← To The Point - Home Services VIP Room Podcast
To The Point - Home Services VIP Room Podcast
Inside a $67M Family-Owned Home Services Business | VIP Guest Hugh Joyce
00:58:04
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- [00:01]
A
What's the password? Don't talk about it, be about it. Welcome in to the to the Point Home Services VIP Room where we invite you, the listeners in to hang alongside some of the biggest, baddest and most successful VIPs of the home services industries. You never know which surprise guest will show up next. So let's get this party started.
- [00:31]
B
Hey, what's up to the Point l listeners, welcome to the to the Point Home Services VIP room. And I'm excited today for a couple reasons. One, because our new co host, Mr. Aaron Gaynor, actually made a podcast episode. So, Aaron, thank you for taking time out of your super duper busy schedule, Mr. Important Guy to make time for our listeners time to listen to the podcast and you bailed on him. So, Chad, aren't you disappointed that he missed the first one, but grateful he's here today?
- [01:01]
C
A little bit. But always grateful to see Mr. Aaron and excited that, that he has joined us on this wild, wild adventure where you never know what may happen next.
- [01:11]
B
You never know which VIP could jump into the the room next. Got a lot of great feedback about our first episode and the new format, so that's really cool. And we'll probably have another little surprise guest co host hop on today, which will make more sense here shortly. But I'm excited for our guest today. He's got his bow tie on, looking real sharp, cut the hair sl. I mean, we're ready to go. I mean, this guy's another marketing guy just running an H vac business. But we got to actually, we met, I think we met a couple different times over the last month and a half or so at a few different events. One was over at Paul Kelly's raising Goats event down in Scottsdale. He was down there. And then we went to a,
- [01:58]
A
over
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B
to Beverly Hills, of all places, a couple of contractors and for, for one of his peer group meetings. And our guest that was on, you know, this previous episode, Jason Hansen, was also at that same at that same meeting. And a bunch of, bunch of independent business owners just kicking some ass in the market. And I thought, man, we got to get these guys on here and talk about it. But we got Hugh Joyce on the podcast, which I'm excited from James River Air Conditioning Company, actually a couple different companies. But Hugh, thanks for one, joining us in the IP room. I'm excited to have you in here and let the boys kind of dig into your story. He's a character, so he might carry the show for us today. So I think we're going to be like we're going to be just fine. But you welcome to the show, brother. We're happy to have you in the VIP room.
- [02:41]
A
Yeah, thanks. Great to. Great to be here today and talk about all things H vac and home services.
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B
We're going to get into it a little bit. I think I'll just kind of set it up for the listeners. I'll probably have you talk a little bit about it. Is queues down in Virginia actually I think your dad started your. This is your second generation. Your dad started the company in 67, right, 67. And you, what about. I think you said you're around 230, 240, 250 somewhere staff wise, somewhere in that range. In three locations. You're Richmond, Charlottesville, Roanoke, H Vac Plumbing, Electric. And you are in residential and commercial. Mostly residential. But you're in commercial. Is that correct that they get my.
- [03:26]
A
Right so far you're right on. Right on the money. Right on it.
- [03:29]
B
See so far so good. Look at me, the new and improved me. I'm doing so good. Well, listen, I want to give a quick shout out to just a couple of our of our sponsors before we go forward. Something new I'm doing too is and this one makes sense because Send it Email Marketing is the new sponsor on the podcast which you all know who that is. Great new company. I would highly advise checking into Send it Email Marketing Quick shout out to Blue on too. I actually thought, thought it was going to be cool to start letting some of our bigger sponsors hop on as a guest co hosts, you know, to just kind of be in like no different than we're not interviewing them. Just let them come on and ask questions from their perspective. That could be kind of cool. So I thought, you know what, since our other big sponsor is so gracious to let me use their studio today since I'm in New York. We might as well bring in the CEO of Avoca. Tyson. Yeah. Pay attention now, buddy. Welcome to the show.
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A
Oh my gosh, you guys. Tyson.
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D
What's up?
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A
Hey, how's it going? Hey, Chad. What's up guys? How's it going?
- [04:36]
B
What's up? Yeah, yeah, so. Hey Hugh, I heard, I heard you were just out here not too long ago in the same. In the same place I'm at.
- [04:44]
A
Yeah, I was up there, you know, a week and a half ago in, in the glass enclosed nerve center of Avoca doing some great stuff for us up there. So very. It was very exciting to meet with them and their sales team and some of the development guys. So really neat company. We also got to see the Knicks completely dominate. I think it was what, game five or something against. Yes, the Hawks. I think the Hawks against the Hawks. Yeah. Yeah, that was a good one.
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D
And then the Knicks just went to Philly. Put it down. So.
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A
Yeah, yeah. Aaron, you can still gonna join us for a game sometime.
- [05:20]
D
I gotta, man. I'm. I'm. I'm a Knicks fan. I'm a Knicks fan, then I'm a cast fan, then a Suns fan. So got a little love in areas, but hometown Knicks. But I'm all for the Knicks right now. I love it.
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A
Hey, the Cavs had a great win last night too.
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D
Yes, they did.
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A
Yeah.
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B
Well, I don't care about any of those teams, so. Yeah. I can't help but notice you didn't offer anything nice for me while I was here at Dyson. Thanks a lot.
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A
Oh, well, I highly encourage you to go to the, the, the, the skybox with them. It's very nice over there.
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B
Oh, thanks.
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A
You.
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B
Thanks. Once you start doing. Appreciate that. Yeah, thanks for highly recommending it.
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A
There was no game. There's no games to. When you're here.
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B
I'm just giving you our time. It's all good. My wife and I had a great time. By the way, you and I are spending most of our day in that same glass. Glass incubator center that, that you were in too, so. Well, let's go and jump into it. Tyson, glad to have you on here as a coast. You can just kind of fire away at random just based on, you know, if you have a question that pops up. It's good to have you on here too. Around a 62, I think you said around 62. Million dollar business at the end of last year, shooting for 67.
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A
This year, shooting 65. 66. 67.
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B
Okay.
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A
See how it goes.
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B
Yeah.
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A
Six, seven. We did a commercial on that.
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B
Oh yeah, well you did that. A commercial, six, seven.
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A
Yeah. Yeah. We're saying you're tired of your kids saying six, seven, call James river and we'll fix your unit. You know,
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D
playing right into the social stuff. Got it.
- [06:54]
B
Like, well, why don't we do this? You let's. I kind of gave a little bit of an overview too. But you know, something that you say is you're, you know, you're a marketing guy that runs an H vac, even though you do more on H vac, plumbing, electrical. You're probably in the boiler market too over there, right?
- [07:11]
A
Yeah, a little bit, but mostly primary heat pump market, you know, Central Virginia Primary heat pump market, a little bit of gas, teeny, teeny bit of oil. So, you know, but I kind of grew up as an all electric guy. I. I do not like fossil fuel systems here. You know, I'm not making a political statement here. This is painting my fanny. They break all the time. I like heat pumps. They're reliable. You know, they make me happy.
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B
Well, let's do this. That's actually kind of a good segue, is because your dad started the company back in 1967, which Aaron was born shortly after. So, you know, he.
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D
All right. I know why he brought me on this podcast now. Just so he can give me. Got it. All right. That was good.
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B
Yep. Well, and I can't wait to have so much fun with all this, all these new audience. Oh, hello. Oh, we're gonna have a lot of fun or I'm gonna annoy a lot of people, but yes, I love it. You have it. Do you have the screaming goat button there close to you, Hugh?
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A
I don't have the screaming boat, but I have my bell. You know, I was ringing those bells. You know, I got my bell if needed, but I heard it.
- [08:19]
B
Well, why don't we do this? Let's go and jump into a little bit of just your background, you know, for the listeners to hear. I mean, it's. I, I talked high level, but maybe, you know, your dad started a company in 67. On the website, there's some pretty old pictures of you on there with your hair looked a little bit darker than it does today. Maybe just talk a little bit about you getting into the industry. And then really, the things I kind of want to hit on are, you know, when. When we, you know, me, Chad, Aaron, you know, Tommy, Ken, whoever, we're sitting in a group talking to contractors at different events. You know, I kind of like the vibe of that. We're just asking normal questions of them, and they're also asking questions back of us. I mean, we have some big players on here. Like, obviously, Aaron and Chad have big, big businesses, so feel free to ask away, you know, on them as well, if you don't. But to me, it's just a good consultant. Let's kick this thing off. Just answers who we've welcomed into the VIP room a little bit about Hugh Joyce.
- [09:12]
A
Yeah, well, you know, look, you know, I'm heating, cooling guy. I've been. Been in the business since I was 15, so starting a shop, picking up paper, you know, did all the things that normal people do when you're growing up in the Business, your dad's running it. My grandpa let my dad five grand to start the business. And back then train said, look, we think air conditioning is going to go mainstream in houses. And houses weren't really air conditioned back in the 60s. So my dad was selling chillers with a buddy of his, worked over a train. He says, hey you, you ought to go do that training class. And it was basically a franchise. Teach you how to sell units. It was a six week immersion class. They sent you back with a, a book. And he did it. My grandpa let him five grand. He got a book and a truck and started selling air conditioners. He was a communication guy. And so we really started on the foundation of trains. Goal of profitability, professionalism and financial performance. And we still run it the same way they taught him 1967. We still use the same little spreadsheet. So fast forward, you know, was selling, went to, went to college. I was going to be a stock broker. So I really wasn't coming in the business. I was going to be a finance guy and got a marketing finance degree. And I was being interviewed, a guy said, Merrill Lynch. He's like, I'm going to hire you. And I was, that's cool. And he said, but I'll tell you, you probably ought to get back in getting that family business. You're going to make more money and you're going to be a whole lot happier than over here selling stocks. I did and I am, and here I am with you fine people. But I've been running the business since about 1995 and my father died in 05. I'm sole owner and I bought my sisters out back in the, in, in the, oh, 2010 or so. And so have been, you know, kind of running it since. And I always, you know, had a unique approach. You know, we're 50, 50, so we're half residential, half commercial. I wanted the two businesses to kind of run side by side. They tend to offset each other. You know, one's a little out of whack, the other is typically strong. And when you get them both cooking, it's, it's really a great way to run. I like it because of the hedging nature. So, you know, we've kind of grown the business on the back of, of maintenance agreements and service. You know, we don't do any new construction residentially, a little bit commercially. But you know, we've got, you know, 20 salespeople over there about half residential, half commercial replacement, primarily H Vac, but we do plumbing and electrical. I Hold the master electrical, master plumb, and master H Vac and gas filter. Don't have master plumbing, but so, you know, just been in the business, and we always wanted to be more of a marketing company, more professional, differentiate ourselves from our competitors. A lot of people have caught up now. You know, that was cute back in the 80s and 90s. You know, everyone's kind of onto it now, but, you know, so here we are, and we're still excited to be in the business. We love what's happening. We love consolidation. We love private equity in the business. One, they make everybody honest. Two, they create value for. For the business if you want to get out of it. They create value if you want to stay in it. So we just think it couldn't be a better time to be in the home service, H Vac service business. My two boys are in the business now. They're both working their way up through. So they were all at it raising goats with us a couple weeks ago. You know, really a little more immersed in kind of management strategy. One is kind of in the commercial group and working his way up. The other's running one of our residential companies we bought in Charlottesville, that airflow system. So he's up there kind of getting his little PhD in, you know, working with people. So, you know, lot a lot going on and, you know, just a really exciting time to be in the business.
- [13:14]
C
Hugh, I got a question for you just because I see a lot of similarities in, you know, kind of. My dad started our business. My brother and I took over for him. My kids are not old enough yet to be in the business, though. My daughter was in a commercial that she still talks about today, which was pretty cool.
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B
How did that.
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C
How did that transition kind of take place? Were there any kind of, you know, road bumps in the. In the transition between you and your dad? And then I guess maybe looking into the future, how do you envision that transition with your boys who are already obviously interested in staying in the business and carrying on that? How do you kind of see that? How did you. How did that go? And then how do you kind of see that moving forward?
- [13:59]
A
You know, it. It went well, you know, with me and my dad went. It went well. You know, generally, we were in the right. You know, he. He was a founder. You know, I was an energy guy. You know, like, we got to move this to the next level. And the big reason was, look, we gotta make. We have to pay two big salaries. So if I don't grow this thing, you know, I'm going to be poor. So. But it's very hard to work for your, for your father I think, you know, because it gets in the, and we never had any trouble. I don't think we ever had a crossword in the business. But it is an extreme challenge because you know, the family relationship then becomes, you know, intertwined in the business relationship. And you know, it, it is, it is difficult. I now know sort of what he was going through, you know, with one boy in the business. I've got two boys in the business and that's going quite well. But it is, I will say incredibly difficult because you know, not only are you running the business but you're training them and navigating, you know, all the business pressures but, but all the family pressures. And by the way, I didn't ask, my dad didn't ask me to come in. I wanted to come in. My two boys worked elsewhere and they asked to come in. I didn't encourage them to come in, you know, and you know, so I, I think certainly it's better to work. I didn't ever work anywhere else. I mean I did little job but never had a big job outside of the business. But I think it's always good if they do. But you know, for me it's no greater joy than working with your dad or your boys. What is no greater challenge? I mean it does completely change the dynamic because you need, you know, you can't go in there guns ablazing too much, you know, because you got other things going on. So. And I've got daughter in laws in here and I've got three and I've got employee associates here with three generations in here. So we're not scared of the family relationship. As a matter of fact, we think it's quite honorable when a child or a grandchild wants to come and work at the business their parents work at. Means we got a good culture that the business is, is, is good. So it is mostly great but it is a little, a little challenging. So, but, but overall the boys are doing a really fantastic job. You know, we're growing and it's neat to see them, you know, mature in their management role. We also have a really great management team that's been, been good at mentoring them along and so I recommend it, but I recommend it with, with some element of caution.
- [16:42]
B
Yeah, I'm a fan of, I'm a fan of it. I just think you have to have boundaries and that to be clear boundaries and expectations and you don't deviate from them. Especially when you have family and because, like, sometimes they're under more scrutiny because it is family and you got to make sure you're holding the deal, everybody accountable, nobody can slip.
- [17:00]
A
Yeah, it's a lot of pressure. You know, when you're not in a family business, you know, there are less reins on. You do, do what you want to do, you know, or may take more risk. You know, when I'm running this thing, you know, you know, I'll take a certain amount of risk, but I. I tend to rein in my risk a little bit. And, you know, at the end of the day, maybe we could have been a whole lot bigger, a whole lot better, a whole lot faster, you know, without some of that. That family pressure on risk. But, you know, I'm very pleased where I am, so, you know, it's not so bad.
- [17:40]
D
I think you've got. All right, so I have a question in the same vein, though, because I think it is interesting, the trans, you know, transferring your business over, because I know, I know Chad, when he joined next door, we met, he was in the middle of taking that over. Do you see the evolution of that? Chad came in and kind of, I don't speak for him, kind of reinvented his. His family business in many ways that his dad did a great foundation for and reinvented. That sounds like you kind of did some reinvented early on to advertise and do stuff like what do you think about when your sons or whoever is going to take over in the family business, allowing them to have the same freedom to kind of reinvent, as you said, without being, you know, maybe leveraging, letting them have some risk and, and maybe doing some new things that you haven't done in the past that you're open for. For them to, to give them be empowered to take over the family business?
- [18:24]
A
Yeah, certainly. I mean, you know, and we're kind of approaching that zone. These boys are 30. They've open over here six or seven years. You know, they, they sort of know how to fly the airplane. And, you know, it's. That, that's a very tricky transition because, you know, even I've been running things 30 years and, you know, so I have my opinions and everybody has opinions. And, you know, then when two young ones come in with opinions, that, that always gets. That gets interesting. And, you know, it's a big, complex machine. It's like flying a 747, you know, when I took it over as a little, little Cessna 172. So there's a lot more going on over here. But the cool thing is, as we do our little acquisitions, we can run out and let them invent that and they're in their own little compartment. You know, if it's a boo boo, it's not the whole thing and get straight and then at some point in the next five to ten years take over the big, the big ship. So, you know, and then we certainly as a company we monitor everything that's going on in partnering in the industry and you know, grow, growing outside of a partnership. So we monitor all, all of that and you know, at some point it may make sense for us to bring a partner on. We don't think that we need one, but it may make sense. So. But the rubric is complex to the point.
- [19:56]
B
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- [20:36]
C
You mentioned, you mentioned doing a couple of. I was just going to say you mentioned doing a couple of acquisitions. Talk to me a little bit about how you're kind of looking at that. I know there's a ton of different models. There's the traditional PE model where it's, you know, we'll just have a, a bunch of brands. We'll kind of let them do their own thing, so on and so forth. There's, you know, our model is more acquire, rebrand, run everything Central as one. Well, how do you guys kind of look at kind of acquisitions and what's kind of been your, your strategy going into those?
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A
It is a really good question. You're probably doing it the right way, I'm probably doing it the wrong way, but I don't have the heart to buy a company started in 1937 and change its name. You know, I just didn't, you know, and, and so I have been buying them and not changing the names. We've got White Scarborough Engineering out in Roanoke and Airflow Systems, which we just brought last year, purchased last year. Airflow Systems In Charlottesville and it had a nice little brand up there. Of course we're James River Air down in Richmond. So you know, I have not wanted to change the names. The smart money changes the name. So then you just stick everything on and move on up the road. We're sticking it on just with a different name. So if I cut a commercial, you know, we'll just do, you know, call James over air, call Airflow Systems. Call Weitz Carver Engineering. You know, just, it's a quick little change up. But that's been our strategy and we, and I did Weitz Carver Engineering a long time ago and we really, this most recent one was interesting because it was a older couple, they were retiring companies, you know, doing about 2 million and you know, they had been kind of break even. So it's, it's hard to sell a break even company. But there's a lot of value in a break even company if you, you know, know what you're doing. And so we were able to put a little something together, get it working and, and it, it'll, we'll have it, we'll do 4 to 4.2 this year. You know, 12 months in. And I mean that, that thing, the sky's the limit. But that, that's a really neat market up there. So we like, you know, PE doesn't like to buy anything broken but we think we can bring a lot of value to the table. Buying things are a little bit broken that are smaller, that we can tweak them around a little quicker and then maybe put an AI bot in there real fast to get the bots answering the phone and doing this and that and see if we can't, you know, rev it up a little bit with some of our partners. But, and so we want to do it, we're going to try to tee another one up, you know, later this year and, and finance wise we try to buy them and these are such small deals, you know, we can internally fund them, you know, because they're not big prices when they're not making any money. And we think we got a pretty neat model to make it lucrative for the retiring couple and give them a little bit, do you still allow them to roll over a little bit of equity as well? No, no, no, we don't, we don't, we don't do that because in a private company it's super, super difficult. But what we do do, and most of them are ready to go so they don't want to go any more risk. So what we do do, we Buy them out, do a little hold back and then I pay them a, you know, as long as they're working, participating, they, I pay them a percentage of the, of the, of the net profits, pretty rich amount. So they'll get some, but they're not going to get a second bite at the apple just because on the private side it just, it's so, it's so difficult. I have not done, you know, any phantom stock or anything for in house people and if I did do something, you know, we would, we would treat some of them like they had phantom stock. I mean you can make it up, you know, we can make it up as we go. So. But what I, what I have seen other guys do is give away or not give away but, but involve minority people in, in equity, actual equity. And it can be very, it can cause many, many problems on, on the, if you do partner up with somebody. I mean I've just seen major problems when it's little small businesses like we have. I had a question on kind of what some of the stuff you're saying. What do you think it is that allows you to, you know, restructure and be able to improve a business that private equity can't do? Because you said private equity won't ever get something that's, that's broken or you know, not doing well. What do you think has allowed you to, to be able to find these, you know, these subpar businesses and be able to bring them back? Oh, it's just a couple little systems we got to put in place. It's not, it's not real complex. And what I said private equity can do it because they're smart. They're way smarter than we are. I mean those guys running those companies are so smart, it blows my mind. They just don't want to do it. They want to do, they want high performing companies, they want to buy them. They need them to work well. They, they don't want to mess with them too much and they need a good leadership team to keep growing them at, at a good cadence and main maintain as Eva does. So they're under a different level of pressure and typically they're working pretty fast so they don't have time to screw around. We're not, we're on our side that, that's the beauty of what we can do. We don't, we're not under all that pressure. We, we can do what we want and certainly we want to do it real well too because when we, we want to be able to show them at the Cocktail parties. We want to be able to show them our Ebitdas and we want everybody does it look as good as their Ebitdas do. And so we're under a little bit of pressure, but so they don't, they don't want to do it. But really what we find. Look, I'll tell you the secret because no one will do it. I mean you, they're all the same. And everyone who does it knows all the same. They got a bad sales system, they don't kick terror, they don't take care of the technicians. You don't pay the people enough and they don't charge enough. You know, all you do is going to get a good, fair pricing, treat the text really good, come up with a neat little scheme for those guys, get an aggressive conversion sales system in there and you're. It's all done. But that is a little harder than, than what I am saying. And most of them won't do it. So, so it's tricky. But two different things, two different ways to get to the same, I think the same outcome, which is, you know, success and profitability and happy customers delight meant everyone delighted and happy.
- [27:14]
D
So for other people that are thinking about maybe your structure, if they like that structure, I mean, it seems to be working for you. Success. Like how do you frame out your shared services? Like how do you operate your business? How do you create scale right in that model? Like does your dispatch get consolidated? You have one dispatch center that handles for all the locations. Do you. I know you can throw evoke on for the phones for anybody, right? So that's a great tool to have. But you have one call center. Like, are you operating all these pretty independently even through operations?
- [27:42]
A
Like we're too stupid to have one call center. You gotta be smart. Big call centers, okay. And I love it. They, I mean, look, I have been in some big ones, like, you know, we were over in Paul, Paul over at, at Paul Kelly's and it's like, oh my. Wow. Yeah. Typically. And ultimately we will, we will bring them together right now. We run them locally. I, I find, you know, and again, both ways are good. But I like having local dispatchers. They know that things are. And when they're talking to people that, you know, when you're dispatching text from another town, you always get into trouble. So we have not consolidated operations yet. And there are some economies of scale if we do do that, but we haven't, we haven't done it. So, you know, we've got client service, call takers and Dispatchers in each of these, in each of these locations. And ultimately what I think we'll start doing once we get a little tighter and I, I didn't mention it. We just did our Service Titan implementation. So we're about 40 days into that. And so, you know, we're getting our, you know, getting, you know, with multiple tenants and all that kind of thing. So we're just getting all that straight in. And once we get that a little more refined, what, what we'll do is we'll probably end up having the mothership up here, James river, which is the big company backing up these other entities. And ultimately we'll, we'll, we'll have more synergies. But I do like having some boots on the ground in dispatch and scheduling that know that market versus having them do it from two states away, which I got buddies doing it that way and they're making more money than me. So, you know, but I'm, but I'm also, you know, in the business because I enjoy it. We like being in the business and you know, some, like, some under less pressure. But yeah, so that's where we are now. I know there was a long winded answer to have we consolidated? But I think they will ease in that way over time.
- [29:53]
D
Can I get your service time referral bonus? Who got that, Paul?
- [30:03]
A
Oh, no, no, no. Look, they, they'll. You ask them, you ask Vahe and All right, they'll tell you the longest sales cycle of any plant was me,
- [30:13]
D
you and Chris Hoffman.
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A
Because I remember, I remember Vahi being over here in my front conference room, you know, back, and he was driving a little Pinto or something. And you're talking about this new software
- [30:24]
D
there different now, right? Well, they're flying now, guy.
- [30:28]
A
We're coming in and drones and Ferraris and I'm happy for him. Look, those guys have worked so hard and you know, it's just neat to see them succeed like that. And you know, the product is, the product is good. You know, it is very hard to do these implementations and so
- [30:51]
D
let's ask the question then. You went this long, you said you're in the longest sales cycle in Service Titan history.
- [30:56]
A
Yes.
- [30:56]
D
Why now?
- [30:58]
A
Because my other software was Sunset. They turned it off. Okay, it was an old Unix and O's. You know, I mean, it was just X and up. But no, they Sunset it and you know, it'll blow your mind, you know, look, it did everything. It did our payroll, did our GL accounting, truck manager, trucks, the fleet, everything. It did it beautifully. It wasn't pretty. 30 grand a year and it worked great. Flawless. And you know, we're spending a lot more than that. And you know it, you know it and it does more. But, but they, they pulled us out of their kicking and dragging and trying, but we're here and we do love the way it integrates. You know, the Aravoca partners, you know, we haven't talked to them much, but you know, they're, they're integrating with us and we'll integrate, you know, live into the board. And so, I mean there are some things that are going to be big time on the front end of the business, back end. You know, I, I, I continue to opine that I think software should be built on the foundation of payroll, minutes worked accounting, GL dispatch and the equipment that we're operating, you know, site system, equipment component, subcomponent so that, you know, the essence of the system is those things and all that other stuff you can have. But payroll and accounting is the foundation and that is normally side thought, not just service tight neither all of them, everybody. Nobody wants to do those. And you know, they're so integrated into the business, you know, the minutes I want to, I want to run it by the minute. And you really can't do that if you don't have a good integration and nobody has it. So I'm not picking on Service Titan there. So that's why it took so long.
- [32:49]
B
Hey, I have a. Well, first off, you made me think of something. We were talking about ARA and Baja and Service Titan. Tyson, I forgot to totally say congrats dude, on your series. Be a billion dollar evaluations a big deal, man.
- [33:00]
A
Oh, it's 1.2 billion to be exact. No, it was one, it was 1 billion. I saw it. I saw 1.1 million. Maybe I dreamed it. Maybe I dreamed that last.
- [33:13]
D
Only one. Only one. One billion.
- [33:15]
A
Yeah. Sounds here you want to Invest at the 1.2. Well, I was a little upset that I wasn't called in on friends and family on that last one. But we're gonna get straight text.
- [33:30]
D
I have the biggest miss ever on this, so don't you worry. Don't you worry. Tyson can tell you. I think Tyson called me like four years ago maybe. I don't even know. Was it like four years ago?
- [33:41]
A
He didn't call me. I didn't know you at the time, but it was right after Josh Campbell from Rescue Air was like, hey, you gotta meet Aaron. We have the same Goldman Sachs like advisor guy. And then I spoke to Aaron and yeah, he he didn't return my call.
- [34:03]
D
He didn't return your call. We talked a couple of times, but then I didn't end up giving him any money, which I told him I was at dinner with him that long ago with. At your event. I sit next to him. I was like, can I go back in time and rewrite a check for like half a mil? I don't know, something.
- [34:21]
A
Look, I apologize if I said anything bad to the salesman last week by the sales people last week, by the way. Oh, no, they love, they loved you here. You did a good bunch of guys. Yeah,
- [34:37]
B
I mean, I got, I won this one. Thank you. Hey, by the way, I'm glad to be part of sitting in August too. Hey, I do have a question of you because I know you shoot pretty straight and we, you kind of talked a little bit about this, but this is a question I want us to ask more often, guys. Like, I think this would be a good one to, to ask on this podcast. General bit like, what part of the home service industry do you think is broken but no one wants to admit it.
- [35:01]
A
Oh my God. What part of the home services industry is broken and no one wants to admit it? That's the question.
- [35:12]
B
Give me something good. Give me something good.
- [35:16]
A
If I tell you, they'll kill me.
- [35:19]
D
No, we want to know. This is a question we want to start asking. We want to start asking this question. What do you think is broken home service?
- [35:32]
A
Yeah, I don't want, I don't want to say it. I can't say it. I'm going to. You know, it's our ability to manage the minutes and technology to do it so that we can gamify the business for the technicians and they can make more money. We can't do it if we don't manage the minutes and the technology solutions just can't get us there yet. And that's all of them. I'm not picking on anybody. We can't manage the minutes and at the end of the day, we, our technicians and our installers walk into their world with 480 minutes. 480 minutes. How we help them amplify those minutes, use those minutes, deploy those minutes, and at the end of the day give them a scorecard and gamify their time and show them how their payroll works and show we have create customer delightenment is my ultimate frustration. My business has been my frustration for 40 years that I can't really get to the next level in that. And, and that's not picking on anyone because it's not easy. It's very, very difficult. And I'm just too dag gum. I haven't been able to find the right people because we need to go down in a dungeon turn, you know, get everybody away from us. And in about six weeks with Claude, we could probably have it done. But it is a problem.
- [36:51]
B
Wow, look at him dropping Claude in there. Love it. Hugh.
- [36:55]
A
I'm trying to learn. Claudia won't talk to my, my, my email yet. I'm so mad. It says I won't delete anything. I said, Claude, go in there and delete the spam. But Claude is really amazing. I, I continue to have my mind blown by that. Along with Avoca in my bot. Those are two things been blowing my mind lately. My bot and somebody. I can't even say after class. I'll tell you what somebody said about the bottom. That won't be neat. Wait a minute. So, but technology is our, is still our challenge, you know what I mean? And getting to the next level and some of this functionality I think is a, is a pretty big deal.
- [37:40]
C
I was going to ask you a question. We talked a little bit about your acquisitions. How you kind of look at that. I was doing a little bit of research. Not as much as my, my fellow co host, according to the main host here of this show. But when I was looking at it, it looks like you guys have not. You not only do, obviously you've got the residential commercial split, but you're not only doing H vac, plumbing, electrical, you've added appliance. And I don't know if you've added it or that was like a main thing. Appliance, you've got some basement stuff. Were those things that you added later on, what was kind of the impetus for adding those? I guess maybe in like to wrap it all up. What advice would you give to people? Because I get this question all the time, when should I add another trade,
- [38:23]
D
what should I do?
- [38:24]
C
So on and so forth. How did you guys kind of look at that?
- [38:27]
A
You know, that's a really good question. And a lot of those we're doing with partners now. Personally, I think less is more and I think focus is probably better. One area, the appliance area is incredibly difficult. So we finally got, and this is just a recent development, finally partnered up with a really, a big local appliance place that has service. We just share the, share that back and forth now we had appliance technicians and we just, we are, we are right as we speak, kind of easing away from that Business. So I really think the ones that go well together, plumbing, electrical and H Vac. H VAC typically drives everything. I think when you get past that I got buddies in pest, you know, pest control. I got, you know, some buddies in appliances. I like to stay a little more focused in. Every time I get less focused, you know, we, we sort of kind of regret it. So my, my suggestion is and I on the crawl space, basement, waterproofing, iaq, duct size, duct ceiling type of kind of things, we do that with a partner and we do it with. Sometimes we do it, you know, I've had it in house, I've had it out of house. I've got a. I like having a couple really good subs on that where we can work together. You know they're referring us business, we're referring them business. It may be under our contracting brand or their contracting brand. So but I think less is more and I really the gooses that are going to lay the golden eggs for us is H vac and plumbing electrical underpins a lot of that, you know. So we like having the electricians in just so we. And we still sub electrical a lot too. So we can be fast and quick and responsive to the client. So I think less is more on that.
- [40:22]
B
Listen, as a marketing guy, I use air quotes for all the listeners. Marketing guy, a marketing company that does H Vac. I'm assuming you have a strong opinion on this.
- [40:35]
A
I, I do.
- [40:36]
B
I'm guessing Aaron will have a strong opinion as well. But what hill are you willing to die on as a marketing company that does H Vac?
- [40:43]
C
One thing you'll hear a lot from Bluon users, they've stopped ordering the wrong part. Derek from FH Fear used to trust vendors for parts only to send his text out with the wrong one costing time, money and customer trust. Since bringing on Blu on their misses have dropped zero. He even says that if a mistake happens now, it's usually because someone didn't run it through Blueon. It's become essential to their parts process. And here at Peterman Brothers, we're definitely seeing that impact too. Click on the link in the description and grab a quick demo. It will be worth it.
- [41:21]
B
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- [42:45]
A
What hill am I going to die on? I'm going to tell you what hell I'm going to die on. I'm going to die on the hill that humans want to be with other humans and we can bring as much technology in as we want to bring in and we can do much Google and all this other kind of stuff but at some point in time humans want to touch other humans and be talked to by other humans. And from a marketing perspective and I tell all my people, you know, we can get you as many Google leads and all this other stuff but if you don't walk next door when we're doing that job and knock on that door and say Mr. Customer, here's my card, I want, you know I'm, I'm doing a job next door for this client and if my guys leave any trash out here or they're playing their music too loud or we're parked in the wrong place, would you give me a jingle? And if we don't go next door, the other door, we're going to fail. And I mean and the same thing in the commercial sector, you don't go in and walk in and talk to some people and follow up with people, we're going to be in trouble. So yes, I love and I'm an old world guy so I'm radio tv, you know and, and I'm, I have having a very difficult time in the online Google AI all the search and you know how all that does and you know there's winners and losers but I'll tell you who's going to win every time humans are going to win and so if we stick to that and we're do all the other stuff, we'll spend all the money on Google and redo our website and all this other kind of stuff. But if you don't knock on the door and you don't introduce yourself to customers and you don't be nice to them and we don't drive our vans good. We don't keep them clean and we don't have good human contact. We're in deep, deep man.
- [44:21]
B
This is such an interesting topic to talk about.
- [44:26]
A
I mean that's what I think.
- [44:28]
D
I don't disagree with them. I think the human element is definitely the most important part.
- [44:32]
A
Right.
- [44:32]
D
It's just understanding what's happening in the, you know, the new answer world online, right? It's like you got to know what you're doing here. How did you create real human content that meaningful people want to watch? And then also understanding how do we answer more questions for people today than we ever did online? That's, that's where it's all going to, right? AEO so it's like how do you do that while doing that? I think if you can do both of those then I mean you're gonna sort of skyrocket past people, right? More than ever. But it's interesting, it's an interesting change and the change is real and it's happening and the people that don't adapt will be, I, in my opinion, this is my opinion will be pretty much in many ways erased from being able to be found online through this new change. I'm a big, I do a lot of radio and TV too. So I very much believe in that. Still a strong market and will always have its place. But then when I go to the search engineers, right, that that world is changing. There's no, there's no,
- [45:32]
A
it's crazy. You know, I do find myself even going past Google to, to Claude for just basic ordinary search nuggets. Sure, it's become so ornery. But so, and I think all of that, you know, AI and advertising, online marketing and, and, and, and bots and all that kind of, they underpin, you know, what, what we're doing and we want to be really good at all those. And I had to jump up and down to get my people to even let me hook up my Avoca bot and initially just let it send an email. But I will also say in addition to that the human is going to win and I think we need to keep human. And I'm for AI so I'm not, I'm not an anti a guy guy or anything. But I think the other thing that's interesting and everything we do, you have 90 seconds before it's ruined. You know, 90 seconds to get something answered and dealt with 90 seconds to follow up. 90 seconds to be on top of a lead. So that is so much faster than it, than it used to be. And it's hard, you know, it's hard to get everybody to understand how fast you know, we have to be. Even my own place like my online people say Hugh, you know, you're just a complete failure. You were like six minutes on this response and blah blah, blah. You know my underpinning answering is just the speed of it is, is, is interesting to me.
- [46:53]
B
Hey, you said you have, I think you sent me over or we talked about this or I could be wrong, completely wrong. I did somebody else. So hopefully I get it right. But you, I think you have 12, 13, 14, 15,000 agreements or something like that, right?
- [47:09]
A
Yeah, yeah, about, about 13,000 residential and about 900 commercial.
- [47:14]
B
Good. So that's, that's you. Anytime I think about maintenance agreements, I always think about Jimmy D. Domenico because. And him building that business on the back of his memberships. But what have you done? I'm, I'm interested in this because you have multi trade and you have multi location and you have now have multi brand and you have multi brands is what have you done like in the, with the maintenance agreements that actually increased lifetime value like not just the membership cow, but what actually increased lifetime value of the, of your customers?
- [47:43]
A
That's, that's a really good question. You know first, you know we, we have decided to focus on, on H Vac as the, you know, the essence of the membership. We ex. And, and with that agreement you get a, you know, priority service. You get your inspections, your cleaning and you get a 30% discount on your repairs off our flat rate book. And that has worked well. We extend that out to electrical and plumbing so if they want those, if they need those services they get that same discount. We are not doing a complimentary inspection yet. As soon as we get everything, we have to redo 13,000 agreements because they don't come from a Unix based system into service titan, you know, properly. So you know, we got, as soon as we get them redone, we are going to continue to enhance the value of those possibly with a couple of free dispatches in there so that you've got that tether a little better tether to the, to the client. Like you don't want to let this go because if something breaks you're going to have to pay a dispatch charge versus not paying one. So we, we're a little bit in, we call them bowtie memberships now. They have a Little bow tie on them and all that kind of thing. But we do think that is one piece of the secret sauce to making these home service businesses work well and commercial service businesses work well. Our commercial maintenance basis, you know, about four and a half million dollars a year, which spins off about another 6 in TNM work and then another 20 in projects. So those things are the lifeblood of these. These businesses,
- [49:38]
D
I'd agree. I think people undervalue those. I think we just saw a great deal with Service Champions Group or Champions Group.
- [49:45]
A
Right.
- [49:45]
D
That just went down. And a lot of that was around their membership. Right. That value proposition for Blackstone to jump in and buy that company had a lot to do with that membership base and how they maintain that relationship and grow that relationship and what it looked like. And I think.
- [49:59]
A
And they're really cast. Yeah. They really. Service Champions really cascades that out to those other trades. Yep. Which just, you know, creates, you know, ebitdas that are so beautiful. I've just never seen anything. They're almost as beautiful as Eileen Goose dress at the Met Gala last Monday. You know that bubble that. All right. She wore. Oh, you gotta look that up. That was pretty cool.
- [50:24]
D
But you are way more attuned than me. I love it.
- [50:28]
A
Oh, you don't.
- [50:29]
B
You didn't.
- [50:29]
A
You weren't. You didn't watch the Runway tapes from the gala the other day. There was some good stuff. But Eileen, probably.
- [50:39]
B
Chad was there.
- [50:41]
C
Yeah. Front row, taking pictures, wearing a vest.
- [50:44]
A
But. No, exactly. But. But back to that. Service agreements really are a key piece of. Of building the value of these. These. These businesses, both residential and commercial, you know, and. And, you know, out into plumbing and garage doors. And. And boy, the. The zinger is these. These landscaper. These lawn care ones, they're getting some big, big multiples too. So. But that service champion, it brought. It brought tears to my eyes how beautiful that deal was. And the guy.
- [51:16]
D
Very happy for them. But I mean, but the point was, like, it was. There was a lot of membership. They, you know, as a maintenance membership base.
- [51:21]
A
85, 000. It was some crazy number. There's a huge.
- [51:24]
D
It was 100 something thousand, right? 100.
- [51:26]
A
Okay.
- [51:26]
D
It was memberships. But that just tells you how valuable memberships can be as your lifetime if you build them the lifetime value of a membership. I think, you know, as we view the scale in our business, we've tried to grow that more. We have about 22,000 members now, and we're just trying to understand, like, what is the LTV to that? And I don't think people calculate that properly or understand that. So do you have a calculation that you do that? Do you understand the life value to this point because you want to go deliver the maintenance. But there is a lifetime value proposition to this membership financially, right? So.
- [51:54]
A
Oh, oh my. We've never really formally calculated, you know, service Titan does do it, you know, you know, once you get some history in there, it'll calculate it. But you know, bottom line, it's huge because invariably, I mean, the average life of, you know, of our agreements is seven or eight years. And invariably in that timeline you're going to get one replacement machine and a couple repairs. So it's, you know, a 200 a year agreement is certainly in my mind worth $20,000 easy, you know, over that same period and probably way more. You know, that's a good question. We've never really gone back and done a formal study, but I mean, I do know we've got customers that we've put in that we're on like their third, you know, replacement machine. You know, we've been, been, been long, long time clients, but know that. And I also think it's interesting, the security companies, you know, they get valued on, only on their monitoring revenue. That's their annual recurring revenue. That's where they get all their big value, you know, in H Vac. They don't even look at that really for us. They look at ebitda, but they don't really look at the, at the memberships. And personally, you know, one day maybe when, when we get heirs up to 50,000, we can go back in and try to get them to rethink it and say no, no, the, the multiples are 100, you know, because of this ARR or whatever, you know, but, you know, but, but the memberships are a big deal. And, and really the other thing that's a big deal in my mind is the numbers of pieces of equipment, you know, that you have under contract. You know, because, you know, if you've got a lot of one systems, that's less if you got a lot of two systems. And you know, when no one, and I've been on this, this is right up there with the minutes and the 480 minute deal. No one really looks at, equip looks at our client base and says we have a customer that has a site that has a system or multiple systems made up of components and they don't relate them. So you just get this big long list of shenanigans. And what I really look when I look up an account, I just want to say they have three systems. First floor, second floor, garage. And when I click on first floor, it opens up and says, they got a blower, they got a condensing unit, they got a humidifier and a dehumidifier and a thermostat. So five components, and no one ever says, what components do you control? How many compressor bearing units do you have? And the systems don't look at it. They don't really analyze it. Components and subcomponents back up to the system and then to the site. And, you know, commercially, it's a really big deal. If you got 100 systems with two components, you got, you know, that's 200 things you're fiddling with on one agreement. So you can look, say they got 900 agreements, but we got thousands of components that we control, which, you know, typically 10% revenue off those things. So you can pretty much use a number. Whatever the value of all the components are, times 10%, that's a spin off from the maintenance. So that may be even a good way to go back and say, what are the lifetime. What's the lifetime value? Just that 10% spin off revenue. But no one looks at things like that. Drives me crazy. You know, when you go in and the equipment's all over the place and it doesn't relate. I know Service Titan is working on this, by the way, as a point of order, but I think it's a pretty big deal, particularly for positional awareness for technicians and dispatchers and CSRs. You know what's broken, and if they can't narrow it down to a system, you got to put it to the site. But most of the time, say, my first floor is broken, so click the call there, you know what you're doing. And, you know, when you get out there, you can open up and say, this is. I got a red light repair on the blower, and I got a green light, a yellow light repair on the condensing unit. And, you know, everything tracks and it's. It's tight and I can't get tight. Now, I never have been able to get tight either, not with my other system.
- [55:40]
D
So I don't know if anybody's got it figured out.
- [55:43]
A
Just so we're clear. I know, I know, I know.
- [55:47]
D
I think the question is, really is like, how do you evaluate? How do you think about it? How do you do that? And I think. And I know these other guys might, as we're coming closer to the end here, time. But, you know, so, so you said you're a marketing company, you have 13,000 members. So I imagine you leaned on these memories metric people three systems with you probably over lifetime. So when you're balancing those two, like how much, how much, what's your percentage that you spend on marketing? Because you seem like you're a lot. Do you, do you have like a what do you spend a revenue on marketing percentage? Are you high end you low? Is your membership offset your repeat page?
- [56:18]
A
That's in our residential group, it's about 6%. Okay. It should be more. It should be more. And you know, you can see it's just crazy. When people go to 10, this happens. When they go to 15, this happens. Yeah, you know, so, but again, we're, you know, somewhat of a conservative. We're, you know, we're not growing 20 a year. We're growing, you know, 7, 8, 10, 11%. It's more conservative, but so 6. And we do a pretty good job of getting credits back and that kind of thing. So. And we're about 50, 50 old world media and new new world media. So about half our money is radio, tv, billboards, trucks, and about half our money is pay per click. You know, all the other different little LSAs and all the other different, you know, things that we do online. So you know, you've got the two things that try to triangulate, but it's, it's a big, you know, marketing is what keeps me up at night because it's so easy, you know, for someone to, to, to, to, to capture things, you know, if you get control of Google and when people type eating and cooling near me and it always goes to XYZ and it's not me, we got problems.
- [57:37]
B
That's a, that's a whole other conversation move that I would love to be in. Yeah. Hey, Hugh, listen, I mean, I know it's at the top of the hour, so I want to make sure I get everybody out of here, but I appreciate you taking, giving all of us your time and then let me kind of throw a couple of curveballs at you and having to deal with this group of people. And I'm just grateful that you know, one, we got to connect a few times over these last couple of months and that we're able to do this. So thank you.
- [57:59]
A
Yeah, no, it's great to, to chat with everybody and you know, you know, beat some ideas around and, and certainly good to see our see you guys up at the glass enclosed nerve center in New York City there with, you know, the evoca guys and all the opportunities with them. So, yes, it's just exciting time. The businesses, you know, we're finally, you know, getting some respect. You know, I'll never forget my sister was getting married this long time ago. Some pretty wealthy dudes. And this guy was Carl Icahn, secretary or something. I don't know. It was a bunch of family. I think my. One of our friends heard the mom. My sister's husband's mother and father talking and said, and they were talking about the wedding, which is at our house. They said, and there were plumbers at the wedding.
- [58:56]
B
Your son was damn plumbers.
- [59:00]
A
So we always had a lot of folks.
- [59:01]
D
Damn plumbers. Here we are. Here we are now.
- [59:04]
A
Here we are. You know, everyone's saying trades and. And it is. I mean, I do think trades are going to be super impactful in the next 20 years. So it's exciting.
- [59:14]
D
I agree. We're very fortunate. Time to be doing what we do.
- [59:18]
A
Absolutely.
- [59:18]
D
And the trades are definitely looked at differently than they were, you know, when I started in 1997. In the trades. Right. And now look where. Now look where they are today. Right. So I get it. It's exciting. Time to be around. So thanks for sharing some of the stuff. You know, I have more questions for you, but I know we got time. There's a but. It's great to meet you. Good to hear about your business. It's always good to hear that people out there doing these, building still great independent businesses. It's exciting to see and hear. So congratulations on all your family success and I look forward to, you know, seeing your family come on. If there's anything I can ever do or reach out, let me know. Love to, love to chat with you, man. So congrats.
- [59:54]
A
Thank you. Thank you. It's great to chat with all y' all and congratulations. Everybody's got neat things going on, so it's super exciting. So thanks for having me on.
- [60:04]
B
Yeah, fun time in our industry. And Tyson, thanks for one, let me steal your. Your studio and make you use your own office. So I really hit that. And coming on and to Chad and Aaron, man, I glad we could finally have everybody, everybody on one on one podcast. So listen to all of our listeners. We talk about a lot of different things. Main thing I always tell you, man, is don't talk about it, be about it. So we'll see you next week back here with us, your friends and whoever the surprise guest going to be on the to the Point Home Services VIP show. We'll see you.