to have a project manager that's able to facilitate, to make sure that project is staying on track throughout the year because they are bigger projects. The other idea of top Grading is using technology today and there's certain things like you talk about. Yeah, it is very hard to increase average sale. But lately we've been using H vac sales presentation software and we've just seen the amount of add ons go through the roof. We've seen our average sale pick up. We're in non peak season and we're over 50% conversion rate on replacements. We actually are really changing these metrics through a company that's really obsessed with the customer buying experience and providing a better buying experience through technology.
- [28:55]
B
I love this. Explain to me, by the way. I think technology is one of the most important things that's underutilized. I always say we're a technology company that does garage doors. I mean we're running like 25. If you include like your project management tools, your payroll software, the cameras in your vehicle. Like I'm running 25 softwares. Yeah, I mean all day long lace things like Rilla. It's just, it goes on and on and on. Revenue for employee. Now I heard Brandon Dawson talk about this with Grant Cardone. You know, the Cardone team is, he's like, if you're under 275, whatever it was, thousand per employee, I've never looked at it like that. Maybe it doesn't work because I'll never be at that. What are your thoughts on revenue per employee? Is that something that you really like, that metric?
- [29:45]
A
Yeah, I'll say. I look at it once a month and just see how we performed on it. I, I do like the metric because it, it kind of just tells you how efficient you're being in your company. Like how much, you know, kind of fluff do you have. And to a certain extent it should be able to tell you how profitable you are, you know. And it is kind of weird about how every industry is, this isn't like art, just our industry, like kind of every industry, it kind of works out. If you do this and you take your revenue divided by the total number of people, not technicians, but like, you know, your call center, your admin staff, your finance team, everybody included, it works out to somewhere between, you know, around $250,000 of per person. And you know, you have really bad companies that are operating around 160,000. You have really lean companies that are operating around 330,000. That doesn't necessarily mean they're good companies. That just means they're lean and they're probably pretty profitable in doing so. But they also might, you know, be stressed out. So it's worth looking at because it's really hard to be profitable if you're not, you know, let's call it over that $225,000 mark or you're definitely not going to be the profitability that you want to be at.
- [30:49]
B
I'll tell you something that might throw a wrench in this equation is we work with a lot of agencies from the media buys to SEO to ppc. Like we've got the best of the best and then we've got people in house that coordinate stuff between them. You know, when I look at, for example, I was out at one hour and they had about 40 people working in their marketing team and I saw a lot of them working on videos and a lot of stuff. Like I don't want to bring all that in house. I want specialists that have the best software to do what they do. I really like you look at the marketing team. The question is, do you bring inventory in house or do you have like your vendor managed inventory? Right. So there's all these different things that, you know, I've been to shops where they don't own any of their inventory that that's all sold to them and they handle that. Then they don't do any of their marketing. They might have three people on their marketing team. So how do you equate for that?
- [31:40]
A
Yeah, so I mean, or maybe even.
- [31:43]
B
A third party call center for half the calls. I mean, sure.
- [31:45]
A
I mean the other like financial metric that you're really going to look at within all our businesses, that a lot of people call it the big five, but you can call it whatever you want, you're managing your top five expenses, which in every one of our companies is direct labor, direct material, office wages, vehicles and marketing. You know, in the best of companies that's operating 75% of your revenue, typically 70 to 75. And the worst companies, that's 90 to 100. And you know, you're looking at what those benchmarks are. You know, your labor should be around 24%, your material should be around 20%, your office wages should be around 11%. You know, if you can do it, marketing, depending on the market might be different. But as a total company, hopefully you're under 10% and you know, your vehicles, which typically range around 5%. But that's, you know, that's where you're targeting with a lot of those metrics.
- [32:42]
B
Interesting. You said labor 20, labor 15 to fully burdened labor across the board.
- [32:49]
A
Is that burden including sales, commissions and dollars, service, everything.
- [32:52]
B
Everything. Office staff, call center.
- [32:54]
A
Well then office Wages.
- [32:56]
B
So those are cogs.
- [32:57]
A
Yeah.
- [32:58]
B
Okay, so how much all in should labor be as a percentage of total revenue? If you include CSRs, technicians, installers, warehouse staff, the, the CFO, the, the, the every. The salaries, the commissions, everything.
- [33:11]
A
Yeah, I mean, the best rank companies are probably around like 33.
- [33:13]
B
That's what I was thinking.
- [33:14]
A
Yeah.
- [33:15]
B
Hey, guys, hope you're loving today's episode. I've got some big news. Donald Trump Jr. Is coming to freedom 2025. And here's the thing. The opportunity to meet him isn't just about shaking hands or getting a selfie. The guy is the real deal. People don't know this, but he grew up working at job sites. He spent summers in high school swinging a hammer. He said himself that he can drive a D10 caterpillar better than a golf cart. And part of why I invited him is this. He's in the know when the media is screaming about inflation and collapse. I don't panic. I find people who actually know what's going on. Lock in your Freedom Event ticket now, and this September you can meet him and the rest of my billion dollar network of owners and experts. And don't forget, early bird tickets come with over $5,246 worth of bonuses. Go to freedomevent.com to lock into the savings. That's freedom event dot com. All right, back to the episode. The problem I have with CFOs typically is they're always looking at lagging indicators.
- [34:21]
A
Sure.
- [34:23]
B
You know, I look at what can we do to generate more calls. You know, I, I think the good balance between me and my guys, he's like, he sees behind corners and he's looking around the corner all the time. He's not just a, you know, maybe that's, maybe that's a controller more, but, but he's looking at the future as well, and he understands growth. We got so good that there's months. We're hitting 27% the bottom line, and I think we could hit 30. I think if we really push, we could hit 33. But then we'd be kind of screwing ourselves on the marketing side because we'd have to start borrowing from marketing. And that's great. We've learned from other companies that's great for about a year. And then you begin to see the decline.
- [35:04]
A
It's an interesting question of when is too much, when is it too much?
- [35:07]
B
Well, what would be, you know, because I've always said if you listen to podcasts, three years ago I was like, if you're making more than 25% either. You're paying your people to less, you're charging your clients too much more. But I took. I didn't take into effect efficiency. I never planned on booking over 90% calls. I never planned on the conversion rates being what they are. I never planned out like, like, plus a great cfo, like, the way that he's able to do stuff. Like, he's like, you know what a great. You want to know the best question in the world is when you ask a cfo, what's one plus one? You know what they say the best answer?
- [35:37]
A
Two.
- [35:38]
B
No. They say whatever you want it to be.
- [35:40]
A
That's a good accountant. That's a good accountant.
- [35:42]
B
Right there, too, would be a good answer. So what do you feel about profitability when everything. And, you know, this is really. There's different industries and there's different competition and there's different private equity involved. So I don't think it's a fair question because if you look at, like, zoom drains. Yeah, they don't have really a whole lot of material costs. They've got these expensive $200,000 trucks, but they're just. They're going and doing drains only. So I don't know. What are your thoughts, though, as far as profitability per home service companies?
- [36:14]
A
Yeah, I mean, I think. I think there's two things that, you know, we need to be careful of going into this year. One is, you know, if prices are changing, we have to be ahead of that, otherwise, you know, we'll lose ourself because you're not pricing yourself correctly. The other one is, and I think this is our entire industry, I talked that I really value data scientists and some of the people that really understand statistics. But I've yet to actually meet a company that's really heavily invested into pricing strategy. Whereas my background's in FP and a. And I worked for a medical distribution company for a long time. It was about 150 billion. Their goal was to get to 1% profit. They usually never got there. But they had whole pricing teams that are looking at elasticity, that are looking at ways to. When they can target, like, more surge pricing, when they can do this. Like, there's, you know, Amazon's doing this. There's no reason, like, we can't invest more into understanding what our pricing strategy should be as a business. And that's probably where you really maximize profitability. So that is actually something we're investing into this year. This year.
- [37:18]
B
You know, I would debate you on that because you. You put My top guy in at any market and I've proven this over and over again. He's going to continue. Good job, bad jobs, good. You put my seat. Best csr, best dispatcher, best technician, best installer. It's incredible. So it goes back to better recruiting, better training. The optimize the price. It's just so hard for me to get behind like but, but the to optimize purchasing is completely different.
- [37:46]
A
But your best guy is probably going to get a yes from that customer. If your garage door replacement is $10,000 or $12,000. Right. Like he's probably going to do it. But there's probably certain there's other indicators that would make the customer more likely to say yes to a 12,000 if we're doing it around demand pricing properly. And that's a.
- [38:05]
B
See in my opinion, you're treating this like e commerce instead of the presentation, the timeliness, the idea of influence. Robert Chitty wrote the book. I'd love to see what you come up with. And maybe I'm dead wrong but I feel like look, you know what's weird at A1 is whatever gets focused on gets kind of a resolution. Like we want to make this happen. We got to talk about it every day. We got to practice it and role play. We got to gamify it and it'll work. But you're kind of robbing Peter to pay Paul because if you focus on this. So we got to make sure we don't focus on too many things we got to say okay, like what's the best thing that we make money on? Number one, selling high end parts.
- [38:46]
A
Yeah.
- [38:46]
B
Because we give options. We have the high cycle life. Number two is taking a service call, turning it into a sale turnover. Those two things if we just get good those two. But what's more important than both of those reviews and conversion rate? Because if I'm not even converting, I'm not going to talk about selling better parts. Like why aren't you even earning the client's business?
- [39:06]
A
Yeah.
- [39:06]
B
And if we're getting bad reviews all the time, we won't be in business very long. Well so those are. It's like this pyramid of like this hierarchy of needs for a home service company.
- [39:16]
A
Yeah.
- [39:17]
B
Oh, I love this stuff, man. You know I, I was talking to Aaron about that the way you guys are do the presentations and the way the pricing works and the way it makes it kind of pulls into effect. The it includes the finance fees which is genius because why should I eat that cost? It's like yeah. If you choose to do this, here's what it costs.
- [39:39]
A
Yeah. As a cfo, you know, CFO is always like, hey, let's, let's not offer financing plans that have any dealer fees, you know, because they don't want to pay the dealer fees. They want to control the margin better. And this takes that away. I feel like if it's automatically building it in, let the customer pick whatever they want because we're not paying for it anymore.
- [39:56]
B
You know, it's. You've heard no. Joe Chrisara, does that ring a bell?
- [40:00]
A
I know Joe, his book behind there.
- [40:02]
B
What should we do? He's always said to me, you know, you pick six options and say, you know, pick one you like, but you start at the best one. Is what I've always learned is you said, look, based on what you told me, going to go over six options, this would be something that I would say is going to be the best fit for you and your family. And then we, you know, if that doesn't work, hey, that doesn't work. Pick one more economical. Pick one you like. Yeah, but this way you're at least earning their business. And by the way, each one of these, you, you know, you've probably heard, but the best profitable one for the company is probably option number four.
- [40:36]
A
Yeah.
- [40:37]
B
And that's where most people fall into. Another thing is putting like, if you want option five to sell the most, price it right. Price it a little more than option five, but far less than option six. And then put most. The people's choice. Most people choose this.
- [40:52]
A
Right. And we think about that a lot from the office. That I think it's probably hard to think about that while you're running the call. You know, I've got, I know you have some really top end sales guys. We've got one named Adam and I know him well.
- [41:03]
B
Yeah, he's presented to us.
- [41:05]
A
I talk to Adam all the time. And I mean, this guy's super passionate about sales. And you know, I remember I went on a road trip with him one time and he spent four hours replaying his calls for me. But you know, he's got this saying that we've kind of adopted in our sales team because we asked the question of how do you stay excited doing the same thing like, you know, three, four times a day, every single day. And he says when I knock on the door, I say to myself, it's showtime. This is my show. And I start playing my role and I get excited for it because it's showtime.
- [41:43]
B
I like that. I like that. A lot. I want to go. You talked about revenue per employee. We talked about that for a minute. I want to go back. Alevi always taught me about ratios. He's like, most people run at a 2 to 1 ratio, meaning you got two people turning a wrench compared to the one support staff. Really bad companies operate a 1 to 1 where you've got all these support staff, CSRs, dispatchers, warehouse guys. You got all this C suite, VP director levels supporting like 1 to 1. It's really hard to make money. There's no efficiency. He goes, when you get to three to one, you're printing money. I like that ratio stuff. Except it's still. You get what happens when you're doing all this, hiring all these marketing companies and doing the outbound call. You know, you might have a third party inbound call center for nights and weekends. Those ratios kind of get masked.
- [42:32]
A
Sure.
- [42:33]
B
What are your thoughts about different ratios like that?
- [42:35]
A
Yeah, I mean, we are actually pretty close to three to one. But you know, you start talking about certain ratios like. Yeah, I mean, you can look at an income statement, but income statement can be misleading. Like, you know, you asked me, is 15% that benchmark? Well then really, what's the benchmark of cash flow on that? You know Carl Icahn.
- [42:55]
B
Yeah, I know Carl Icahn. He does hostile takeovers. Great mastermind.
- [42:59]
A
One of his famous sayings is happiness is positive cash flow. Because that's really what matters at the end of the day. Are we generating cash, what we're doing, and we're not just putting it. You can hide stuff on an income statement by putting it on a balance sheet. You can never hide stuff on the cash flow statement. It's really going to tell you the true story of the business. So that's, that's one that we always look at. And you know, if you're generating. Even if you're generating 15 of profit, you know, after you're paying taxes, after you're doing all the distributions of everything, you should still be looking to get 7 to 8% actual free cash flow at the end of the day.
- [43:32]
B
That's interesting. Yeah, I mean, we do, you know, Alan Ror taught us what a financial quick check is. And we don't do it like we used to. But every week Adrian sends me just a quick text of here's what's going in and out of the bank. Here's where he said, it's just for me. And he just decided everyone doesn't need to know what's in our bank account. I really didn't care.
- [43:54]
A
We don't report that. A lot of places do. We are transparent on our income statement. But, you know, I don't think people are really going to understand like paying taxes and.
- [44:02]
B
Yeah, that's true. I mean, look, it is none of their business when it comes to. I agree with Adrian now, now that we talk man to man, eye to eye and a lot of things, he and I see the same thing in a lot. Well, let me ask you. I know a lot of businesses, the way they solve their problem for next year and a lot of times the problem is it works, is they raise prices. But there comes a point of diminishing returns. Obviously, when we get our price raised from a manufacturer like the distribution center, we raise our price to the same day. And Tom Howard said the best is Instead of doing two price increases a year, do 1% a month across the board. That way no one really feels it. What are your thoughts? Because we're still doing two a year. I couldn't sell my team on doing 1% a month.
- [44:55]
A
So, I mean, I'm actually kind of famous in the company of not telling anybody when I change the prices or increase prices. I don't usually tell anybody that's happening because I don't think it's the price. Is the price like that. That's. This is what we need to do in order to be profitable. I don't think I actually need to communicate it out. And people ask like, hey, did the prices change? And I'm like, yeah, they did, you know, but that, that should just be part of business. It shouldn't be really.
- [45:15]
B
Get a raise. You got a raise. But I guess there doesn't really need to be transparency. They don't need to know why.
- [45:21]
A
Yeah, this is, you know, I don't think that they're looking at, you know, they're trying to understand the entire cost of the business, of what our sold hours should be, what our efficiency should be. You know, obviously we want to be come more efficient as company. If we can, we become more profitable. But you're not going to like, you're not going to plan on becoming more efficient. You're going to plan on operating your business as it currently is.
- [45:42]
B
I like that. And you know what I get excited about is playing these podcasts. Very few and far between. 1 out of maybe 30 to my internal team. And this is one I'm definitely going to have them listen to. So I'm going to ask some questions that I think when I ask questions, my team can get a Lot out of. I think I'm actually doing a lot of justice for the listeners depending on the size of their company. Obviously you know, if you're, you're pre 10 million, some of this stuff is you're probably not ready for yet and that's okay. When you said you leverage this technology that helps build the different pricing models and it's a better demonstration of the client and it takes into effect these things like financing, what was the biggest thing that caused that software? Is it just the presentation? It was at the easiness to adopt for the technicians. What caused the growth and how much did you grow in conversion rate and average ticket?
- [46:35]
A
So in add ons in the H Vac this, this is, we're testing this as a product. We're testing in H Vac sales right now. So it's not across the entire business but we're seeing some positive results. And you know it's a third party company so you could, you could sign up for if you were selling H Vac systems. But they, you know, the way that they present to their customer is. The way they present to the customer is. It is, you know, very much a toggle method of like here's the options and. But you can see very. If I don't want, you know, this humidifier, I just press a button and toggles it back off and it's the price changes and you can see you can really, you're putting that power into your customer's hands rather than you know, at service side and somewhat static like here's the estimate. The other thing is you're building the financing fees. And another cool aspect of it was that you are anytime a cut like if you don't close right there and a customer reengages with that estimate, like they open it back up, you know when they get notified and the salesperson gets notified. So they can. And it prompts the salesperson to say like hey, do you have any questions you want to ask about this or is there anything I can help you with? So it's, you know, better communications, better buying experience. H Vac, it's a newer thing to us. If you took it back, we've only been doing it for three years. Our conversion rates used to be like 25%. Now they're pretty much 50% on a regular basis. So we've been doing a lot better. And then our average sales gone up too. I mean that's the crazy part of our business. If you look at a business that's going down this year, well, you know in H vac, well, we've got the 454 transition, which will probably raise your prices 10%. And then you've got tariffs which might raise your material prices 10%. If you're not.
- [48:18]
B
Wait a minute. What was the first one?
- [48:20]
A
So in H Vac, they switched energy efficiency. Yeah, 410 to 454. But it raised equipment prices about 8 to 10%. If you're not growing 16%, you're basically static to last year.
- [48:32]
B
That's what people forget.
- [48:34]
A
Yeah. So.
- [48:34]
B
And they brag about growth, but. Yeah.
- [48:37]
A
Yeah. So that's. I mean, that's one way to look at it. But another thing with that one is important. Like, you are having these things that are happening with your business. Like, and Aaron knows this, and he, like, I love to get a win in negotiating. Negotiating is my favorite thing to do. But regularly just going back to our vendors and saying, like, are we going to accept these price increases? Like, are we going to have at least have a conversation about it? Because you can literally save, like, 10% across your business just by negotiating stuff. And I mean, any piece of software out there is negotiated. I mean, we've got one deal that right now we have, like, our phone systems are basically being. Our iPads are basically being paid for for three years for switching over to this other company.
- [49:25]
B
You know, Aaron. When me and Aaron were at the golf tournament, Adrian walked up to me and he goes, we got an extra 600 grand coming back for our insurance, something. And he's like, I didn't even know about it, and he knows about everything. But I was like, cool. Like, I love this stuff, dude. Because, like, I love negotiations, too. I think I pushed my vendors a little bit too hard. But I'll give you an example. I was out of town, but Luke did a great job. They came in to give us a 10% increase, but our volume's gone through the roof, like, dramatically. And they ended up. When they left, they lowered our price by 10%. He goes, you know how much business you guys are losing, by the way, look at how much business we've given to this other company. He showed them when they left, they, like, this is what's nice is by. Some people go all in on vendors, and then they got all the keys to the city. And you have no. One of the things we've learned for private equity is, like, always have two vendors and don't give anybody everything.
- [50:21]
A
I agree with that.
- [50:23]
B
You know, I want to jump into this idea of hiring, because I've always said, hire Slow fire, fast. We we L l was a big seven power contractor. Taught us manual, standard operating procedure, steps of delegation. But the big thing that I don't talk a lot about is he taught me how to build technicians from the ground up.
- [50:41]
A
Yeah.
- [50:41]
B
Now I realized certain industries, you need to be a journeyman, you need to be an apprentice. You need to work your way up. And I do think even if that was the case for grocers, I would still do it because it's worth them to be homegrown and learn our ways. And it's. It's a long. It's a longer investment into people, but it's the best investment. What are your thoughts as far as getting the best technicians and installers now that you guys are in multiple trades, multiple markets?
- [51:05]
A
Yeah, I mean, I got a few thoughts on it. Recruiting across our trades is, if you don't have a dedicated recruiter, you should. At any. At $10 million, you should have a dedicated recruiter, because it's that important in your business, even if you're just recruiting students. Back in 2019, we were booked out, like, three weeks and for plumbing services. So we're like, you know, we looked at it and we said, we have to create a school. We got that launched up, and we even knew when we launched a school, we said, you know, this first class is probably going to suck, but the 10th won't. And now we're on, like, 16th. And, you know, it's a pretty good program that really brings people into the trades. The other thing about recruiting is, like, you have to have, whether you call them your core values, your guiding principles, you have to have the right fit of people. I don't know. I mean, you grew in your business from the ground up. And I remember, like, I remember reading this book called Sapiens, and I read it right around the time we were around 150 people. And it was like, hey, once a community hits 150 people, it fragments into another community, because that's about as many people as you can know. And so if you're not recruiting, well, like, and right now we're at 400 people. Like, yeah, I have to spend most of my time walking around saying, hi, I'm Mike, because I don't know the people in the company anymore. So you have to make sure that you are recruiting for those values that you really think are important. That's where a good recruiter will be worth their weight in gold. The other thing that I will say about creating the own people in your trades, and I know you Have a great training center here. I've toured through it. It's amazing is people don't think about this. It creates that alma mater effect. We've had people leave, you know, for whatever, $5 more on the hour or something, and they come back because they're like, well, all my friends are here. This is where I learned the trade. This is my school. Like, this is my university. Whatever you know, you call it, it's. It creates an alma mater effect that you're at. You're giving back to the trades, but you're also creating this kind of community of people that you brought into the trades.
- [53:04]
B
Yeah. Plus, you know, the fact is, people say, if you got a best friend at work, best friends don't happen. They happen outside of work. They happen when you meet with your family, you break bread, you go to the bowling league. When you build a best friend at work, 85 of people say, I'm not leaving because I have a best friend here.
- [53:18]
A
Yeah. Yeah.
- [53:19]
B
And that's the key. I. I think that's true. You know, I was. I was at this group. I pay 100 grand to go to these three meetings a year in this big event, and I really enjoy it.
- [53:31]
A
You should negotiate that.
- [53:32]
B
I should. I probably could. It's. It's Joe Polish's Genius network. And, you know, there's this guy that was training us the other day because this just last week, and he goes, I think core values and mission and vision are way overrated. He goes, because I've trained some of the largest companies on the planet, whether it's Google, LinkedIn. He goes on and on. He goes, I went to small companies. He goes, I'll go up to 10 of your employees randomly and say, what's your mission, vision and core values?
- [53:55]
A
Yeah.
- [53:56]
B
And he goes, nine out of ten of them don't know. Yeah. And he goes, so if it was that important, they would at least know them off the top of their head.
- [54:03]
A
You know, we. We actually thought the same this past. We. Around our budgeting conversations. This year, we. We had a similar conversation that our mission statement was too long, and we really just switched it down to one statement of to create great tradespeople, advance their lives and win big. That's what we want to do. It's. It's not necessarily about the customer experience. It's about what we're doing for each other.
- [54:23]
B
We just made ours. You know, it used to be. To be the largest, most trusted grassroots company in North America now is to make our people dream bigger than they ever thought. Possible and achieve more than they ever thought. Yeah, it's pretty simple. You know, you started talk. Jack Tester used to be the CEO of nexstar.
- [54:42]
A
Yeah.
- [54:43]
B
And I think he's a brilliant guy. I learned from him the one on one form where he basically said, if you're a leader, your team should report to you. You shouldn't have to ask questions and lead the presentation on the one on ones they'll present to you.
- [54:59]
A
Right.
- [54:59]
B
But I know you guys are working pretty closely with Jack. He's. He's part of the business in certain aspects. What's it been like to work with Jack as a leader and what have you learned from him?
- [55:08]
A
Yeah, I mean, Jack's. Jack's on the team. He's on our leadership call every week. He's been amazing to work with. One of the, One of the, you know, we're going through the budgeting cycle this year and we talk about the importance of budgets and then talk the importance of missions and core values and all that stuff. And one of the things that he talked about is that as leaders, we are dealers of hope. And actually this is from like the King Solomon Bible and there's this phrase, without hope, the people will perish. And so we have to be providing hope for everybody. That's part of our team. And that has sat with me since he brought up the concept. And literally, like, I don't think a week goes by that I don't think about that, is that we as leaders are dealers of hope so that our people don't perish.
- [56:04]
B
I love that. You know, you came in here pretty prepared. You've got two pages of notes. Those of you not watching Mike As a CFO, I think CFOs are just DNA is wired to prepare. There's probably some stuff we didn't hit. So what do you got there in your notes, the things that you wanted to discuss?
- [56:23]
A
One of the things, I'll just mention that I think I've always done pretty well throughout this. And I remember when you called me back in 2015, you probably don't remember this. You called me and I'd only been at Eco for about six months and I'd kind of implemented Service Titan, built out the price book and all that within Service Titan. And you called me and you were.
- [56:45]
B
Like.
- [56:47]
A
Hey, I want to get on Service Titan. I heard you're on it. Because I think we were like the 30th customer ara pitched aaron individually. And you started talking to me about it and I know you got onto it. So you were very persistent, but I was like, man, this guy is special. And I was like, Aaron, you gotta talk to this guy. And I know you and Aaron are now best friends, but I hooked you guys up to start talking. But the importance of building your network, whether you're a cfo, whether you're a manager. I just connected my GM and another GM from a company today that I thought that they should know each other. You really just need to spend time building your network, both professionally, within the industry. And then, I mean, there's like, I'm part of a group called YPO that I've really enjoyed. And I mean, sort of like, you know, your $100,000 group. You're just building these relationships with people that are thinking about things the same way you are. And those relationships tend to just open so many doors to help out the company and to help out everything.
- [57:45]
B
I couldn't agree more. It's your network is your net worth, who, not how, meet the right people. Relationships are everything. And that's my plan. Literally. Like you probably know, I'm building a nice house in Idaho, and I'm building even a nicer house in pv. And the plan is to be able to break bread, have people in there, and build deep, deep, deep, to deepen relationships. Because I live fine in a thousand square foot apartment. I can do fine. And it's not necessarily to impress them. It's a place because I can't fit very many people in a 1200,000ft apartment. I can't really have a party or have a social engagement. So, like, I might be overdoing it a bit. But my plan is like, you know, people want to come stay the weekend. We never need to bump into each other. Bring your family, go in the lazy river, will go shoot some guns in the shooting range, play a game of bowling, and to build deep in the strength in relationships. And I think this concept is so strong. I think the problem that most people have though is they'll go to a meeting and they'll give everybody a card. I think what you should do when you go to a gathering is try to build one or two relationships and deepen those rather than try to get to know everybody.
- [58:52]
A
I agree with that for sure.
- [58:53]
B
I think that's a lot of people, man, and it's so hard to even keep up. I get people because this podcast is almost 400 episodes and they come give me a UG. And sometimes like a guy rolled his window down yesterday, got a roofing, he's got a the Tesla cyber truck. And I was with Raul, my driver. But I was like, dude, I'm going to drive. We're going to go to a restaurant. We're going to go to a movie. He's like, never drove with me. Where he's a passenger and guy rolls down his window and he's like, do you know this guy? I'm like, I look over, it's a rap truck, roofing truck. And I'm like, no. And he's like, tommy, what's up? He's like, I knew that was you because the trx. I'm like, what's up, man? And he goes, how have you been? I'm like, great. How have you been? He's like, great. I was like, hey, it's great seeing you, brother. I'll see you later. And he's like, how do you know? I'm like, I don't know. I feel bad, but, like, dude, I like, I didn't recognize the guy. And it's like, it's a bad quality, you know? But if I had a dime for everybody that, like, gave me a hug or said, what's up? Or saw him at the airport or I'm in Boston, I could be anywhere. Bumped into a guy. I was telling Aaron I bumped into a guy in Bora Bora.
- [59:59]
A
Really?
- [59:59]
B
Yeah. That's crazy. He's actually out of. He lives in Ohio.
- [60:05]
A
Yeah. I mean, it is actually strange. So I'm from Ohio, and, you know, it feels like. And the Buckeyes are big, but wherever I travel, I said, people are wearing. I'll be in the most random places, and I'll see people wearing Ohio State. Oh, yeah, Ohio State stuff. Like, I was doing the running of the Bulls and the guys wearing an Ohio State hat, and I was like, what? We're in the middle of Spain.
- [60:22]
B
You know, that's. That's awesome. You know, you guys took us to an Ohio State game and we had the time of our lives. We're going to do that more often. That's one thing is trying to get back. I never heard anybody say, man, I wish I worked more. You. We've always heard that saying of like. I've never really heard anybody say, I wish. Wish I worked more. But I also never met anybody that looked at somebody successful and say, they must have not worked for it. You know what I mean? So there's this happy medium of, like, if today was your last day. Well, it's not my last day. I don't think so. I got to work hard today, and I'm going to Take a little sacrifice, put a little bit more in today so that my future self has a better life. What are your thoughts on that?
- [60:59]
A
Yeah, I think, you know, I have children, and you think about what kind of life you want for them. Do you really want your children to be happy? I don't know that, like, I'm not sure that, that I need them to be happy, but I do want them to live a life that has purpose and that they feel like, you know, I'm doing something that's important. I feel that way when I come to work every day. So it, to me, it's like this is something that I'm doing to show the appreciation that I have for my team that's out there every day. I mean, you guys have nice weather here. It was negative, you know, five degrees in Ohio yesterday. So, you know, that they're out there every day. They're working so hard. They're, you know, in these trades that are really helping their community. And I want to see people win big. And so. And I want to see people get. Celebrate things in their lives. And so, you know, as long as you're feeling content that you have a sense of purpose in what you're doing, it doesn't really feel like work to me. I've never been good at separating work in life.
- [61:56]
B
Yep.
- [61:57]
A
I should be probably, maybe somewhat better at it, but I really like both aspects of it and I do travel a lot, so I like, I like to get out and have fun, too.
- [62:05]
B
Yeah, I know you do. We've had a lot of fun. How do people get a hold of you, Mike? They want to reach out. They want to learn more about CFOing a $91 million company or. Just got some observations or questions.
- [62:14]
A
Yeah, the best way to get is. My email is miketeco.com G-E-T-E-C o.com or hit me up on LinkedIn.
- [62:23]
B
LinkedIn. There you go. How do you spell your last name again?
- [62:26]
A
I have it right here, but Barnhart. B A R N, H A R.
- [62:29]
B
T. And if you add a couple books, not the Bible, not the E myth, not the most common ones. Napoleon Hill, Dale Carnegie. Maybe some books just that aren't so common. What would they be and why?
- [62:47]
A
Yeah, a few of them. I always pick a book from my favorite year. So in 2022, I loved the Almanac of Nabal Ravikant talking about wealth and happiness. 2023, I read this book called Unreasonable Hospitality. And for, I mean, so I'm always the bougie one. In the company. Right. I'm the one that likes to buy Cristal to celebrate if we're winning a month or something like that. I like nice things. I like fine dining. This book called Unreasonable Hospitality. It's really good. It's about 11 Madison park, which. These two guys got really obsessive about food and customer service and, you know, being the best at what they do. They were an unknown restaurant, and they became the number one rated restaurant in the entire world for two years in a row, and it only took them about seven years to do it. And that was a really cool journey of their story. You know, if you ever just need an audio book, you can't go wrong with Green Lights. You know, it's just a fun one.
- [63:50]
B
Yeah. All right. And we talked about a lot of stuff here. I mean, a lot of stuff. And I bounced around a lot, but I wanted to do this this way because I only had you here for a little over an hour. So I just wanted to hit a lot of topics. And we've been meaning to do this. We'll have to do a part two, but maybe something we didn't hit, maybe there's something that the audience needs to hear. You know, you've seen this company grow in the last 12 years from. From little over a million to almost 100 million. It doesn't need to be about work, doesn't need to be about business. Could be about whatever you want, But I'll have you close this out.
- [64:24]
A
Just my thoughts on it.
- [64:25]
B
Yeah, Just anything we talked about a lot, but anything you want.
- [64:29]
A
Yeah. I mean, most off, I just feel a deep sense of appreciation. You know, I love the partnership that I've had with Aaron. I've loved, you know, the partnership that I've had with a lot. You know, as you become bigger, it's really hard to build those relationships. But, you know, whether it's Jack or Elliot or Barbara or different people that have come and gone on the team, you know, just building those relationships with them has been a, you know, great experience, and I feel really proud of what we've accomplished. So there's a real sense of pride. And, you know, I don't really think necessarily about, like, I have this abundance mindset I always have. Like, I'm the eternal optimist. I don't really get, like, all right, we need to protect it. I just think, like. Like, we're going to lose it. I just think, like, what's next? What are we going to do next? And how are we going to keep innovating how are we going to keep modernizing the home experience for the customers? How are we just going to stay on top of our game? Because whether you're acquisition, whether you're Greenfield, the world is ours to go take. There's no reason if for 100 million today, it can't be 500 million in five years or whatever you want to do is possible if you're willing to put the effort in and do it.
- [65:46]
B
Well, that was a great closing, but I'm not going to close now because what if private equity changes that? I mean, I know. I don't know when that moment's going to come. It could be a year, it could be 10 years. But eventually, like Built to Sell means that's real. You hear the horror stories and you also hear my story, which I love, our relationship with the PE guys. Like, I really like Mike, I really, really like Doug. I really like the whole team over there. They still give me control. They give us, they ask us the right questions. But do you still. Are you worried about potentially when that day happens down the road or it could be strategic, it could be anybody for all I know. But when that does happen, what do you think life's going to be like? What are your kind of SWOT analysis?
- [66:29]
A
Well, I mean, I certainly agree with you that you should build your company to sell it. Like, even if you are planning a transaction, you should never say, I'm going to operate my company differently because I plan on transacting in 12 months and I'm going to cut all this stuff. Like you should, you should operate your company like you're going to continue to run it forever, but it's going to become a profitable. It's going to be a profitable company. Like, at any given point in the next. If we want to sell sometime in the next 10 years, at any given point of that time, I should always be happy with where I'm at and to sell it.
- [66:56]
B
Right. Any moment of any time. Yes. Yeah, I speak a little bit with a couple of things. The only thing I'll tell you is like, if you're going into the 12 months of the rolling trip, 12, you better have a conversation to talk to the team and get them, especially if they have equity or they have any type of P units or whatever it is, have them push a little harder that year because those. That, that that year counts the most. So. But, but don't cut things. I agree with you. Don't cut things. Set yourself up for failure the year after it sells, because that's a Bad deal for anybody.
- [67:27]
A
But even when you look at the reports that are out there still, I mean, our, both our industries are so heavily fragmented. You know, it's like even with PE coming in and they still only own a very small percentage of the total.
- [67:37]
B
What do you see the percentage being? I'm just curious. I don't, I haven't looked at that recently.
- [67:41]
A
Yeah, I mean there's some reports that come out of each year. You have to usually pay for them to get them, but they're usually pretty solid reports. And you know, it's about 12% in the H vac, plumbing, electric industry. You know, for us, we have, we, we do have a little bit of different strategy. Like we know we're, we're really good plumbers and we're learning H vac and electric. So we have a little bit different strategy of how to grow there than maybe some other PE groups do. But overall, I just think that it's still a very open market to do whatever you want to do.
- [68:11]
B
Well, I've heard the H Vac Plumbing Electrical is about a little shy of $200 billion market cap. So that's why there's a lot of people getting into it. It's just a huge market cap.
- [68:20]
A
Yeah. And I heard your podcast. Can you open a company with $20,000? Well, probably not anymore. You know you can, but you're going to spend 10 years trying to build that thing. You do need some investment and these guys, you know, can provide great investment.
- [68:33]
B
Well, Mike, this was brilliant. I'm sure you're going to get a lot of follow up questions, but thank you for being here and doing that. Sorry you had to come to 76 degrees today.
- [68:43]
A
I appreciate it.
- [68:43]
B
Thank you. Great job. Hey there. Thanks for tuning into the podcast today. Before I let you go, I want to let everybody know that Elevate is out and ready to buy. I can share with you how I attracted a winning team of over 700 employees in over 20 states. The insights in this book are powerful and can be applied to any business or organization. It's a real game changer for anyone looking to build and develop a high performing team like over here at A1 garage door service. So if you want to learn the secrets that help me transfer my team from stealing the toilet paper to a group of 700 plus employees rowing in the same direction. Head over to elevateandwin.com podcast and grab a copy of the book. Thanks again for listening and we'll catch up with you next time on the podcast.