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- [00:00]
Chris
Budgeting is the opportunity to create vision, right? And without vision, the people perish in your business, Right? They just do. Vision also creates hope in the organization, meaningful hope. But this does give people a purpose and a vision to get up and go, try to achieve something, right? And they get a line, they get bought in and they get excited about it. So I think budgeting is very much a very important part of vision that you have to go into it that way, not just being like, hey, here's all these KPIs just bombard people with numbers. This is to the Point a Rhino experience voted one of the top home services, marketing and operations podcasts.
- [00:41]
Aaron Gaynor
Cutting through the and getting to the point.
- [00:47]
Chad Peterman
Hey, what's up to the point listeners? It's your boy, Chris. And I have my boys on here too. My co host, my beautiful co hosts looking so dapper on the other end with the AirPods stuck in the. Oh, both ears. Sorry. You got a good hard part going on. It looks like the fall weather is kicking in. In the window behind him, that's Chad Peterman. Chad, welcome back. I appreciate you being on here, buddy.
- [01:05]
Thomas Mello
Yeah, thanks for having me. Excited to chat with the with the boys today, you would think fall weather, but it's 80 degrees here today, so I'm not really sure when fall's coming, but the trees are a changing. But it is very warm out.
- [01:18]
Chad Peterman
Well, I've got my hoodie on because it is cold here today. I woke up to 47 degrees.
- [01:24]
Thomas Mello
That was colder than it was here.
- [01:26]
Chad Peterman
Yeah. Well, so also we have on here my good buddy Aaron Gaynor. Aaron Gaynor, what's up? And then also Mr. Thomas Mello has blessed us with his presence. Sammy, welcome back to the podcast.
- [01:37]
Aaron Gaynor
Pleasure. It's 67 degrees, I've got jeans on.
- [01:43]
Chad Peterman
And no show socks. No show socks. By the way, my kids told me no show socks are not cool anymore. So I don't know.
- [01:49]
Aaron Gaynor
I've heard that. I started wearing them right when they became unpopular. Like I do the opposite.
- [01:58]
Chris
I wait till the trends go out and then you pick them up.
- [02:01]
Chad Peterman
I was like, why did I just.
- [02:03]
Aaron Gaynor
Save my long socks?
- [02:06]
Chad Peterman
Everybody loves a good pair of white tube socks. Let's be honest, right? They just feel right. Well, listen, you know, we don't have the entire crew on here today, guys, can we all. While nobody else is on here to debate, we. I feel like we have to come up with a different name for our crew. I feel like, I feel like LSD and there's no way you can just switch the letters around, by the way. Because I've thought about that. Because it's either lsd, dsl, dsl. DSL ain't going to work because there's another. Yeah, that's not going to work.
- [02:34]
Chris
Lds.
- [02:35]
Chad Peterman
Lds. That's not going to work for us. I mean, maybe Tom Howard, but we're groups more. And Tom. So I don't know, but we need to, like, rethink that for 20, 25. Okay. Can we. Can we get that on the agenda with Ishmael?
- [02:45]
Aaron Gaynor
You know, he. He came up with the service Avengers. I thought we'd be called something cool like the Power Rangers or.
- [02:51]
Chris
Yeah, yeah. I don't know where he's came up with this.
- [02:54]
Chad Peterman
Instead, we're a psychedelic.
- [02:56]
Chris
We need a. We need a rebranding. We need a rebranding. Let's get this together and get a whole new rebranding done.
- [03:03]
Chad Peterman
You're right.
- [03:03]
Chris
We need to. We need to rebrand this.
- [03:05]
Chad Peterman
We're gonna. We're gonna take it.
- [03:06]
Aaron Gaynor
You know what we are is we're the up and comers, right? We're like the goats of the industry are all in their 60s, 70s. We all look up to them.
- [03:14]
Chad Peterman
Keep going, keep going, keep going.
- [03:16]
Aaron Gaynor
This is like, I think we do qualify. We're all fairly large businesses. Chris, you're in a little bit of a different vertical, but you know what's going on everywhere. And I think it should be something along the lines, like the up and comers are like. It's not a good name, but something along the lines of, like, the new generation or. Because I think we all got about at least a couple of decades in the tank, so.
- [03:40]
Chris
Yeah, I know, I know. Ishmael likes to kind of put me in the old group here sometimes.
- [03:47]
Aaron Gaynor
You are right at the tipping point.
- [03:49]
Chris
I am on the tipping point there a little bit.
- [03:51]
Chad Peterman
I know.
- [03:51]
Chris
To be fair, you young guys be keeping me young, though, so.
- [03:55]
Chad Peterman
All right, to be fair, of the group, you are the oldest.
- [03:59]
Chris
I am. You're not too far behind me, Doctor.
- [04:02]
Chad Peterman
I'm not talking about too far by. I'm talking about the oldest.
- [04:04]
Thomas Mello
That's.
- [04:04]
Chris
You fair.
- [04:05]
Chad Peterman
Okay.
- [04:06]
Chris
I think it's kind of, you know, rebranding this a little bit into something that. What does this mean? What are we trying to do? And, you know, the work that we're all putting in into our businesses, our lives and into the industry. I think, you know, how do we package that up as something. But. But other probably better topics today that you'd like to get into besides people hearing about us rebranding? Ourselves.
- [04:27]
Chad Peterman
Hey, welcome. Travis Riggy joined us. Travis, what's up, buddy?
- [04:30]
Chris
Yeah, sorry, guys.
- [04:31]
Travis Riggy
I was wrapping up the nuve call for the month, so.
- [04:33]
Chad Peterman
It's okay. You didn't miss anything important, other than the fact that we're going to rebrand the name of this group from LDS to something different, which I'm sure you're in the approval of. So we'll figure it out. Don't keep that. Keep that to yourself for now until we come up with a solution. Okay. Us and all of our closest friends listening right now. Okay, so we are actually going to jump into the topic. And by the way, when this thing rolls out, if you haven't voted, please, for the love of God, go vote. Right? I don't know. I saw, you know, some of you guys got your votes and you saw I got my vote in. Yeah, you know, you know, like, there's a couple things that you're not supposed to talk about with friends that we always talk about with friends, and that's religion and voting. So I love talking about those things. So I got my vote in and I. And I hope that it's always easier.
- [05:17]
Chris
When everybody's kind of the same to have that we don't. I mean, it does make this, make.
- [05:23]
Chad Peterman
It a little bit less controversial, but.
- [05:25]
Aaron Gaynor
It wasn't even a question. I mean, look.
- [05:31]
Chris
Where people are going with this.
- [05:33]
Aaron Gaynor
You know, I go straight down the line. But the one thing, if it's a hidden tax, like, all these things seem to be on the different propositions. It seems like they're just finagling another way to extract money most of the time. So. And they always disguise it at making your schools better. Like, we want to get better teachers and bring up the education. And it's like none of that stuff makes it through. So they're all hidden little proposals. And I'm, you know, if I can't study them, I typically don't vote on them. But I'm just saying, typically, that's what they are, is hidden tax.
- [06:04]
Chad Peterman
Well, let me just share with you that I didn't. A lot of those pro. A lot of the propositions on. No matter what state you're in, I'm sure you got different propositions that say similar things, but there are like short little 12 minute clips on YouTube that explain the propositions pretty good. And I had to watch them to make sure I voted the right way on them. So be responsible when you're voting, please, but for God's sake, go vote. Don't just pitch and complain about it and not be a voter. Okay, now let's get to the actual thing that we're going to talk about and today is we're going to talk around budgeting. Doesn't budgeting just excite you when you hear the word budgeting?
- [06:35]
Aaron Gaynor
No.
- [06:39]
Chad Peterman
On everybody's face right now, budgeting, it's like one of those things that, you know, it. There's so much work that goes into it, but it's so important, right? And, and people listening to this right now think, oh, I know what I'm budgeting for. I want to grow a million dollars next year. That's not budgeting. Okay, that's, That's a goal you might have, but it's not budgeting. Like, what are you gonna do to get there? Are you going to maintain profitability? Like, what are you doing? So we're all kind of going through it right now, and we were talking about this, Travis, where you hopped on. It's kind of that time of year and this, you know, while this podcast rolls out, people will be going through it, or hopefully they're. They're about to start going through their budgeting for 2025. But we figure we'd just share kind of some of the different tactics or things, you know, have conversations around what we're doing in preparation for next year. And, you know, some people are listening to saying to still have no idea how to budget properly. Now, I know Hoffman's not on here, and I talked about this on a podcast with Hoffman. I can't remember, Chad, if you're on this one with us or not, you know, because you missed so many. But when, when I had the podcast with Hoffman, he talks about how he likes to do his budgeting from the bottom up and. Which I thought was a pretty interesting, you know, tactic. So it's a bummer he's not on here. But let's just talk about it, you know, from like, the general budgeting approach. Like, let's kind of start from the basics and not assume that everybody just understands or gets it. But what you, you know, and you guys can just chime in wherever, you know, and speak up when it. Whenever. And if you guys want to give the finger to say, hey, I'm next, you know, then we all can see it. Who's see each other. So we're not talking over top of each other, but, like, let's go ahead and start with, like, what's the most important first step for these companies when preparing next year's budget? Like, what's number one thing you gotta do in preparation for budgeting.
- [08:19]
Chris
Go number one thing, schedule a day with your team.
- [08:25]
Aaron Gaynor
At least a day.
- [08:26]
Chris
At least. We have, we have like five or six days with the main people. So I book it out, put it on the schedule. I guess I know we're about, you want to probably go like what, what KPI to start with and build your budget up. But I think it's like build a budget, build a plan and build an agenda and be very clear about what that is day by day to facilitate this conversation with your team. And you do have people do it a little bit different in different settings. But you know, sometimes we, we come a little bit with some preset numbers and budget for them. So we, we do some Pre workout with GMs and Mike and I do some pre work stuff and then we bring it to the team and try to get them engaged. But I think the first thing is like how many days do you need? Do you have the right information? Doing the work, not just getting people and saying here's a budget. So setting the day, setting multiple days, giving your team enough time to collaborate on the budget and the ideas. Right. And it's not just all numbers. But you know, I'll say that first thing is get it on the calendar, own it, have a clear agenda, get the right people in the room. Right. Start there.
- [09:28]
Travis Riggy
I think that one of the things that popped into my head with that, Chris too is the first thing you need to do well before you create a new budget. I think you got to look at last year's budget and see if you hit it and how you did with that budget. And then if you didn't hit it or whether you did or didn't reflect on like what went well and what needs addressing because like what I'm going to do, and we were just talking about this actually in the new call is, you know, one of the biggest and most powerful things I learned from budgeting is that it made bonusing my management team really easy because all of a sudden they knew, you know, they had the road map of, to their, to their bonus. And so if they didn't hit their bonuses last year, well, we got to figure out why and how we can change that this year. And so I think I'm going to review, you know, even before I get in my, in a meeting with a management team and start building a new budget, reflect on how we did last year and bring some, some solutions to the table or some, some improvements to the table.
- [10:28]
Aaron Gaynor
In either case, I think gap accounting, data accuracy, KPI accuracy, accrual accounting, audited financials all play into this. When I, we lead sometimes. Tom Howard is there, Alan Rohr, when we lead these audited financials. And this whole idea of a budget, most people don't use it. It should be your North Star. It should be everything, your whole bonus structure. It should be everything that guides the business, minus greenfield, minus acquisitions. Greenfield, you add in later because you know you're going to be dumping a lot more money in and you cannot plan for certain an acquisition. So I think most of the people I know that budget, unlike the people on this call, they live, die and breathe it. This is like, we've got to hit this budget. And by the way, I stay uninvolved. It's not my job. Because you guys know me and I know you. We're hunters and we're going to go, this is bullshit. There's no way we could double this. We could increase our booking rate, increase our conversion rate. We got the trainers, we'll recruit better. And so if it's my idea, unfortunately, I don't think we've ever hit the Tommy budget. Never. So we have a budget we can hit and then we have helped push.
- [11:42]
Chris
Them to beat the budget that was set because of the big ideas and pushing people out. Right? I think, I do think, Tommy, to your point, there is a. Budgeting is the opportunity to create vision, right? And without vision, the people perish in your business, right? They just do. So if you don't have vision, people perish. And vision also creates hope in the organization, meaningful hope. That seems achievable too, right? These budgets, probably your point there. Sometimes we all come in, we want to set high stuff. We've all done it. I do it, I just did it again, just in this budget cycle. I'm like, oh, do this, we could do that. What are you talking about? But I think the idea is your budgeting is more if you really go into the budgeting, not just all about numbers and all these things, and you really think about it from a vision setting standpoint, collaborating that, creating, buy in from the organization and the people, that your budget is the foundation of starting to build some of that outside of like your core values and, you know, why you're in business and the meaningful things. But this does give people a purpose and a vision to get up and go, try to achieve something, right? And they get a line, they get bought in and they get excited about it. So I think budgeting is very much a very important part of vision that you have to Go into it that way, not just being like hey, here's all these KPIs is combined just bombard people with numbers which they need to understand.
- [12:56]
Aaron Gaynor
But the only thing I disagree is that you know the cortex. Our partner agreed with me is what do we know for certain? We know we need to book the phone calls. So we drive it by cost per lead and we've got that number. We've got attribution, we've got a blended cost per cpl. Next thing we know is our booking rate. Next thing we know is our conversion rate. Next thing we know is our average ticket. That alone. That alone. Of course you got cancellations and a lot of other numbers. But if you leave it simple, that alone you can figure out a very, very foundational budget. You know, what each department needs to do now. There's of course different ad backs and all kinds of other shit that you can bring into it. How much cost savings can you renegotiate your pricing? One of the biggest things we took away. What's the easiest way to affect budget? What's the one thing that you could affect budget the quickest that we talked a lot about with our partner? What's the very simple thing you can do? Raise prices, right?
- [13:55]
Chris
Yeah, of course. But that's not always the best thing to do.
- [14:00]
Aaron Gaynor
Well, we know for a fact that if the, if the marketplace will handle it, that we know if nothing else changes and we could keep those KPIs the same, of course. And they're little subtle increases that we always get from our vendors. We can, we can do that. And what we did is we looked at the average cost per, I mean LSA is up 40% this year. So what we did is we talked to Goldman, we talked to Morgan Stanley, we talked to a lot of people about economic outlook. Are people going to be working on homes? What's the home starts looking like next year? On all accounts, Goldman Sachs went down from a 27% chance of recession to 13%. Obviously there's a lot of things that go into it politics. We don't really say is Trump or Kamala going to get in. But if it's a good economic outlook and everybody that I've talked to said there's going to be a lot of deals happening, a lot of money going to be invested in service industry. We're a little bit bullish, I will say but will because it's everybody's, it's everybody's bonuses, I want a number that they could hit. By the way, if we don't hit our budget, our partners got to go talk to their LPs. The next possible investor that comes in says, you guys are known for not hitting your budget. That's the last thing you want to do. You want to set a goal. You know, you could certainly hit in. You could have a BHAG budget, but your main budget you turn into the auditors should be one that you could predictively hit for sure.
- [15:25]
Chad Peterman
Sorry for the interruption to the point listeners. Have you heard of rilla? Are you using RILLA yet? If not, are you for Rilla? See what I did there? Rilla is the leading speech analytics software for the trades. It is on a mission to bring physical ride alongs to an end. You can coach your reps with virtual ride alongs now. They're a hundred times better, faster, and much more efficient than the physical ones. All you gotta do is use the killa. Rilla. That's R I L L a Rilla. Yeah.
- [16:00]
Chris
Yeah.
- [16:01]
Thomas Mello
I think I would say just, just to kind of, I guess repeat kind of what these guys said. I think for us it's to what Travis said.
- [16:12]
Chris
It's.
- [16:13]
Thomas Mello
It's set the budget based on. We always look at it. The first draft is. Set it as if lead volume is the exact same as last year. So just set that and then see what that spits out. And that'll start to influence kind of your SG and a. What's below the line. Okay, well, what can we spend? So on and so forth. And then I think the most important part, or at least that I've learned is, okay, well, obviously we want to grow. So we don't want to do. We don't want to do the budget that we did last year. That's cool. So now what are all the things, what are all the levers that we can pull to give them actionable items that they can actually work on? Like, hey, if we're going to increase in H vac service, well, our conversion rate was here and our average tickets here. So if we tick Those up, say 3% on conversion and we raise average ticket by 50 bucks, maybe that's raising prices. Maybe that's just converting more. Whatever it is, okay, then the manager who's responsible for that budget starts to understand how they're actually going to influence getting there. And I think it also gives them. I think in the past when we didn't do that, you've got a lot of managers just crossing their fingers, hoping that they're going to hit it, just sitting by like, well, you know, we got to do this. Whereas to me, the goal of, I mean, the budget has a number of purposes, but I think one of the most important is giving working with your managers to understand what are they going to need to do a little bit differently than they did last year in order to hit this. Because I think once they have the tools, well, then all of a sudden they've got things that they can work on. They've got a list of priorities of, hey, these are the most important things, or these are actually going to increase it more, or, shoot, if I could increase it 8%, I'm going to definitely hit my bonus and we're going to be off to the races and so on and so forth. And then you start to factor in things. Well, okay, we think we can drive more leads. We can, you know, whatever it may be, all of these other things. So I think that's important where I think when I talk to people about budgeting, it's like, oh, we're going to grow by 40%. It's like, well, how are you going to get there? I think it's the important, like, you need a plan for how you're going to get from where you are to where you want to go, rather than just writing it on a piece of paper and crossing your fingers and hoping you get there.
- [18:27]
Chad Peterman
Hey, let me ask you guys a question. Not one of you said cost per customer acquisition in your formula.
- [18:35]
Aaron Gaynor
Why cost per lead?
- [18:37]
Chad Peterman
Yeah, you said cpl, but that to me is not customer acquisition. That's just the cost per lead doesn't mean close lead unless you're factoring it.
- [18:44]
Aaron Gaynor
Chris, if you take the CPL against the booking rate, against the conversion rate, it's cost per lead. If you go cost per acquisition, acquisition means you close it. That means 100% conversion. CPA is already burdened. CPL goes through the burdening factor. Does that make sense?
- [19:03]
Chad Peterman
It does. Yep. I just want to make sure you're explaining it for all our listeners to hear. Thank you.
- [19:06]
Chris
Yeah, we do it both ways, too. We do it both ways, Chris. I already did it.
- [19:16]
Thomas Mello
What, do you think I'm stupid?
- [19:20]
Chad Peterman
That was fun. Okay. But I do want to say one thing.
- [19:24]
Chris
Was that really just to educate you, Chris.
- [19:27]
Chad Peterman
I just went through this whole process, so I just went through this because I have four different companies. Well, it's kind of in an odd position because even though there's four companies, even with the merger of Blue Corona and to Rhino, I still have to look at two separate companies. Data from this past year. But I basically had to go in and look, if we're going to grow this thing another 19, $20 million, well, what's that going to take from a marketing perspective? And I had to work my way backwards to it to figure out what does the math tell me right now based on performance, you know, through the first nine months. That's what I, that's what I just went through the last, you know, week was just trying to figure out the numbers. So then that, so this is to your point, Travis. It's like you kind of have to have, you know, you actually know and feel confident in your numbers to be able to start like accurately planning. And then you guys all kind of said this in your own different way. It's, you know, I, what I love about Hoffman's, you know, Hoffman's methodology on budgeting is basically he set the stage for what they want. He's just having, going to the different departments and having them work their own plan to hit that budget and agree to that budget. So that way they've kind of got input into it to gainers. Point is it's like cool. Then if you work at their incentives to it, like they've, they've bought into the deal because they've helped put together whatever the, you know, the plan is going to be to hit the budget and get the incentive. And that gives them hope and makes it exciting and they believe it and everybody's kind of bought into the process, which is incredibly important by the way. And so even though everybody on here has got, you know, or has, you know, big businesses or worked in big businesses and are talking numbers, it doesn't matter if you're one person, like set your own, like you still gotta know your numbers, make your own budget and then make sure you feel good about actually hitting it with real numbers. So it's not just like a pie in the sky type of thing. So I want to go.
- [21:08]
Thomas Mello
Chris, I was going to say one thing that I think, I think you made a good point that I think is important for especially probably a lot of listeners who have multi trade businesses. You mentioned that, hey, I got to work through it with like three different companies. I think it's important for listeners to, when you talk about growth, like different segments of the business, plumbing versus H Vac versus electrical, like those can all have different growth rates or different growth. You may see, hey, you know, we got a lot of Runway and electrical or you know, whatever it may be and working through those different segments individually because effectively while you think you're running one business, you're Running three different companies. They all have different close rates, they all have different customer acquisition costs, they all have, all of these things are different. And I think it's important to dive into those and get a little bit granular when you're looking at your budget. And then once you compile it all together then you can kind of see, oh shoot, well, we think we can grow 10% in H vac, but maybe 40% in electrical and different stuff like that rather than just looking at as one whole thing. Because your numbers are going to vary pretty widely I would think.
- [22:18]
Travis Riggy
And to that point, Chad, like same thing with bonus, right? As you tie stuff back to that budget is that, you know, we, you gotta bonus people on things inside their control. And so you can't, you can't bonus, you know, put your, your install manager's bonus determined on a 65% gross margin that plumbing's pooling, right. Like it's just never going to happen. So you got to departmentalize that budget so that you can structure bonuses around things inside their control, inside their.
- [22:50]
Thomas Mello
I got a question related to bonuses. So I think this is always a hot topic. How do you do it? Different things like that. One of the things that I've thought about but haven't done, but be interested to see if you guys have done it. So there's obviously like the typical bonus, hey, we bonus on whether it's revenue, whether it's gross profit, dollars, whether it's ebitda, whatever it is. Like the result. Like you bonus on, did you hit the result? Have any of you ever played around with bonusing like behaviors like hey, I know if you do these things and I'm willing to give you money for them, I know that there's probably a better chance that you're actually going to get an outcome.
- [23:33]
Chris
We've messed around like on conversion in the past and have done monthly spiff things for managers to try to drive conversion or average sale, if that's what you're asking. Leading versus lagging metrics, right? I would say, you know, there's been some focus on that. But again it all comes down to like did you get the gross margin dollars? Right. At the end of the day it's like gotta have the gross margin dollars so you should be doing those to get the outcome of those. Right. So I wouldn't say that we've had major success on doing that, but also would say we haven't gone all in on it either. Right. We may a b test it, maybe, you know, shoot a little pellets at it. But we haven't like, you know, shot something really big out of big cannonball at it, I guess. Right. To use for lack of term, that's.
- [24:17]
Chad Peterman
The point of creating incentive is to create a behavior. Right. Like that's, that's the point is. But you're all banking on the end result of that behavior. So it's an interesting topic, you know, to think about. It's just a riskier. It's a riskier topic. But if it.
- [24:32]
Travis Riggy
Yeah, a lot of deja vu in this conversation from my last meeting. But. And I asked Tom Howard specifically about it, but you know, we were so focused on the customer experience and delivering that that we didn't want to be the numbers pushers, where our managers just got so hyper focused on numbers that they didn't care about the customer anymore. And so we always tried to balance and give them two things in their control. So for example, like our service managers would have to balance like review percentages and their gross profit targets so that they can't just push one or the other. They always had to be balanced to deliver the desired outcome. So, Chad, I thought you were more saying like, hey, if you do this leadership training or read this series of books, I'm pretty confident it's going to affect change in you. I think that's a great idea. I haven't done anything like that. I'm not sure if that's where you were going with it, but we did try to incentivize something outside the numbers and the budget to get the end result that we wanted.
- [25:41]
Thomas Mello
Yeah, I was thinking more. I think you're right on. I was thinking like the two things that come to mind right away are like one on ones and what was the other one? I was just thinking of one on ones and retention. Like if you have, you know, obviously there's going to be some people that exit the company. But like to me, if you focus on that, well, I know you're meeting with your people. I know you're trying to improve them. I know you're doing all of that. If they're staying, that means that they're happy with you type thing. And again, I think there's got to be a component of the end goal. Like there's maybe those are smaller incentives, maybe, you know, whatever that looks like. And then your bigger one is gross profit dollars. Like, hey, we want you to do these things. I'm going to incentivize you because I know that they'll probably lead you closer to that goal. So like a combined plan, but it's just something we've been tossing around. I don't, I don't know which way we'll end up going, but just something I thought I'd throw out there.
- [26:37]
Chad Peterman
Do you guys have education? Worked an education. KPI worked into any of your incentive plans? So, so like I know that we have monthly education like requirements that everybody has to hit to get x percent of whatever their overall incentive is. And I think that when you're talking about driving a behavior, Chad, like okay, I guess I could kind of think of it like that because it's not like they just read a book and they retain everything. So there is like a, they have to complete the form at the end that says, hey, I read this, this is how it applies to my job. Or this is what I learned. This is how it applies to my job. And then they have, they go over that with their leaders. Right. So there is like there is like some follow up to it. So it's not just like yeah, I listen to a podcast. But it's a factor in the overall incentive plan is that you have to, I mean it's one of our core values. So we have to push that initiative and work into the incentive.
- [27:29]
Chris
I know Tommy will probably have some thoughts on this, but I think I look at it two ways. I don't think it's bad to try to bonus on certain behaviors, but I also think there's a level of like accountability that is just this is what you need to do to do your job and if you're not doing it then this is you're not the right person for this job. Right. Like to get these outcomes. So I think I'd be careful on to for the message here. Chad too and to other people is like I think we've all gone down some of these paths trying to bonus all these micro bonuses all over the place. It's like reality is like if you can't run run on ones as the manager, then you're the wrong person as the manager. Right? Like you got to do the job. Like that's how you get the outcomes. And but also the question would become is let me ask another question. If they were hitting the gross margin dollars and the revenue and they weren't doing outcome and doing one on ones, how much how would you, would you get worked up about it? You know, I don't know. You know what I mean? It's hard, it's hard to say, right. So but the reality is we know one on ones do help create retention and collaboration and focus on those things. So I think we try to look at it. We're not perfect because we screw this up a lot, but it's trying to balance the ideas. Like we have two bonus really metrics for the team. It's revenue and gross margin dollars. Right. Like that's your, that's what you get. And these other things are metrics that you have to do as the manager. If you're not doing them, then obviously there needs to be sit downs and conversations and understanding coaching opportunities and training to develop people along the way. And that should be part of their responsibility to do so. You know, I don't know where I kind of go with that. I guess maybe I'm going along the lines of like, I don't want to incentivize people to actually do the job that they're already paid to do as much as, you know, they need to do the job. You know, the get it wanted capacity to the job. Right. The GWC model. Right. And I think we've been down that rabbit hole a little bit. I think there's some success. But I don't know how thrilled I am with that model personally. That's my, just my personal opinion.
- [29:24]
Chad Peterman
So do the damn job without incentive.
- [29:29]
Chris
Well, I mean you want to incentivize people, but I mean on their, on the major metrics that you know, have big outcome on the departments.
- [29:35]
Aaron Gaynor
Right.
- [29:35]
Chris
And you know, which is rev and top line revenue growth to the budget and gross margin dollars, of course.
- [29:41]
Chad Peterman
Okay, I'm gonna shift gears for a little bit. Thanks for that energy. So in regards to seasonal shifts for those who are in seasonal businesses, do you guys like, how do you plan for fluctuations in seasons? I mean you're just looking at past data, making decisions off of that, you know, like how are you guys planning when you're, you're thinking about budgeting, you know, for just, you know, the seasonal shifts. Because that's not just like a marketing thing, it's also a labor thing. So there's, you know, multiple things that play into it. But like what are you guys doing for those that are, you know, in seasonal businesses, you know, and how are you guys planning forward or how are you opening up those conversations or like where is it starting? Like, let's talk about it.
- [30:25]
Thomas Mello
Well, we live in the Midwest, so yeah, you never know what you're gonna get. You know, I think we look at a lot of historical data. Like we can see kind of what the trends are. We know when the, when the season is supposed to change, when it may you know, I think in, in install, we look a lot at budgeting off of kind of a very flat lead volume because we feel like that's a somewhat safe like estimate. Like, okay, regardless of whether I feel like I can generate as many leads as I generated last year, you know, H vac replacement is 60 to 65% of our business too. So like, to me, from a budgetary standpoint, that feels pretty like safe, like. Cause that' going to be a big driver of what we actually do. So I'd rather not overshoot it and then be sitting there and it doesn't get hot in a summer and then we're like up creek going, what do we do now? So that's. We've taken a more. I think probably, that's probably the department we're the least aggressive in. Just because you just don't, you know, the weather regardless is going to influence whether people are buying new systems. It's just a thing. If it gets really cold, great. They, their systems break and they replace them, it gets really hot. Same thing. So we've just taken a little bit, I guess, less aggressive approach when it comes to budgeting that. And then just looking at historical kind of patterns of like, how has our, how has our sales trended over the last. Call it three years from a. And not so much like in a dollar amount, but like percentage of sales each month. So like, okay, typically in June we get this percent of our total revenue comes here. And then you basically take, okay, we think we can do this number and then you just break it down by kind of the percentages that we feel like we can do each month is kind of how we look at it.
- [32:20]
Travis Riggy
Yeah, we do similar. You know, in Phoenix, we basically got a perfect bell curve on revenue because of the summer hits hard and skyrockets revenue. So we're looking at data from the past year. But one thing we included later on is a makeup bonus so that if the weather doesn't hit on the months that we think it's going to hit, but they overrun budget on later months, they can make up that, that other bonus by hitting, you know, both the thresholds, which is brought to us by the management teams. Because, because of that, it's like, hey man, we didn't hit second quarter, but we crushed third quarter, you know, and it's like, all right, well, as long as by the end we've cumulatively hit all, all the budget that we'll still get you your full bonus.
- [33:09]
Chad Peterman
Love it.
- [33:10]
Chris
You know, I haven't been in the h VAC business that long. It'd be the, you know, fourth, fourth year for us coming up. And yeah, we do historicals that we do have. Obviously I've been fortunate enough to have a lot of friends that are in this space that had some, had some conversations and learned from and hear from and it is seasonal, especially in our region area. I definitely think there's some seasonal stuff here. But I did, but I did say in a meeting just like two weeks ago that we had a budgeted meeting and some language kept getting thrown around from some of our team and even Mike as our CFO is as we become more of a seasonal business. As we become more of a seasonal business, right? And everybody's like in the season I said I don't want to hear this language anymore. Our job is to not be seasonal dependent and figure out how we're going to run a business. Unseasonal dependent and making sure that we're not just banking on that the season is going to happen here and there. Because a lot of the stuff we're doing is everybody's like, oh, June and July, let's. That's where it is. Which it probably will be, right? We know that. But then it's like everybody's ignoring the shoulder seasons and the other seasons where we should become less seasonal independent and become more of an operating business that wins on off seasonal times. And I think this is where, you know, goes to some of the stuff when you go back to, you know, the older guys that I'm close closer in age here as we've stated earlier, you know, like Leelam and those guys saying hey, we're not going to be a seasonal driven business. We're going to be a great service providing business that, you know, generates revenue all season. And I think it's just a mindset too because the more we say seasonality the more everybody just believes it's only going to happen in seasonality. So to me there's like there is reality to it for sure, but also not just allowing that to be the, the you know, the positive or negative to the outcome of what happens. Because I got an H back the first two years, everybody told me it was going to be we're going to be gangbusters in June, Chad and that May and the heat was going to be crazy, right? And it was like nothing happened.
- [35:04]
Thomas Mello
Hey, I can't predict the weather. I did tell you to join when we had the summer miscalculation on my.
- [35:12]
Chris
SO and I get it. But we are there is seasonal in the Business. I'm not ignoring that we do events that. So I don't have as much data on that. But I do think, just being careful that everybody's only depending on seasonal statements.
- [35:22]
Chad Peterman
Tommy, do you see, do you see the seasonality in your business and the colder climate markets, slightly springs or anything like that?
- [35:31]
Aaron Gaynor
It's not a huge factor. Less, less replacements. But you know, I've been to probably 100h vac shops, which is probably one of the more seasonal businesses. What I can tell you after visiting with Morris Jenkins and some of these larger companies, they don't rely like I see some of the newer companies rely only on turnovers. They really do a good job servicing other things and servicing the units. It's not just make it or break it. We either sell a $20,000 unit or we get nothing. It's, we're going to fix a lot of this stuff because if we focus on repair instead of 80% of our revenue being replacement, it's a little bit more even keel. It's steady. And I find, you know, it's hard for me to want to be steady because I want rapid growth. Like, look, seize the day, get it while the getting's good. But steady growth compounded as up to be a lot. And you've heard the saying, a lot of people overestimate what they could do in one year and underestimate what they could do in five. And anything over 15 to 20% growth in a year sometimes creates problems that you didn't realize. And right now we're really top heavy in the company, predicting a really, really huge growth year. A lot of hiring. I wanted to just tell you guys, we're going to budget all the way down to technicians, installers sold hours, down to the CSR level of the booking rate. And one of the things we did recently that it was profound, we had Robert Chidini come in and he talked a lot about this idea of one of the seven influences of commitment, of keeping your word and being committed and stating to the entire company, like everybody, of what your commitment is as the CSR manager, as the dispatch manager, as the install manager. Make sure that you write, you sign off that you're committed to this and make sure it's in a spot that everybody sees it. That's what Robert Shanini says. The most important thing that you wrote down, you signed off on it, you committed to it, you helped influence the goal. It wasn't a goal that was arbitrarily picked for you and then you stated you were going to hit it now what happens after that is a lot of self policing. You should see my operations. Talk to my marketing team. They are always figuring out it's healthy though of you said you were going to do this. You're making my job more difficult. And I like this, this tension within the company. I will say, unless we're talking behind people's back and just saying this guy is a lazy piece of shit, it's like look, you said you were going to do this. This is what we budgeted for. You're not holding up your end of the bargain. And the self policing that goes on within the company I think is super healthy because we stated this before the year started. And then there's always this ramp up period. It's not. And we've got three FP and A people that do a very good job of not predicting this is where we're going to get this massive growth this month. It's based on. And by the way, the most important thing I can tell you guys that really what we've learned over the last few years, me personally, is look at the working days of the month. We work Saturdays and Sundays as well. But look at how many Monday, Tuesday, Wednesday, Thursday, Fridays you have of each month. Because that plays a big, big outcome in what's your budget's gonna be.
- [38:52]
Thomas Mello
Yeah, that's a great point. Yeah. Cause you can swing. I mean this year we'll swing from 23 day months to 19 day months if you're just working Monday through Friday. And we'll work some on the weekends. But like it's not, we don't, we're not full full out. So we always just look at kind of the weekends as kind of gravy. Hey, we're just going to budget for the working days of the month, but yeah, it can. So I mean especially when you get bigger. I mean if you're doing half a million a day, two less working days could sway your revenue a million dollars in a month. So that's an important piece. Budget out all your holidays and different things like that because it'll affect how many days you got in a month. That's a good point, Tommy.
- [39:33]
Chris
Yeah, I mean if you're going that grain. There you go. How many working days are there and how many hours are available to your staff each day, each to work. And you'll start building it that way right through the model which then start adding all the other things and you get to. Tommy, you used to sold hours there, which is a old ideology that's been around. But a Lot of people don't know it and they don't use it. There's a lot of power in it. Once you understand how you really are in the business of selling hours than you are in the business of selling anything else. I think sometimes we all think we're in the business selling H vac equipment and plumbing and blah, blah, blah. But the reality is all your people are really in the business of selling hours. And how many hours are you going to do them and how fast are you going to get them done effectively, right? Like we're in the business stuff, but the reality is we sell hours and that's what we sell every single day. And once you can understand how many hours you're selling and how. How efficient you can be doing those, then, you know, you can really improve your net profit and your bottom line quickly, your margins, all these things. So, you know, to that. To that point, if you're going to that direction, love it.
- [40:30]
Chad Peterman
And the value of that hour is very important. I'm gonna. I'm gonna shift gears for just a second, guys, because this is something else. I think that I'm really curious to hear everybody's different opinions on it, because this is industry agnostic. I think it's the. Let's talk about the unexpected expenses. So whenever you're budgeting, do you guys set like a certain percentage revenue, whatever it is, something aside for like the unexpected things that, you know are going to happen in the business or like whether it's like, I mean, this could be something where it's like, you know, repairs that you have to make or to the fleet or that, you know, or you crashes, like, whatever it is. Like, do you guys have like a set budgeting for just like the, you know, the unexpected expenses that are probably going to happen, you know, in your business? And listen, that might not be a thing when you're smaller. Maybe it is when you're smaller, but, you know, do you have like a little kitty over here that's like, I know some shit's going to go sideways and I need to have, you know, some cash sitting on the side to be able to, to, you know, to handle that well.
- [41:34]
Aaron Gaynor
So for us, what we've done is, you know, Adrian on the finance department, he said there may be a couple of top grades. I know one I'm going to need an extra 50,000 to get the right person. And we've really been talking a lot about top grading positions. And everyone's buying into this to see how much better their department performs by getting an Ace a 10 out of 10 in that department. And like, you know, Luke with operations is saying, look, I'm going to need at least 12 more people next year just for the infrastructure. And we took an average cost and we figured out 12 is basically three per quarter. And we burdened that throughout the year. And we built all these things that we said, we're going to build a nice buffer of a budget for you to hire the people we're going to need. And this is something very few companies. We say, look, we're going to get economies of scale. We're going to do better job of this. We're going to find money where it didn't. But we're actually budgeting to build more infrastructure and we've got a huge budget for more technology, whether that's call center pro service titans. Add on something else, comes up with an AI call center, who knows what it'll be. But we built this buffer for technology and we added a lot of buffers because at the end of the day, I'd rather have that extra money. If we find it, it's money extra. But. But we've got a partner that we've got to deliver on, and they've got LPs they got to deliver, deliver on. So we did. We built a lot of different department hires, technology, other costs and everything. Of course, the trucks, the hiring cost, the recruiters, the trainers. Every department added a lot of people they know they're going to need. But after doing this for years and years in a row, you start to get more and understand historically what you needed to get to the next level.
- [43:24]
Thomas Mello
Yeah, Yeah. I think one important thing when it comes to, you know, as you talk about overhead, I think one important exercise, I do this every single month, is comb every line of the P and L. Because there is, as you get bigger, there's so much money and there's like, well, why. Why do we have four of these? Like, what?
- [43:44]
Aaron Gaynor
What?
- [43:45]
Thomas Mello
Well, so and so didn't know that so and so bought this or whatever. It is like it is like it is like, I'm always with our cfo. Is it closed? Is it closed? Is it closed? Is it closed? All right, good. I'm going in. And I spend probably two hours going literally through every line item and looking at what are we spending money on. I mean, like last month we're, you know, like most of our small locations, like, they just pick up after themselves. Well, we had two locations that were spending like $600 apiece on someone cleaning the office. I'm like, there's a person and a half in the office. Like, what, what are we cleaning? Like, pick up after yourselves. But like, just like little stuff like that. Well, it doesn't sound. It sounds insignificant, compounded. You can find a ton of money in that. And I think also one of the things that we've really kind of honed in on is like, all of these categories have someone that oversees them and giving them like a target. Like the guy who manages the warehouse. Like, hey, I'm going to give you like, we spent $6,000 a month last year in warehouse stuff or whatever it was. Like, do you think you can get that to like 4? And what you'll find is, yeah, they can. It's like, oh, shoot, my bud, I got four, 4,000. Like, maybe I'll just push that off till next month. Well, like kicking some stuff down the road, like, is it gonna. Are we gonna die if we don't buy that in the next five days? Like, just keep pushing it down the road and you start to find all of these extra dollars within the organization, especially as you get bigger. It's mind numbing. But I love finding things. I'm always sending out emails people know. At the end of the month, I'm sending out emails to find out why we bought this.
- [45:30]
Travis Riggy
I was going to say the same thing, as everyone knows when we're starting to comb them, because they start getting a lot of questions. But another thing that I think is just universally that you could almost put a fudge factor on this that's handled just horribly in trade companies is warranty returns and credits. I took that over for six months myself because I knew we were not getting credited on all these items. And so I took it over, built a procedure, and then turned it back over to the warehouse. But it was astronomical. How many $2,000 compressors or coils that we are buying and returning back to the vendor and never getting a credit on.
- [46:09]
Thomas Mello
On them.
- [46:10]
Travis Riggy
You know, they're just scrapping them.
- [46:11]
Chris
And.
- [46:11]
Travis Riggy
And so that, like, that's, you know, an area that's kind of a fudge factor that you could really tighten up. But you know, I was going to say, Chris, in regards to, you know, my technician driving the truck into a pole or, you know, a transmission going out. Those, those, those oh moments happened historically too. So I just add a little extra percentage of. To it each year and it seems to fall in line.
- [46:37]
Aaron Gaynor
But I don't. I.
- [46:38]
Travis Riggy
We never set money aside, you know, for it.
- [46:43]
Chad Peterman
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- [48:06]
Chris
Yeah, I think we just go through budget like the fleet area. We add in a percentage that we think might be additional repairs based on age of vehicle or things happen, you know, how much you might see previous years of buying equipment that breaks. We just got to add them in the areas and put a little fluff in there to, to hopefully offset those costs. I wouldn't say we've ever just said here's this bucket of oh shit money, right. If something happens, I mean obviously we hope we build up enough cash and other things and you know, you'll never know when the big, big thing may happen anyway. So you just need to be, you know, as prepared as possible with you know, cash position or the ability to get resources from bank or whatever you may need if something big does happen to you. That's way out of your, you know, the smaller realm of may mess up your P L or your net for a month. Right.
- [48:56]
Aaron Gaynor
Okay.
- [48:57]
Chris
But we do set cash budget goals which I know a lot of people don't do that too everybody their ebitda. We actually do set like cash goals for the year too as an organization, as percentage.
- [49:10]
Aaron Gaynor
I'm just gonna add, you know Chad, I like what you're doing. I love the fact that my CFO and controller though, like yeah, my control, my CFO came up to me the other day. He said the marketing team, which I kind of oversee had two late payments. So we dug into it. There's a credit coming back from those. He said there's a department that's taking and I Love taking our people out to lunch and dinner, but they were 4x what the other departments were, and that's not fair. And so I think he does a better job. And this is what I love. I love it when I find somebody in the company that could do way better than I could ever do. They could be the bad guy. They could identify things. Like, I don't think there's very many CFOs and controllers, NFP and a like us. In fact, Cortex said it was the best combo they've ever worked with. And what I was going to tell you guys as well is this idea. If you've got the right historical data, this idea, like one of the major things our CFO does is he makes sure that our insurance is locked in place. Like we're locked in. There's not going to be any surprises. We make sure we lock in our vehicle price. What he's always trying to do though, is if he could negotiate a better merchant fee or a better cash back, he doesn't necessarily add that. He kind of holds that in there and says, I'm not going to add this in. It's just going to make us. Because look, we've got a partner. Another thing we stopped doing that I think is really interesting that you guys should really consider is stop taking cash. We didn't drop a beat. We did not by stop taking cash. And you might say, well, shoot, now we're paying a different, obviously a credit card fee on that. Dude, guys were it. We stopped doing that years and years ago. No cash. We don't accept cash. And I think as your company grows and you start getting on accrual accounting and you start getting a lot more wanting to know the numbers in real time, those, those checks and those credit cards going through same day make a big difference.
- [51:17]
Thomas Mello
Yeah, we haven't accepted cash in a couple of years now. At least it took a little while for everybody to get over the hump. They're like, oh my God. Well, no one's going to pay. Yes, they will.
- [51:27]
Chris
Like everybody's got a damn debit card.
- [51:31]
Thomas Mello
Yeah, right.
- [51:34]
Chad Peterman
But you know why some people will stay cat take cash, right?
- [51:38]
Aaron Gaynor
Oh, yeah, we know why.
- [51:41]
Thomas Mello
Yeah.
- [51:43]
Chad Peterman
Just saying. There's probably somebody listening right now. It's feeling a little uncomfortable about this conversation.
- [51:49]
Thomas Mello
There will come a day, there will.
- [51:51]
Chad Peterman
Become a day when that will change.
- [51:52]
Travis Riggy
You know, the problem with T doing that is that if you ever plan to exit you, you know, you would have got, you know, your 10x multiplier on that cash, which is a Lot more than the small tax bill you would have got.
- [52:02]
Chris
So.
- [52:04]
Chad Peterman
Yep, good point.
- [52:05]
Chris
Well, running your business like a, like.
- [52:07]
Chad Peterman
A big boy, right, or big girl?
- [52:09]
Chris
Big girl. Both.
- [52:11]
Chad Peterman
Gosh. Geez. Come on, Aaron, Come on. Okay, I'm gonna finish off with this, with this question. Sorry. Now, Chad, you kind of said, I think if I heard you correctly, like maybe at the end of the month or whatever when it's closed, you're kind of going through the P and L line by line. Do you guys think that there's a frequency in which you should be going over those numbers? Like, is it, is it monthly? You guys have heard Leland say this before and I actually believe him when he said it. He would say he would look at financials every day. Every day he's looking at financials and like, listen, like, teach their own. But like, is there a frequency that you guys think, is it, is it monthly? Like, hey, you, yes, you should be going through these monthly. Is it more than that? Is it less than that? Like what is it quarterly? Like what's your guys take on like the frequency in which you should be reviewing your financials? And is there, is there a certain size when it matters more than others? Or do you kind of set the tone early in your business if you're smaller? Like, let's just talk about that topic for a second.
- [53:11]
Travis Riggy
Are we talking about like actually reviewing the P and L or just looking through KPI?
- [53:16]
Chad Peterman
I think, I think it's, you know. Well, we can talk about both. I think it's, you know, looking at your, your KPIs, I think has to be frequently. But I'm talking about your financials. Like that's really where I was headed to. Your P L, are you looking at it, you know, your month, your monthly, your balance, you know, your statements. You're looking at your, I mean, KPIs, I feel like should be more frequent than that, at least on our team.
- [53:38]
Chris
Every day, right? KPIs every day. And then what happens?
- [53:41]
Aaron Gaynor
Yeah, I would say, look, I'm very, very lucky because the team now, and this is used to be, and I think this is where most companies are really struggling. Most home service and home improvement companies suffer not having a strong financial department, period. If I would have had the people on my team now 10 years ago, I'd be at 10x the size minimum. But what I can tell you is I know within 1% what our EBITDA and revenue will be. I knew, I knew by the 28th of the month and it's never been more than 1% off. And by the 3rd of the month, I've got a full financial layout of what really happened. People say you should shoot for the 10th. Our team is so strong. I have it by the third. Because by the way, by the 10th, a third of the month already went by.
- [54:35]
Chris
Yeah.
- [54:35]
Aaron Gaynor
You know, a third of November already went by if I'm looking at October. And there could be a big black hole of something like capacity planning. And the marketing team is looking every day at capacity because PPC happens to be one of our most expensive marketing. And these things need to be looked at a lot. But the financials, we look at each week as a. Just a quick overview and four hours a month we go through in detail. And I don't know if it's the right way or the wrong way. It's just a cadence we're on and we've been on and it seems to be working because our net is super high and we see a true opportunity to get five extra points to the bottom line. And we know what needs to be done in each department to get that. And it's almost selfish because we're at a really good number now. But, but that's, that's because we've been able to negotiate more with our vendors and we're pushing each vendor every week, every month. And we renegotiate, I mean, on a monthly basis with our vendors, not just in marketing, but everything.
- [55:36]
Chris
To Tommy's point, we, you know, I think the industry standard should have been closed on the 10th. Right. But by the time you close and you review and then you meet with your team, I mean, most people aren't getting to the 20th by the time that even happens. If you're even getting that organized. Right. You know, most. You guys know Mike on our team, and so he's done a great job. And to Tommy's point, having somebody in that position, that's really strong. Chad, I know you've got somebody in the last year or so in a position that's been really strong. You said, you know, having somebody in a really strong CFO or controller or support staff or being it yourself is important, but I think you do got to get those books. We try to close them on third now too. By the fifth, by the fifth. And then within the first two weeks, like we're already having a meeting, we review with all the GMs, trade line managers, financial reviews all the way through once a month. And you know, I don't, I don't look at the financials every day. I'm not. I Look at the KPIs, I look at Pace report, I look at high level kind of where are we? Where's departments behind. I look at call volumes by department myself. I don't go through the, the financials per se every week. But I mean, Mike and his team and your controller, they're looking at it every single day. I mean, they're doing it every day. So something's popping up and they're trending. There's something going on. You know, again, we're talking. Our businesses do have, you know, staffing and more people than some businesses may be able. But if I go all the way back before, like, yeah, I went back when I went back when it was me doing a little bit more of a doing. I was in my QuickBooks all the time looking at my bank statement, looking at what's going on right now. Do I got money? Right? Like all these things in there. So it depends on the scalability where you are as you start to have more team and people that can look at things on a regular basis that are aware. And to Tommy's point, art, same thing here. By about the 28th, there's so roughly. We kind of know exactly what's going to happen already. And now it's just. And now it's just about closing the book and maybe some invoice might show up somewhere that was lagged from some vendor somewhere, but for the most part we kind of got it, got that dialed in and then get that conversation happening very quickly because trying to have it in the 20th as this team is already so far into the other month already, like that change is just, it's too slow. It just takes too much time.
- [57:34]
Thomas Mello
Yeah, yeah. I think from my perspective to kind of echo Tommy's point, like, yeah, depending on your size, not everybody needs a cfo. But if I was going to spend money when I was small and looking back, I would have gotten someone who's really strong in finance so that I know what I'm actually looking at. Making sure that your P and L is actually set up to where you're actually looking at gross profit, not some phantom thing that like, well, this is our gross profit. I'm like, you don't even have any labor in there. How was that growth? What do you mean? That's gross profit. But it's like little things like that. Like you can't direct the business if you don't know what it's actually spitting out. And I think the timeliness of that is another important piece is like you have to have it timely in order to make decisions, or else you're always a month behind looking at stuff. So I think, again, it's all dependent on size, but having someone that's really strong and can pump out the accurate stuff so that you know where you're at, I think is incredibly important. Yeah, I'm not looking at the financials every day. I'm more of, like, pace and similar to Aaron. Like, okay, where are we at? So on and so forth, and are we doing the things that we need to do? But, yeah, I think that's an important piece where people, you know, they think they're looking at something and they're not looking at that at all. It's something completely different. Different. Yeah.
- [59:05]
Chad Peterman
I'm gonna. I'm gonna try and wrap this thing up a little bit because, you know, there's probably people that are listening to this right now, too, that have no clue what the hell you're talking about. Even you're talking about gross profit, you know, or people don't know how to read a P L. And. Or understand the P L. And like, I've. I had to learn, you know, and. And there's probably a lot of people listening now that don't know that either. And, Tommy, you have. You. You have Tom and Tom and Ellen coming in to do. Are they doing a. Like a. Like a budgeting workshop or a finance workshop? Is that what's coming up?
- [59:36]
Aaron Gaynor
Yeah, it's a budgeting workshop. And Alan came in, I got to say, seven years ago, and I asked Adrian because he didn't believe in that necessarily her approach, but I said, give me a quick financial. Quick check each week. What's in the bank, what's coming out, what big is coming out? Do we pay all of our major vendors? Do we have a big bill coming out on our. On our loan? Because we borrowed a lot to scale this business. And so Allen is really, really good, and Tom's adopted a lot of her practices. And I will say the people that have attended. And actually, the funny thing is, most people that attend, they do their budget and never look at it again. And I understand why, because they don't trust the numbers and they don't have help. But if you do it correctly, like a guy like Paul Weiss went from 700,000 to 3 million of EBITDA in one year by doing the budgeting. Right. But really what it comes back to is it drives back from your price book, is you've got to make a profit based on your price book. And I'm not saying raise your price. I'm saying price adequately to build in profit. That's completely burdened with all the costs. And once he understood Tom's formula, it changed everything for him.
- [60:49]
Chad Peterman
Yeah, so where I was going with that for the listeners is. And you guys can chime in on this with your suggestions, but there's help out there to help you understand how to read these things and how to have somebody, a resource you can go to understand it. And I mean, I think, listen, the sooner you can understand it, the better for you. And not that you need to understand all these things. Like I said, to Chad's point, you don't have to have a full time cmo. You get a fractional cmo. You just have somebody who's really, really good at understanding your finances in the business. But, you know, I think, I think you should try and at least understand. Just understand what you're looking at on these P. Ls and understand the numbers. And, you know, and I think especially as the business gets bigger, it's important to, you know, to know those things. So. But there's options for you, right? And so I mentioned, you know, Tommy's, you know, putting, or, you know, Tommy has Ellen and Tom coming in to put on this budgeting workshop, you know, to maybe help you understand how to budget better if you need help. And that's okay. But I mean, I, you know, you guys heard Dish talk about all the time how he didn't even understand this stuff until Tom came, Tom Howard came in and helped him understand how to read his P. L. Yeah, Chris, let me.
- [61:53]
Travis Riggy
Let me hop in there real quick. I know you're wrapping up, but I gotta say, just from personal experience, that the most, and I've said it at, I think Rhino and one of the first vertical tracks, but one of the most monumental shifts in my business, which was very similar to what Tommy's just talking about, is we went from about $950,000 in profit to $3.1 million in a year. And then we sold. And that was strictly from Tom coming in, looking at our finances, saying, hey, you're running a tight ship. Raise your prices. And then building a budget with us that included the profit that we needed to get to and pricing that weight, which is where my brother raised the prices. So I would attribute much of our success to having that fundamental budget that we tied to all of our managers and brought them in on the process and bonus them off of that. Like, I think if you're not doing that, you're Missing a huge part of the operational side of the business that is going to drive the growth and the profit. So, I mean, you know, you've got Tommy putting on a workshop with Tom and Ellen. Like two people that do it is good, if not better than almost everyone else. If, if you need help, you gotta go because you're gonna literally walk out of it with a budget for next year.
- [63:14]
Chad Peterman
Tom, when is it? Isn't it coming up like in.
- [63:18]
Aaron Gaynor
Yeah, it's. I actually had to look it up real quick.
- [63:21]
Chris
It's.
- [63:23]
Aaron Gaynor
It's in Chandler. November 21st and 22nd. I just did a search. Tom Howard and Alan Rohr Freedom budget meeting and it popped up with the Facebook link.
- [63:33]
Chad Peterman
I'll add it in the notes.
- [63:34]
Chris
So that way, if I could throw. Just come quick in here. Hopefully to a couple of things. One is price, for sure. I think everybody should assess their price. Here they are. I think there's opportunities. A lot of people I see is, I just do like holistic price, 3%, 2%, 4%, 5%. Like you have so much opportunity in different parts and verticals of your business that you can raise certain areas 20% something, 5%, something else like this. A lot of people try to go in and drop a straight price book. And so I think really understanding where you can actually, you know, raise prices in areas that are beneficial to get your margin. Also this year we are trying to take. We are. Somebody has to own your price book. To Tommy's point, like, who owns your price book in your organization? You. Is it somebody else? We're really trying to turn that over to our data science team here. I know that's, you know, not everybody has that, but we're really turning over to Elliot and doing stuff to assess where the prices are, where we're going, what's happening. I know I see you laughing at over here, but, you know, really getting that more insight to it instead of just the managers being like, well, I think, I think Jim thinks the price is too expensive. Or I think we. You know what I mean? Or you go in and break down job costs, really analyzing where the opportunities based upon conversion and what the sales are and on certain items across the whole organization and trying to maximize that. And then the next part there is like, if anybody is really sitting out there saying, I don't know this information and don't understand it, like, I, I was going to be blunt, like, it's on you. There's all types of YouTube videos, there's all types of information available. There's workshops everywhere. I mean, I first, you know. Yeah, I've been fortunate, Mike. But, you know, right here, my computer, I've watched many YouTube videos on finance P and L balance sheets, right. Cash flow statements. It's all available to you. You just actually have to want to sit and spend time understanding it. And then, yes, there are some best practices to our industry that you should go learn. But the bottom line is the basic fundamentals of this is very much readily available to every single person in the United States at any time.
- [65:24]
Chad Peterman
Aaron, how do you really feel?
- [65:26]
Chris
That's how I feel now.
- [65:30]
Chad Peterman
I felt that I. How badly you want everybody to go to YouTube if they. They got no excuse is what I hear you say.
- [65:36]
Chris
Well, I just think because you sit around, you're like, I'm gonna wait till this new thing. This new thing. Like, literally you could get off here and go watch a video about this now and start understanding this, not waiting. You should go to this workshop because you want to be around peers and people that are doing stuff 100. But. But I think sometimes in this industry and ourselves, and I did this in the past. I'm speaking from experience as I sat around waiting to something for somebody to show me. And finally I was like, this doesn't make any sense. There's plenty of books, there's plenty of videos. There's plenty of things that I could start learning and put to work. Now.
- [66:07]
Chad Peterman
Listen, I completely agree with you, but there's some people who obviously have to have somebody with them to help them understand, too. But the point is, there's so many different opportunities. You have no excuse to not learn these things. It's just taking the time to actually do it and then making the effort to do it and then doing the hard work to do it. Because sometimes this is really hard work, especially don't understand it. So just as a reference point so I can close this thing out. Guys, one, I appreciate you guys all hopping on. And to all of our listeners who I know are, you know, probably eagerly waiting for us to come up with a new name for the group, we'll figure that out and then we'll follow back up with you. But to Tommy's point for his. For his event, if you just go to homeservicefreedom.com you can find the. Find the event with Ellen. And again, it's. It's November 21st, 22nd. And that's a great starting point. I have no idea how much it costs to participate in it, but I'm sure it probably says on the site somewhere I'M scrolling through it and trying to look for it right now, but point is, is I guarantee you whatever it costs is going to be a lot cheaper than what you're probably not paying attention to or losing by not knowing these numbers. So go and do it. Get figured out. It's a good starting point. Or if nothing else, you know, go to visit YouTube. So, boys, I appreciate you. Again, I can't stress enough to the listeners. If you haven't went and voted yet, please go vote. All right, V O T E. That.
- [67:19]
Aaron Gaynor
Means this has to come out before next Tuesday. Chris. Wait.
- [67:24]
Chad Peterman
What's the wait? Hang on a second.
- [67:25]
Chris
Tuesday is the video.
- [67:26]
Chad Peterman
Yeah.
- [67:26]
Chris
You're telling everybody to go voting, and then it's Tuesday next week, so.
- [67:30]
Chad Peterman
So today, vote today. If it's because it comes out on Tuesday, vote today. Holy. Is it already?
- [67:36]
Thomas Mello
Yeah, next Tuesday.
- [67:39]
Chris
We'll be texting on Tuesday.
- [67:41]
Chad Peterman
Oh, my God. Hey, stop listening to this and go get your damn vote in right now.
- [67:46]
Aaron Gaynor
Okay.
- [67:46]
Chad Peterman
Go. Hey, guys, I appreciate.
- [67:48]
Aaron Gaynor
Tommy.
- [67:48]
Chris
I'll see you in a week, bro. See you guys. Sir.
- [67:50]
Aaron Gaynor
Thank you, guys. This was great.
- [67:52]
Thomas Mello
Appreciate you guys.
- [67:53]
Chad Peterman
All right. And to all our listeners, you ain't got to do everything, but you got to do something. No. Zero days.