Harnessing AI for Financial Insights with Mike Barnhart

Speaker 1 As leaders, we are dealers of hope. And there's this phrase, without hope, the people will perish.
And so we have to be providing hope for everybody that's part of our team.

Speaker 1 And literally, like, I don't think a week goes by that I don't think about that. Is that we, as leaders, are dealers of hope so that our people don't perish.

Speaker 2 Welcome to the Home Service Expert, where each week Tommy chats with world-class entrepreneurs and experts in various fields like marketing, sales, hiring, and leadership to find out what's really behind their success in business.

Speaker 2 Now, your host, the home service millionaire, Tommy Mellow. Before we get started, I wanted to share two important things with you.
First, I want you to implement what you learned today.

Speaker 2 To do that, you'll have to take a lot of notes, but I also want you to fully concentrate on the interview. So, I asked the team to take notes for you.
Just text notes, N-O-T-E-S to 888-526-1299.

Speaker 2 That's 888-526-1299. And you'll receive a link to download the notes from today's episode.
Also, if you haven't got your copy of my newest book, Elevate, please go check it out.

Speaker 2 I'll share with you how I attracted and developed a winning team that helped me build a $200 million company in 22 states. Just go to elevateandwin.com forward slash podcast to get your copy.

Speaker 2 Now, let's go back into the interview. All right, guys, welcome back to the Home Service Expert.
Today is a special I've been trying to get Mike Barnhart here for three years. Three years.

Speaker 2 And we've been talking about just how to get him on the podcast. He's a busy guy.
He is acting as the COO, the CFO, shared services within Eco Plumbers.

Speaker 2 You guys know I hang out with Aaron Gaynor quite a bit, but Mike started listening to the podcast originally, turned Aaron on to me.

Speaker 2 And little did you know that Aaron's son, Chase, moved out here to go to ASU. So Aaron's out here a lot.
We share a lot of business advice of what's going on, good, bad, and ugly.

Speaker 2 Mike's an expert in finance, strategic planning, performance management. He's located in Columbus, Ohio.
He's worked quite a few places. I know Victoria's Secret is my favorite one.

Speaker 2 He met Eco's owner, Aaron Gaynor, in 2013 and officially joined the company in January 2015, helping Eco Plumbers grow from $1.9 million. to a projected $73 million.

Speaker 2 Mike is known for his strategic initiatives, financial acumen, and emphasis on data-driven decision-making. What's up, brother?

Speaker 1 What's up?

Speaker 1 I got to fix one of those numbers.

Speaker 1 We did 73 million last year. We're going for 91 this year.

Speaker 2 91.

Speaker 2 You know, it's a CFO when they're like, so no other people say 90 or 100. You say 91.

Speaker 1 91.

Speaker 2 So what's a healthy bottom line on 91?

Speaker 2 Usually people say 15%.

Speaker 1 Yeah, I mean, 15% is a good one. If you can get to 17 or 18, you're doing even better.

Speaker 2 That's true. What do you consider failing?

Speaker 1 Under 10.

Speaker 2 Under 10. In growth years, one of the things I've realized that I always used to tell myself before I got a great CFO is I keep putting, I always used to say, I put the money back in.

Speaker 2 Hey, I put the money back in. I put the money back in.
But I didn't realize unless it's going into marketing or strategic hiring.

Speaker 2 or some type of like Power BI analytics, I wasn't putting the money back in. I was actually wasting the money and I just lied to myself.

Speaker 1 You know, our strategy has always been greenfielding, but still, like our Cincinnati location, we still lose money in it today. You know, and we're a year and a half in.

Speaker 1 But, you know, our advertising spend is 35% of revenue right now.

Speaker 1 So, you know, you're doing that because, you know, when you look at the success story of it, like our Dayton location, we opened up in 2021.

Speaker 1 This year we're doing $20 million in Dayton and it's super cash flow positive. It's actually the highest margin in.
location business right now in our business. So

Speaker 1 it is a little bit different as you're scaling and how that changes.

Speaker 2 I've got a business right now, and I obviously under NDA, but it would cost us about $30 million to buy.

Speaker 2 And Core Tech, our sponsor, said, Would you rather put that money into marketing or buying this business? And I'm like, Aha!

Speaker 2 I'm like, I'd rather put it into marketing. So you're going to give me that over and above what we spend today.

Speaker 2 It's, you know, me and Tom Howard are having a debate actually at Rhino about

Speaker 2 Greenfield versus or Greenfield versus buy and build, or, or you know buy and build or MA.

Speaker 2 And he likes MA way better.

Speaker 2 I feel like you got to find the right company. Then you got to, there's a lot to be done on integrations, changing the culture.
You lose a lot of the employees, but you're buying the lead source.

Speaker 2 I don't know. You guys haven't done much acquisitions, but whereas you're, if you had to pick and choose, I think Greenfield allows you to take your own shot, call your shot, grow whenever you want.

Speaker 2 Once you build that playbook, and I think it's worth more. If I'm going to buy your company, I'm going to say, man, these guys figured out Greenfield.
Yeah. They could scale to any market at any time.

Speaker 1 It is, it is slower, for sure. You know, and you talked to Tom Howard.
I remember I asked Tom one time, I was like, tell me about, you know, a tuck-in that didn't go well.

Speaker 1 And he's like, they've all gone well. You know, so maybe some people are better than others.

Speaker 1 But, you know, with greenfielding, it's, it's kind of crazy because yes, it does take three to four years to really adopt in the market.

Speaker 1 But once you've hit that kind of threshold, it's like you've always been there. It's like you've been there for 20 years, you know, even though like once people do pick up your name.

Speaker 1 And really, I mean, anything that we've ever, I don't know if you've seen this, but anytime I've ever like made a change or, you know, we used to just be plumbing only, we added excavation and we added HVAC, we added electrical, we added other locations.

Speaker 1 Like you have these like changing points within your business.

Speaker 1 And they all, from the minute you make them and you start to enact them, they all seem to take like 30 to six months to get some traction.

Speaker 1 Maybe you can make it a little faster than that with as many as good as you are, but like it always has taken me three years to really build something.

Speaker 2 Yeah, you know, that's the thing.

Speaker 2 people overestimate what they could do in one year underestimate what they could do in five everybody wants it tomorrow they're like i i look at people's budgets and i'm like wait you're gonna 3x this year but you never 3x'd like why this year and they're like well you know i'm focused now and you've proven it's possible and i think some people unfortunately that listen to this podcast are trying to live my dream and do what i did but they don't know the sacrifice it took.

Speaker 2 I don't have kids. I'm not married.
I didn't spend enough time with my niece and nephews. I don't know what your thoughts are, but

Speaker 2 your goal should be to get to an exit that provides for you, your family, and takes care of you, and hopefully you get to roll equity and continue to. We like to grow things.

Speaker 2 I mean, as a COO and part owner of Eco Plumber, I'm sure you're like, dude, you're enjoying the growth more than probably maybe trying to hit the finish line.

Speaker 2 What do you, what mentally, how do you look at the growth of

Speaker 2 ECO?

Speaker 1 So, yeah, I mean, you know,

Speaker 1 to look at it throughout the years, I've been doing it for 11 years now. We've gone from 1.9 million to 91 million this year.
It's been a really rewarding journey for sure.

Speaker 1 You know, you do have those kind of pressure points along the way where you do hit these parts of scalability that feel really rough, and then you kind of push through them.

Speaker 1 And a lot of that really comes down to the infrastructure that you build within your company. You have good people, you've got the right meeting cadences, you've got the communication rhythms.

Speaker 1 And for me, it's, you know, like I've never stopped being really curious about the business.

Speaker 1 You know, for any CFO out there, one of the things that I do every Sunday, and I've been doing it for 11 years now, I send out an email to the whole management side and leadership side of the company of, here's what I think about last week.

Speaker 1 And, you know, I go through about 20 different reports that, you know, I've got kind of flagged on my side. And I look at them and I look at them every Sunday and I start to see trends.

Speaker 1 You start to understand that business and then you become a really good storyteller.

Speaker 1 And, you know, you're not going to do do that if you're not curious.

Speaker 1 But once you get able to tell that story, like this year, I was actually, I went to the management team and I was like, hey, I think I'm going to stop doing this email.

Speaker 1 I'm still going to do it for myself.

Speaker 1 And they were like, no, you have to keep doing this email because it really does highlight out what is happening within the business, where we have areas for opportunity, where are there anomalies in the business.

Speaker 1 And then you can, you know, I'm not the one that's most of the time fixing them these days, but I'm helping people understand what's happening so they can address it.

Speaker 2 You know, Aaron was telling me you guys are playing around with AI Chat GPT and you loaded stuff in and it said something like renegotiate with your vendors or something crazy.

Speaker 2 Like what exactly, how are you as from a CFO slash COO perspective using AI?

Speaker 1 Yeah, I mean, I mean, at the basic level, it's like, why you don't have to, it's, you know, the nice thing about like ChatGPT is how easy it is to use. Like, I just load our PDF.

Speaker 1 financial statements in each month and then I'll ask it questions about it.

Speaker 1 And I'm pretty good at understanding the business, but it will pull things up that I didn't actually see within the business because you can ask really specific questions.

Speaker 1 Like I could put January of 24 and January of 25, and I say, and but it has every month in between.

Speaker 1 I say, you know, compare this against the last quarter and compare it against January of 25 by location.

Speaker 1 And I want to specifically look at the sewer department, and it'll give you like a really, you know, detailed answer on what's going on with that.

Speaker 1 And, you know, you're, I don't know why every CFO doesn't do this because it's the time it takes to do it is under a minute.

Speaker 2 And I know, you know, I was screwing up with ChatGPT yesterday.

Speaker 2 How do you, you know, I got the app that goes online and you log in, but what's the easiest way to upload a document like a balance sheet income statement or P ⁇ L? Yeah.

Speaker 1 So, and that's, that's the really intuitive thing about ChatGPT. I do use the desktop version more than the app, but you can, you know, you just load it right in there.

Speaker 1 It doesn't have to be in any sort of format. Like it knows how to go read it and pick up the correct information.
And you can ask, you know, extremely detailed questions if you want to get in on it.

Speaker 2 So do you have your favorite?

Speaker 2 this is supposed to be a very helpful podcast to people out there so maybe you'll share maybe you won't but do you have like certain prompts you use other than comparing year over year

Speaker 1 um a lot of times i'll look at location differences so like i want to see how locations are scaling on margin you know as as cfos we definitely care about margin and you know that's that's the nice thing is you you know when you're greenfielding a location you can get to margin stability before you can get to cash flow stability.

Speaker 1 And

Speaker 1 you want to keep focusing on how do I actually just make this a margin profitable business where, you know, some people have gross margin of 50%, some people are 55%.

Speaker 1 Really depends on what your trade is. You know, if you're a heavy HVAC replacement, you're probably going to be lower than if you're an electric residential service.

Speaker 1 But trying to manage that 50-plus percent margin across your business is always going to keep you super healthy.

Speaker 2 You know, I remember it wasn't that long ago. It feels like yesterday where Aaron Kamen and he's like, we finally hired a Kick Charge.

Speaker 2 And it really was built out of the fact that you guys were going into so many other industries. It couldn't be eco plumbers, ECO, the plumbers you know.
Yeah. So what was that like?

Speaker 2 You know, redoing your brand at how big were you guys? What was the revenue?

Speaker 1 So we did the brand started in 2022. So we were about 40 million.

Speaker 2 That's about when I did it with A1. Yeah.

Speaker 1 And, oh yeah, he just showed me that your

Speaker 1 pickup truck wrap. That looks pretty good.

Speaker 2 I want one of those.

Speaker 1 But the

Speaker 1 yeah, we worked with them because we added HVAC and electric. And we worked with Wizard of Ads on that.

Speaker 1 Adding electric was a pretty last-minute decision.

Speaker 1 But, you know, the brand is eco-plumbers, electricians, and HVAC technicians. That's very intentional.
It's not eco-plumbing. It's not eco-electric.
It's eco plumbers. It's eco electricians.

Speaker 1 It's about the people. It's not about the service.
And so we rebranded as that, you know, made it more focused on the eco. So it's a, you know, it's very in your face.
And, you know, even this year,

Speaker 1 so we're almost up to 300 trucks now. And we realized like, we don't need billboards in Columbus, Ohio anymore.
We have 250 of them going around.

Speaker 1 So let's put that money into a different part of marketing.

Speaker 2 That's interesting. You know, I did want to bring up Roy Williams, the wizard of As, based out of Austin, Texas.
I went and visited him for a day. Drank quite a bit of wine.

Speaker 2 Learned a lot about Don Quixote. And,

Speaker 2 you know, a lot of people don't know this, but if you want to go visit him, it's not easy to get the invitation, but it's 10 grand.

Speaker 2 He'll take you out to the nicest dinner, educate you on his whole process of how he comes up with his ads. He was the original guy that really made

Speaker 2 Rolex take off in a lot of the jewelry stores. And then the company started using him for home service and home improvement.

Speaker 2 2800 got junk, I believe, was one of the first ones. And they're a monster.
And,

Speaker 2 you know, you guys started using him.

Speaker 2 And it's one of those things where you got to trust the process because you might spend a fortune for the first six, nine, 12 months.

Speaker 2 But you're trying to be able to build this thing in their hypothalamus, their memory bank. To like, when there's something happens with HAC Plumbing Electrical, they think of you.

Speaker 2 They remember your jingle. They like you.
They trust you. And they'll wait a bit longer to book the call.
They'll spend more money with you. They're going to smile more because they like your story.

Speaker 2 Aaron's been telling me about the the hate email you guys have been getting. Like, you got to, you're talking about.
You sound like a smoker. Tell me about working with

Speaker 2 Roy.

Speaker 1 Yeah. So, I mean, you know, I'm the finance side of the business and I do some ops, but, you know, I've always been super lucky.

Speaker 1 Like, Aaron's always handled marketing and sales strategy, but Roy seems to really like me. He calls me Bear.

Speaker 1 But, you know, the.

Speaker 1 We have a good relationship with them. And, you know, I think the interesting thing is the way I look at marketing and the way that Aaron and him look at marketing are way different.

Speaker 1 So like every time I've had an idea, he's basically like, that's a terrible idea, Mike, because I don't think that like I look at it like, you know, maybe connecting with the logic or the value of a customer.

Speaker 1 And he thinks about marketing more about storytelling and being an entertainer and really just like, you know, taking a minute to allow people to think about something else from their day other than, you know, what's actually happening in their lives.

Speaker 1 And for that, it's been a really good partnership. We've definitely created a storyline that happens within the business.
And,

Speaker 1 he's done a great job for other companies as well.

Speaker 2 Yeah, we were out to visit Morris Jenkins about six months ago. And

Speaker 2 the crazy thing about

Speaker 2 Roy Williams is he doesn't like working with anybody but the owner, maybe like a CFO, COO, because he hates PE.

Speaker 1 Yeah, him and Aaron still talk every week.

Speaker 2 Yeah.

Speaker 2 Well, the problem with that is eventually, you know,

Speaker 2 if you're working on getting to a deal, which I think everybody should be, if you're in business, I could say this because I've been through it and I've got, well, I was missing a lot of hair because I got like, what is that called when you lose your hair?

Speaker 2 LAPESHA. LAPICHA.
I got that through the process. It was like stressed.
And it was super high stress. And now going into the next deal, I'm so excited.
Like everything's running towards the next deal.

Speaker 2 Like built to sell, grow your EBITDA, like find the not next best partner, but a partner that could take you to the next level.

Speaker 2 And I'm super excited because for some reason I still feel like anything could happen. You know, anything could happen in the economy, anything could happen within an industry.

Speaker 2 I know it was really hard for HVAC. You hear HVAC plumbing electrical companies.
2024 was a hard year. 2023 was a hard year.
I don't know.

Speaker 2 Are you hearing that within the just the echo chamber of like, I know you guys work with Nexstar?

Speaker 1 You know, I've heard it from certain companies. At the same time, we just didn't experience it much.
Like we did 25% organic growth last year.

Speaker 1 We're doing on right now, I mean, yesterday we had our largest sales day in company history at almost $600,000.

Speaker 1 It's just, it seems to be moving in our direction the right way. But I have heard that some, even some of those PE groups have, you know, been down year over year, you know, 4% to 5%.

Speaker 2 Yeah. So I've got a theory that we're going to be experimenting with that we're going to pour

Speaker 2 whatever our marketing budget is now, we're, we're going to,

Speaker 2 it'll be 250% of what it is today. Really? So like if 100% is called 12%,

Speaker 2 we're going to be spending close to 30%. Yeah.

Speaker 2 And the way that our CFO is structuring that is more in a way that

Speaker 2 it's considered greenfield. You know, it's considered an adback because that's what you spent to grow.
I understand. And I don't know exactly.
I don't, but he does. And you do.

Speaker 1 Well, your business is so different than mine in the fact that

Speaker 1 if you have a replacement, you're probably not going to see that customer for a long time or unless you have, I don't know if you have memberships, do you?

Speaker 2 Yeah, we've got 50,000.

Speaker 1 So 50,000.

Speaker 2 Wow.

Speaker 1 So last year we made a big push on memberships and we went out. We sold 10,000 memberships last year.
So I heard like you talk about some of your core tenants this year, call center and marketing.

Speaker 1 One of ours is actually membership fulfillment. Like we have 30 students in our HVAC school right now to become clean check maintenance techs.

Speaker 2 And they get good at the turnover?

Speaker 2 What's that?

Speaker 2 Getting turning over to equipment.

Speaker 1 Right now, well, these are green people that have no industry experience. We're teaching them and then we'll flip them to the LTO experience eventually.
But, you know, for me, that's the biggest

Speaker 1 unknown part of our business. Like, right now, our call volume is so high.

Speaker 1 And, you know, historically, we've always had about 70% of our customers be net new customers. And that's becoming 60 and 50.
And it's becoming more and more repeat customers.

Speaker 1 And I don't know what the impact of selling 10,000 memberships a year really does for your future call volume. And I think I have a different view on memberships than most people.

Speaker 1 Like, we, on average, we sell between, or we create about 200, 250 new members a week people are like how do you do that many a week and

Speaker 1 I sell we sell for the discount

Speaker 2 and then we retain them because we offer a good level of service you do yeah you got to give a discount up front and then get them in for the reoccurring but almost every PET

Speaker 1 sell you're gonna sell your other industry like electric or you know yeah but all these best practice groups are always like no don't sell it on the discount don't sell it on the discount I'm like why not like if I'm if I if I end up in three years with 50,000 members, do you know how strong that makes me as a company?

Speaker 2 Well, here's the deal: that every PE company, including our partner, Cortec, you got to be able to prove, and a guy like you could prove this pretty simply, but he goes, very rarely have I seen throughout the last decade of looking at HAC companies,

Speaker 2 this is coming from the PE companies, have I seen them build

Speaker 2 a profitable model for service agreements. I have so many and we collect this monthly fee, $13 a month per membership, but we have a really hard time.
Like here's our biggest problem.

Speaker 2 Two things. Number one, you never, Keegan taught me this, never pay commission to a maintenance tech.

Speaker 2 You do not want the client feeling like you're out there just to sell them shit when they just signed up because you'll burn them, you get bad reviews. Number two,

Speaker 2 and your goal is just to build a fence around the client.

Speaker 2 And number two.

Speaker 2 We've taken technicians that can't make it in the real world and made them maintenance techs. I think that that's a mistake.

Speaker 2 You got to teach them how to be lead setters. Just say, look, I'm just a maintenance tech.
I'm going to take care of you. We learning this from Leland.
I had a 29-point tune-up.

Speaker 2 Now it's 151-point tune-up. Make sure it's long and you take stuff apart and you send pictures to the client.
And this takes time to learn this stuff because you guys are newer at this, I believe.

Speaker 2 So don't send commission. Take a long time to do it.
Just have them be good at selling lead, setting leads, but do not

Speaker 2 take your, your guys that don't make it in the real world and make a maintenance text. Yeah.

Speaker 2 Because the maintenance text can make the most money out of anybody in the company because this client already likes and trusts you. You know what I mean? Does that make sense? I do.

Speaker 1 I mean, and as

Speaker 1 the CFO of the company, incentive plans have always been like one of my biggest things that I focus on.

Speaker 1 So, you know, our strategy has always been, why can't we pay the best and be the best company at the same time? Right.

Speaker 1 But, you know, for anybody that's not using configurable payroll on Service Titan, like start using it.

Speaker 1 It creates visibility for your technicians to understand how they're going to get paid, when they're going to get paid, what they're going to get paid every single week.

Speaker 1 And, you know, you can really design pretty good incentive plans through configurable payroll.

Speaker 2 Ryan from chirp always brags about how he turned on a couple of campaigns along with you and Aaron and just murdered it on

Speaker 2 calls that abandonment calls. And as much as you guys get, Aaron's like, look, we can't book out.
Sometimes we're too busy. We are.
And that's a good problem.

Speaker 2 And then I just got done showing Aaron Lace AI.

Speaker 2 And

Speaker 2 I do believe, like, I really don't think AI is in the call center. Like, I don't want to talk to AI.
Not when I have something broken. I just don't.

Speaker 2 So I do what I would want to do as a client, but Lace is built to just to train our call center to get to 90 plus percent and reduce our cancellations.

Speaker 2 And, you know, we're going to do 300 million plus. So every percent we book and every percent we reduce cancellations is $3 million.

Speaker 2 And that's the way I look at it.

Speaker 1 We tested Lace AI and then we ended up adopting it in the entire call center because it is a really good coaching. You know, it teaches even the reps how to be better.

Speaker 1 I did just hear from Service Titan on Friday of last week that they used to have this feature called second chance leads. Yeah, yeah.

Speaker 1 But there was only if you were on Phones Pro, and they just opened it up to everybody.

Speaker 2 So,

Speaker 2 what are your favorite KPIs from your perspective? Gross profit, obviously, bottom line, EBITDA, but what do you really, year over year comparing the same month?

Speaker 2 What are some of the things you look at that are your favorite KPIs?

Speaker 1 Yeah, and some of them probably aren't financial, to be honest. Some of them are more operational, but definitely

Speaker 1 always looking at the quality metrics. So we're looking at recall rates.
We're looking at how many members are we rebooking or canceling.

Speaker 1 How many canceled calls do we have? Those are what I call like the quality metrics. You're looking at your reviews every week.

Speaker 1 Every week we get about 360 reviews right now on average. We have about three that are under four stars.
So, you know, you're addressing what those quality measures are up front.

Speaker 1 I heard you say you're going back to all your one, two, and three star reviews to try to fix them. I will say that some of them are more around our radio ads.

Speaker 2 Those do do get removed.

Speaker 1 They do get removed.

Speaker 1 But, you know, definitely looking at quality metrics and then looking at, you know, certainly in our business model, that turnover percentage is super important. So bring that up every week.

Speaker 1 The way that we actually sold 10,000 and created 10,000 new members last week, we talked about it every single week. So Aaron and I still get on a 7 a.m.

Speaker 1 call every Wednesday with the entire field staff across all locations, and we talk about certain things. And, you know, for 52 straight weeks last year, we brought up memberships.

Speaker 1 That was something we just weren't going to drop until it was really adopted within the business.

Speaker 2 But let me ask you. So

Speaker 2 we go through this budget, and I got to tell you, budgeting for a guy like me

Speaker 2 used to be useless. I used to think it put me in a box.

Speaker 2 And, you know, back in the day, we were on a cash versus accrual. We didn't know what, like, look,

Speaker 2 I've learned a lot. I think budget, like, first of all, I think everyone should have a budget.
I think every single human being should have a personal budget.

Speaker 2 I think every single technician, installer, warehouse guy should have a budget, like personal budget.

Speaker 2 And I kind of talk about budgeting by just understanding how many calls do I need? What's my booking rate? What's my conversion rate? What's my average ticket?

Speaker 2 And when I understand that, I could really build a really good budget of things to target. And I think Adrian thought I was nuts.
He's like, that's not that simple. And then Cortech, without my.

Speaker 2 guidance said, this is how we build our budget through these KPIs, the exact same thing. Yeah.
So when you're thinking about a budget, what do you think about to put it together?

Speaker 2 Is it through lead gen and hiring and capacity planning? I mean, what are the things you're thinking about? Yeah.

Speaker 1 So, I mean, I love budgeting. Actually, it's, it's one of my favorite times of the year.
And there's a couple of things I always do.

Speaker 1 One, when you say everybody needs to have a budget, you're entirely right. If you ever look up, you know, the four steps of execution, we always call it the five steps of execution.

Speaker 1 You got to have your mission statement. You got to have your KPIs.
You got to have your visual scorecards of whether you're winning and losing.

Speaker 1 That creates accountability and then you can celebrate it if you don't have a budget you can't literally do any of those things so that's number one another thing that i always like to do with the budgeting um

Speaker 1 cycle is reflection on the past year you know successful people they do two things one they are they reflect on what is happening in their lives and usually the readers um but one of the things that We do in our business is, you know, Jim Collins, he had a book called Great by Choice.

Speaker 1 Talk about bullets and cannonballs. And, you know, you have, you've got your, I heard you on your podcast, you've got your four cannonballs, you know, you've got your call center, your marketing.

Speaker 1 We do the same thing.

Speaker 1 We look at throughout the past year, what are all these bullets that we fired? And what are all the small things that we like tested out to see if they were going to work or not?

Speaker 1 And which one of those should we actually dedicate a lot more traction to within the budgeting process?

Speaker 1 Getting at the budgeting level, I actually work with the GMs to build each of their budgets in each location.

Speaker 1 And we start out at the department level at and you know your basic KPIs, how many texts do you have, how many calls per week are you going to run, what's your conversion rate, what's your average sale, and that should drive revenue.

Speaker 1 We do budget a lot of other metrics on that, but you know, every time I do that with the GMs, like we did that this year, and our budget ended up at 91 million this year, they created a budget about 115 million.

Speaker 1 So you got to teach people like, hey, it's not so easy to drive these metrics up.

Speaker 1 You get something called budget euphoria where you start to, you know, I can just increase conversion rates by 3% and I can create, you know, an extra $80 on my average sale, but it's not that easy.

Speaker 1 Like you have to tie that back to behaviors.

Speaker 2 Well, it's interesting. I'll tell you, the behaviors are definitely true, but this idea of top grading,

Speaker 2 we've really, really taken this idea up of, look, I'm going to have a conversation with you. And Mike, here's the two, here's the fork in the road.

Speaker 2 Either you're going to train really hard for the next 90 days and I'm pulling you off the schedule. A lot of ride-alongs, go back to Phoenix.

Speaker 2 We're going to have to enhance your efficiency dramatically. Or I'm going to write you a letter of recommendation and

Speaker 2 I'm going to volunteer you to go work at our competition.

Speaker 2 My CFO, Adrian, amazing guy, started to top grade his team. And he goes, oh my gosh.
He came to me like a few months ago and goes, I cannot believe how much easier my life has gotten.

Speaker 2 Because he was micromanaging. One of the things Chad Peterman had said,

Speaker 2 if you find yourself micromanaging your direct reports, you got the wrong person. You shouldn't have to micromanage your direct reports.

Speaker 2 They should be able to report to you and get their tasks done and their projects done on time and on budget. What are your thoughts on

Speaker 2 top grading?

Speaker 1 I mean, when you,

Speaker 1 there's two kind of areas of top grading,

Speaker 1 especially as having our

Speaker 1 businesses right now is like, one is people. Like, you know, when you find the right person, it just all seems to work out.

Speaker 1 Like, we just, we just found a HR person in the past year that's really just clicked within the business and she's done a great job job and taking people to the next level, taking recruiting, taking onboarding, all that stuff to the next level.

Speaker 1 So that

Speaker 1 investing in people ahead of where you need them is always the right move, especially like when you think about top grading right now at the size of our business, we're about 400 people.

Speaker 1 Data scientists can be very helpful. and project managers can be very helpful.

Speaker 1 Very similar to you, we have our kind of six initiatives for the year. And each one of those has to have a project team around them.

Speaker 1 Like, it is, it is like, this is, this is a team that is going to solve this for the year, and they're responsible for A, implementing that, and then B, communicating that out to our teams.

Speaker 1 So, but you need to have a project manager that's able to facilitate to make sure that the project is staying on track throughout the year because they are bigger projects.

Speaker 1 The other idea of top grading is using technology today. And, you know, there are certain things that you talk about.
Yeah, it is very hard to increase average sale.

Speaker 1 But like lately, we've been using a HVAC sales presentation software.

Speaker 1 And we've just seen the amount of add-ons go through the roof. We've seen our average sale pick up.
We're in non-peak season and we're over 50% conversion rate on replacements.

Speaker 1 Like we actually are really changing these metrics through a company that's really obsessed with the customer buying experience and providing a better buying experience through technology.

Speaker 2 I love this.

Speaker 2 Explain to me, by the way, I think technology is one of the most important things that's underutilized. I always say we're a technology company that does garage doors.
I mean, we're running like 25.

Speaker 2 If you include like your project management tools, your payroll software, the cameras in your vehicle, like I'm running 25 softwares. Yeah.
I mean, all day long. Lace,

Speaker 2 things like Rilla. It's just, it goes on and on and on.

Speaker 2 Revenue for employee. Now, I heard Brandon Dawson

Speaker 2 talk about this with Grant Cardone. You know, the Cardone team is,

Speaker 2 he's like, if you're under 275, whatever it was, thousand per

Speaker 2 employee. I've never looked at it like that.
Maybe it doesn't work because I'll never be at that.

Speaker 2 What are your thoughts on revenue per employee? Is that something that you really like that metric?

Speaker 1 Yeah, well, I'll say I look at it once a month and just see how we performed on it.

Speaker 1 I do like the metric because it kind of just tells you how efficient you're being in your company. Like how much kind of fluff do you have?

Speaker 1 And to a certain extent, it should be able to tell you how profitable you are.

Speaker 1 And it is kind of weird about how every industry is this isn't like our just our industry like kind of every industry it kind of works out if you do this and you take your revenue you divide it by the total number of people not technicians but like you know your call center your admin staff your finance team everybody included it works out to somewhere between you know around 250 000 of per person

Speaker 1 and you know you have really bad companies that are operating around 160 000 you have really lean companies that are operating around 330

Speaker 1 That doesn't necessarily mean they're good companies. That just means they're lean.
And they're probably pretty profitable in doing so, but they also might, you know, be stressed out.

Speaker 1 So it's worth looking at because it's really hard to be profitable if you're not, you know, let's call it over that $225,000 mark.

Speaker 1 You're definitely not going to be at the profitability that you want to be at.

Speaker 2 I'll tell you something that might throw a wrench in this equation is we work with a lot of agencies, from the media buys to SEO to PPC.

Speaker 2 Like we've got the best of the best, and then we've got people in-house that coordinate stuff between them.

Speaker 2 Um,

Speaker 2 you know, when I look at, for example,

Speaker 2 I was out at one hour, and they had about 40 people working in their marketing team, and I saw a lot of them working on videos and a lot of stuff.

Speaker 2 Like, I don't want to bring all that in-house, I want specialists that have the best software to do what they do.

Speaker 2 I really like you look at the marketing team, the question is, do you bring inventory in-house or do you have like your vendor managed inventory, right?

Speaker 2 So, there's there's all these different things that, you know. I've been to shops where they don't own any of their inventory that that's all sold to them, and they handle that.

Speaker 2 Then they don't do any of their marketing, they might have three people on their marketing team. So, how do you equate for that?

Speaker 1 Yeah, so I mean,

Speaker 2 or maybe even a third-party call center for half the calls.

Speaker 1 I mean, sure. I mean, the other like financial metric that you're really going to look at within all our businesses, a lot of people call it the big five, but you can call whatever you want.

Speaker 1 You're managing your top five expenses, which in every one of our companies is direct labor, direct material, office wages vehicles and marketing you know in the best of companies that's operating 75 percent of your revenue typically 70 to 75 in the worst companies that's 90 to 100 um

Speaker 1 and you know you're looking at what those benchmarks are you know your labor should be around 24 percent your material should be around 20 percent your office wages should be around 11 percent you know if you can do it your marketing depending on the market might be different but as a total company hopefully you're you're under 10

Speaker 1 and um

Speaker 1 you know your your vehicles which typically are range around five percent but that's you know that's where you're targeting with a lot of those metrics

Speaker 2 interesting um you said labor 20 labor 15 to 20

Speaker 2 fully burdened labor across the board is that fully burdened including sales commissions installers service everything everything office staff call center uh within office wages so those are cogs yeah okay so how much all in should labor be as a percentage of total revenue?

Speaker 2 If you include your CSRs, technicians, installers, warehouse staff, the CFO,

Speaker 2 the salaries, the commissions, everything.

Speaker 1 Yeah, I mean, the best-ranked companies are probably around like 33.

Speaker 2 That's what I was thinking. Yeah.

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Speaker 2 The problem I have with CFOs typically is they're always looking at lagging indicators. Sure.

Speaker 2 You know, I look at what can we do to generate more calls.

Speaker 2 You know, I think the good balance between me and my, my guy is, he's like, he sees behind corners and he's looking around the corner all the time.

Speaker 2 He's not just a, you know, maybe that's, maybe that's a controller more, but, but he's looking at the future as well. And he understands growth.

Speaker 2 We got, we got so good that there's a month we're hitting 27%,

Speaker 2 the bottom line. And

Speaker 2 I think we could hit 30.

Speaker 2 I think if we really push, we could hit 33, but then we'd be kind of screwing ourselves on the marketing side because we'd have to start borrowing from marketing. And that's great.

Speaker 2 We've learned from other companies. That's great for about a year.
And then you begin to see the decline.

Speaker 1 It's an interesting question of when is too much. When is it too much?

Speaker 2 Well, what would be, you know, because I've always said, if you listen to a podcast three years ago, I was like, if you're making more than 25%,

Speaker 2 you're either paying your people too less, you're charging your clients too much more. But I took, I didn't take into effect efficiency.
I never planned on booking over 90% calls.

Speaker 2 I never planned on the conversion rates being what they are. I never planned out like like, plus a great CFO, like the way that he's able to do stuff.

Speaker 2 Like, he's like, you know what a great, you want to know the best question of the world is

Speaker 2 when you ask a CFO, what's one plus one? You know what they say? The best answer? Two. No, they say whatever you want it to be.

Speaker 2 That's a good accountant. That's a good accountant right there.

Speaker 2 That too is a good answer. So what do you feel about profitability when everything, and you know, this is really

Speaker 2 there's different industries and there's different competition and there's different private equity involved.

Speaker 2 So I don't think it's a fair question because if you look at like Zoom drains, they don't have really a whole lot of material costs.

Speaker 2 They've got these expensive $200,000 trucks, but they're just, they're going and doing drains only. So I don't know.
What are your thoughts, though, as far as profitability per home service companies?

Speaker 1 Yeah. I mean, I think there's two things that, you know, we need to be careful of going into this year.
One is, you know, if prices are changing, we have to be ahead of that.

Speaker 1 Otherwise, you know, we'll lose ourselves because you're not pricing yourself correctly. The other one is, and I think this is our entire industry.

Speaker 1 I talked that I really value data scientists and some of the people that really understand statistics, but there is, I've yet to actually meet a company that's really heavily invested into pricing strategy.

Speaker 1 Whereas my background is in FPNA, and I worked for a medical distribution company for a long time. It was about 150 billion.
Their goal was to get to 1% profit. They usually never got there.

Speaker 1 But they had whole pricing teams that are looking at elasticity, that are looking at ways to, when they can target more surge pricing, when they can do this.

Speaker 1 Like there's, you know, Amazon's doing this. There's no reason like we can't invest more into understanding what our pricing strategy should be as a business.

Speaker 1 And that's probably where you really maximize profitability. So that is actually something we're investing into this year, this year.

Speaker 2 You know, I would debate you on that because you put my top guy in at any market, and I've proven this over and over again. He's going to continue.
Good job, bad job.

Speaker 2 You put my best CSR, best dispatcher, best technician, best best installer. It's incredible.
So it goes back to better recruiting, better training.

Speaker 2 The optimize the price,

Speaker 2 it's just so hard for me

Speaker 2 to get behind, like, but the optimize purchasing is completely different.

Speaker 1 But your best guy is probably going to get a yes from that customer if your garage replacement's $10,000 or $12,000, right? Like he's probably going to do it.

Speaker 1 But there's probably certain there's other indicators that would make the customer more likely to say yes to a 12,000 if we were doing it around demand pricing properly. That's a

Speaker 2 problem.

Speaker 2 In my opinion, you're treating this like e-commerce instead of the presentation, the timeliness, the idea of influence. Robert Shitty wrote the book.
I'd love to see what you come up with.

Speaker 2 And maybe I'm dead wrong, but I feel like, look, you know what's weird at A1 is whatever gets focused on gets kind of a resolution. Like, we want to make this happen.

Speaker 2 We got to talk about it every day. We got to practice it in role play.
We got to gamify it and it'll work. But you're kind of robbing Peter to pay Paul.
Because if you focus on this,

Speaker 2 so we got to make sure we don't focus on too many things. We got to say, okay,

Speaker 2 like what's the best thing that we make money on?

Speaker 2 Number one, selling high-end parts. Yeah.
Because we give options. We have the high cycle life.
Number two is taking a service call, turning it into a sale, a turnover.

Speaker 2 Those two things, if we just get good, those two, but what's more important than both of those?

Speaker 2 Reviews and conversion rate. Because if I'm not even converting, I'm not going to talk about selling better parts.
Like, why aren't you even earning the client's business? Yeah.

Speaker 2 And if we're getting bad reviews all the time, we won't be in business very long. Won't.
So those are, it's like this pyramid of like this hierarchy of needs for home service companies.

Speaker 1 Yeah.

Speaker 2 Oh, I love this stuff, man.

Speaker 2 You know, I was talking to Aaron about that, the way you guys are, do the.

Speaker 2 presentations and the way the pricing works and the way it makes it kind of pulls into effect the uh and includes the finance fees, which is genius. Because why should I eat that cost?

Speaker 2 It's like, if you choose to do this, here's what it costs.

Speaker 1 Yeah, as a CFO, you know, CFO is always like, hey, let's not offer financing plans that have any dealer fees

Speaker 1 because they don't want to pay the dealer fees. They want to control the margin better.
And this takes that away.

Speaker 1 I feel like if it's automatically building it in, let the customer pick whatever they want because we're not paying for it anymore.

Speaker 2 You know, it's you've heard, you know, Joe Crisara. Does that ring the bell? I know Joe.
Book behind there. What should we do?

Speaker 2 He's always said to me, you know, you pick six options and say, you know, pick one you like.

Speaker 2 But you start at the best one is what I've always learned is you said, look, based on what you told me, I'm going to go over six options.

Speaker 2 This would be something that I would say is going to be the best fit for you and your family.

Speaker 2 And then we, you know, if that doesn't work, hey, that doesn't work. Pick one more economical.
Pick one you like. Yeah.
But this way you're at least earning their business.

Speaker 2 And by the way, each one of these,

Speaker 2 you've probably heard, but the best profitable one for the company is probably option number four. Yeah.

Speaker 2 And that's where most people fall into. Another thing is putting,

Speaker 2 like if you want option five to sell the most, price it right.

Speaker 2 Price it a little more than option five, but far less than option six. And then put most the people's choice.
Most people choose this.

Speaker 1 Right. And we think about that a lot from the office side.
I think it's probably hard to think about that while you're running the call.

Speaker 1 You know, I've got, I know you have some really top-end sales guys. We've got one named Adam, and I talked well.

Speaker 2 Yeah, he's resented to us.

Speaker 1 I talk to Adam all the time, and I mean, this guy is super passionate about sales.

Speaker 1 And, you know, I remember I went on a road trip with him one time, and he spent four hours replaying his calls for me.

Speaker 1 But you know, he's got this saying that we've kind of adopted in our sales team because we asked the question: How do you stay excited doing the same thing, like you know, three, four times a day, every single day?

Speaker 1 And he says, When I knock on the door, I say to myself, it's showtime. This is my show.

Speaker 1 And, you know,

Speaker 1 I start playing my role. And, you know, I get excited for it because you, you, you know, it's showtime.

Speaker 2 I like that. I like that a lot.

Speaker 2 I want to go, you know, you talked about revenue per employee. We talked about that for a minute.
I want to go back. You know, El Evi always taught me about ratios.

Speaker 2 He's like, most people run it a two-to-one ratio, meaning you got two people turning a wrench compared to the one support staff.

Speaker 2 Really bad companies operate at one to one where you've got all these support staff, CSRs, dispatchers, warehouse guys, you got all this C-suite VP director levels supporting like one to one.

Speaker 2 It's really hard to make money. There's no efficiency.
He goes, when you get to three to one, you're printing money.

Speaker 2 I like that ratio stuff, except it's still,

Speaker 2 what happens when you're doing all this,

Speaker 2 hiring all these marketing companies and doing the outbound call, you know, you might have a third-party inbound call center for nights and weekends. Those ratios kind of get masked.
Sure.

Speaker 2 What are your thoughts about different ratios like that?

Speaker 1 Yeah, I mean, we are actually pretty close to three to one, but you know, you start talking about

Speaker 1 certain ratios. Like, yeah, I mean, you can look at an income statement, but an income statement can be misleading.
Like, you know, you asked me,

Speaker 1 you know, is 15% that benchmark? Well, then, really, what's the benchmark of cash flow on that? You know, Carl Icon.

Speaker 2 Yeah, I know Carl Icon. He does hostile takeovers.
Great.

Speaker 1 Sure.

Speaker 2 Mastermind.

Speaker 1 You know, one of his famous sayings is that happiness is positive cash flow.

Speaker 1 And,

Speaker 1 you know, because that's really what matters at the end of the day. Are we generating cash from what we're doing? And we're not just putting it.

Speaker 1 You can hide stuff on an income statement by putting it on a balance sheet. You can never hide stuff on the cash flow statement.
It's really going to tell you the true story of the business.

Speaker 1 So that's one that we always look at.

Speaker 1 And, you know, if you're generating, even if you're generating 15% of profit, you know, after you're paying taxes, after you're doing all the distributions and everything, you should still be looking to get 7% to 8%

Speaker 1 actual free cash flow at the end of the day.

Speaker 2 That's interesting. Yeah.
I mean,

Speaker 2 we do, you know, Alan Rory taught us what a financial

Speaker 2 quick check is, and we don't do it like we used to, but every week Adrian sends me just a quick text of, here's what's going in and out of the bank. Here's where we sit.
It's just for me.

Speaker 2 And he just decided everyone doesn't need to know what's in our bank account. I really didn't care.

Speaker 1 We don't report that a lot of places.

Speaker 1 We are transparent on our income statement, but I don't think people are really going to understand paying taxes.

Speaker 2 Yeah, that's true. I mean, look, it is none of their business when it comes to.
I agree with Adrian now.

Speaker 2 Now that we talk man-to-man, eye to eye on a lot of things, he, he and I see the same thing in a lot. Well, let me ask you,

Speaker 2 I know a lot of businesses,

Speaker 2 the way they solve their problem for next year, and a lot of times the problem as it works is they raise prices.

Speaker 2 But there comes a point of diminishing returns.

Speaker 2 Obviously, when we get our price raised from from a manufacturer like the distribution center, we raise our price to the same day.

Speaker 2 And Tom Howard said the best is instead of doing two price increases a year,

Speaker 2 do 1% a month across the board. That way no one really feels it.
What are your thoughts? Because we're still doing two a year. I couldn't sell my team on doing 1%

Speaker 2 a month.

Speaker 1 So, I mean, I'm actually kind of famous in the company of not telling anybody when I change the prices or increase prices.

Speaker 1 Like I don't usually tell anybody that's happening because I don't think it's the price is the price. Like this is what we need to do in order to be profitable.

Speaker 1 I don't think I actually need to communicate it out. And people ask like, hey, did the prices change? And I'm like, yeah, they did.
But that should just be part of business. It shouldn't be really.

Speaker 2 I would tell them they get a raise. You got a raise.
But I guess there doesn't really need to be transparency. They don't need to know why.
Yeah.

Speaker 1 I don't think that they're looking at, you know, they're trying to understand the entire cost of the business of what our sold hours should be, what our efficiency should be.

Speaker 1 You know, obviously, we want to become become more efficient as a company. If we can, we'll become more profitable, but you're not going to like, you're not going to plan on becoming more efficient.

Speaker 1 You're going to plan on operating your business as it currently is.

Speaker 2 I like that. And, you know, what I get excited about is playing these podcasts, very few and far between, one out of maybe 30 to my internal team.

Speaker 2 And this is one I'm definitely going to have them listen to.

Speaker 2 So I'm going to ask them questions that I think when I ask questions, my team could get a lot out of.

Speaker 2 I think I'm actually doing a lot of justice for the listeners, depending on the size of their company.

Speaker 2 Obviously, you know, if you're pre-10 million, some of this stuff is you're probably not ready for yet, and that's okay.

Speaker 2 When you said you leverage this technology that helps build the different pricing models,

Speaker 2 and it's a better demonstration to the client, and it takes into effect these things like financing.

Speaker 2 What was the biggest thing that caused that software? Is it just the presentation? Was it the easiness to adopt for the technicians?

Speaker 2 What caused the growth and how much did you grow in conversion rate and average ticket? So, in add-ons.

Speaker 1 In that HVAC,

Speaker 1 we're testing this. It's a product we're testing in HVAC sales right now.
So, it's not across the entire business, but we are seeing some positive results.

Speaker 1 And

Speaker 1 it's a third-party company, so

Speaker 1 you could sign up for it if you were selling HVAC systems. But

Speaker 1 the way they present to the customer is it is very much much a toggle method of like here's the options and but you can see very if I don't want you know this humidifier I just press a button and it toggles it back off and it's and the price changes and you can see you can really you're putting that power into your customer's hands rather than you know a service sign somewhat static like here's the estimate

Speaker 1 the other thing is you know you're building the financing fees in another cool aspect of it was that you are Anytime a cut, like if you don't close right there

Speaker 1 and a customer re-engages with that estimate, like they open it back up you know when they get notified and the salesperson gets notified so they can and it prompts the salesperson to say like hey do you have any questions you want to ask about this or is there anything I can help you with so it's you know better communication it's better buying experience

Speaker 1 HVAC you know it's a newer thing to us you know if you took it back we've only been doing it for three years I mean

Speaker 1 our conversion rates used to be like 25% now they're you know pretty much 50% on a regular basis so we've been doing a lot better

Speaker 1 and then our average sale has gone up too i mean that you know that's the crazy part of our business like i mean you look at

Speaker 1 if you look at a business that's going down this year um well you know in hvac well we've got the 454 transition which will probably raise your prices 10 and then you've got tariffs which might raise your material prices 10

Speaker 1 if you're not wait a minute for what was the first one So in HVAC, they switched energy efficiency from 410 to 454, but it raised equipment prices about 8% to 10%.

Speaker 1 If you're not growing 16%, 16%, you're basically static to last year.

Speaker 2 That's what people forget.

Speaker 1 Yeah.

Speaker 2 They brag about growth, but yeah.

Speaker 1 Yeah. So that's, I mean, that's one way to look at it.

Speaker 1 But another thing with that one is important. Like, you are having these things that are happening with your business.
Like, and Aaron knows this, and he, like, I love to get a win in negotiating.

Speaker 1 Negotiating is my favorite thing to do. But regularly, just going back to our vendors and saying,

Speaker 1 like, are we going to accept these price increases? Like, are we going to have, at least have a conversation about it?

Speaker 1 Because you can literally save like 10% across your business just by negotiating stuff. And I mean, any, like, any piece of software out there is negotiated.
I mean, we've got one deal

Speaker 1 that right now we have, like, our phone systems are basically being, or our iPads are basically being paid for for three years

Speaker 1 for switching over to this other company.

Speaker 2 You know,

Speaker 2 when me and Aaron were at the golf tournament, Adrian walked up to me and he goes, we got an extra 600 grand coming back for our insurance, something.

Speaker 2 And he's like, I didn't even know about it. And he knows about everything.
But

Speaker 2 I was like, cool. Like, I love this stuff, dude, because like I love negotiations too.
I think I pushed my vendors a little bit too hard, but I'll give you an example.

Speaker 2 I was out of town, but Luke did a great job. They came in to

Speaker 2 give us a 10% increase, but our volume's gone through the roof, like dramatically. And they ended up, when they left, they lowered our price by 10%.

Speaker 2 He goes, you know how much business you guys are losing? By the way, look at how much business we've given to this other company. He showed them.

Speaker 2 And when they left, they like, this is what's nice is by some people go all in on vendors and then they got all the keys to the city and you have no, one of the things we've learned from private equity is like, always have two vendors and don't give anybody everything.

Speaker 1 I agree with that.

Speaker 2 You know, I want to jump into this idea of hiring because I've always said hire slow, fire fast.

Speaker 2 L was a big seven-power contractor, taught us manual standard operating procedure, steps of delegation.

Speaker 2 But the big thing that I don't talk a lot about is he taught me how to build technicians from the ground up. Yeah.

Speaker 2 Now, I realize certain industries that you need to be a journeyman, you need to be an apprentice, you need to work your way up.

Speaker 2 And I do think even if that was the case for garage, I would still do it because it's worth them to be homegrown, to learn our ways. And

Speaker 2 it's a longer investment into people, but it's the best investment.

Speaker 2 What are your thoughts as far as getting the best technicians and installers now that you guys are in multiple trades, multiple markets?

Speaker 1 Yeah, I mean, I got a few thoughts on. I mean, recruiting across our trades is, if you don't have a dedicated recruiter, you should.

Speaker 1 At $10 million, you should have a dedicated recruiter because it's that important in your business. Even if you're just recruiting students.

Speaker 1 Back in 2019, we were booked out like three weeks for plumbing services. So we're like, you know, we looked at it and we said we have to create a school.

Speaker 1 We got that launched up and we even knew when we launched a school. We said, you know, this first class is probably going to suck,

Speaker 1 but the 10th won't. And now we're on like 16th.
And, you know, it's a pretty good program that really brings people into the trades.

Speaker 1 The other thing about recruiting is like you have to have, you know, whatever you call them, your core values, your guiding principles. You have to have the right fit of people.
I don't know.

Speaker 1 I mean, you grew in your business from the ground up. And I remember like

Speaker 1 I remember reading this book called Sapiens. And it was, I read it right around the time we were around 150 people.

Speaker 1 And it was like, hey, once a community community hits 150 people, it fragments into another community because that's about as many people as you can know.

Speaker 1 And so if you're not recruiting well, like and right now we're at 400 people, like, yeah, I have to spend most of my time walking around saying, Hi, I'm Mike, because I don't know the people in the company anymore.

Speaker 1 But so you have to make sure that you are recruiting for those values

Speaker 1 that you really think are important. That's where a recruiter a good recruiter will be worth their weight in gold.

Speaker 1 The other thing that I you know I will say about creating the own people in your trades, and I know you have a great training center here, I've toured through it. It's amazing, is the

Speaker 1 people don't think about this. It creates that alma mater effect.
Like we've had people leave

Speaker 1 for whatever, five dollars more on the hour or something, and they come back because they're like, well, all my friends are here. This is where I learned the trade.
This is my school.

Speaker 2 Like, this is my university.

Speaker 1 Whatever

Speaker 1 you call it, it creates an alma mater effect that you're giving back to the trades, but you're also creating this kind of

Speaker 1 community of people that you brought into the trades.

Speaker 2 Yeah, plus, you know, the fact is people say if you got a best friend at work, best friends don't happen.

Speaker 2 They happen outside of work. They happen when you meet with your family, you break bread, you go to the bowling league.

Speaker 2 When you build a best friend at work, 85% of people say, I'm not leaving because I have a best friend here. Yeah.
Yeah. And that's the key.
I think that's true.

Speaker 2 You know,

Speaker 2 I was at this. group.
I pay 100 grand to go to these three meetings a year in this big event. And I really enjoy it.

Speaker 1 you should negotiate that.

Speaker 2 I should. I probably could.
It's Joe Paulish's Genius Network. And,

Speaker 2 you know, there's this guy that was training us the other day because this is just last week. And he goes, I think core values and mission and vision are way overrated.

Speaker 2 He goes, because I've trained some of the largest companies on the planet, whether it's Google, LinkedIn. He goes on and on.
He goes, I went to small companies.

Speaker 2 He goes, I'll go up to 10 of your employees randomly and say, what's your mission, vision, and core values? Yeah. And he goes, nine out of ten of them don't know.

Speaker 2 Yeah. And he goes, so if it was that important, they would at least know them off the top of their head.

Speaker 1 You know, we actually thought the same this past we had around our budgeting conversations this year. We had a similar conversation that our mission statement was too long.

Speaker 1 And we really just switched it down to one statement of

Speaker 1 to create great tradespeople, advance their lives, and win big.

Speaker 1 That's what we want to do. It's not necessarily about the customer experience.
It's about what we're doing for each other.

Speaker 2 We just made ours, you know,

Speaker 2 it used to be to be the largest, most trusted gross drug company in North America. Now it's to to make our people dream bigger than they ever thought possible and achieve more than they ever thought.

Speaker 2 It's pretty simple.

Speaker 2 You know, you started talking.

Speaker 2 Jack Tester used to be the CEO of Nexstar. Yeah.

Speaker 2 And I think he's a brilliant guy. I learned from him the one-on-one form where he basically said, if you're a leader, your team should report to you.

Speaker 2 You shouldn't have to ask questions and lead the presentation on the one-on-ones. They'll present to you.

Speaker 2 But I know you guys are working pretty closely with Jack. He's part of the business in certain aspects.
What's it been like to work with Jack as a leader and what have you learned from him?

Speaker 1 Yeah, I mean, Jack's on the team. He's on our leadership call every week.

Speaker 1 He's been amazing to work with. One of the, one of the, you know, we're going through the budgeting cycle this year, and we talked about the importance of budgets and

Speaker 1 the importance of missions and

Speaker 1 core values and all that stuff. And one of the things that he talked about is that as leaders,

Speaker 1 we are dealers of hope. And he actually, this is from like the King Solomon Bible.

Speaker 1 And

Speaker 1 there's this phrase, without hope,

Speaker 1 the people will perish.

Speaker 1 And so we have to be providing hope for everybody that's part of our team.

Speaker 1 And

Speaker 1 that has sat with me since he brought up the concept.

Speaker 1 And literally, like, I don't think a week goes by that I don't think about that is that we are as leaders are dealers of hope so that our people don't perish

Speaker 2 i love that you know you uh you came in here pretty prepared you've got two pages of the notes those of you not watching uh mike as a cfo i think cfos are just dna is wired to prepare uh there's probably some stuff we didn't hit so what what do you got there in your notes the things that you wanted to discuss

Speaker 1 I mean, one of the things I'll just mention that I think I've always done pretty well throughout this. And

Speaker 1 I remember when you called me back in 2015. You actually, you probably don't remember this.

Speaker 1 You called me, and I'd only been at Eco for about six months, and I'd kind of implemented Service Titan, built out the price book and all that within Service Titan.

Speaker 1 And you called me and you were like,

Speaker 1 hey, I want to get on Service Titan. I heard you're on it because I think we were like the 30th customer.
Ara pitched Aaron individually. And, you know, you started talking to me about it.

Speaker 1 And I know you got onto it. So, you know, you were very persistent.
But I was like, man, this guy is special. And I was like, Aaron, you got to talk to this guy.

Speaker 1 And I know you and Aaron are now like best friends. But I hooked you guys up to start talking.

Speaker 1 But the importance of building your network, whether you're a CFO, whether you're a manager, I just connected my GM and another GM from a company today that I thought they should know each other.

Speaker 1 You really just need to spend time building your network, both professionally within the industry. And then, I mean, there's other, like I'm part of a group called YPO that I've really enjoyed.

Speaker 1 And I'm sort of like, you know, your $100,000 group. It's, you know, you're just building these relationships with people.
They're thinking about things the same way you are.

Speaker 1 And those relationships tend to just open so many doors

Speaker 1 to help out the company.

Speaker 2 And to help out everything. I couldn't agree more.
It's your network is your net worth. Who, not how, meet the right people.
Relationships are everything.

Speaker 2 And

Speaker 2 that's my plan. Literally, like.

Speaker 2 You probably know I'm building a nice house in Idaho and I'm building even a nicer house in PV.

Speaker 2 And the plan is to be able to break break bread, have people in there and build deep, deep, deep, to deepen relationships because I live fine in a thousand square foot apartment. I can do fine

Speaker 2 and it's not necessarily to impress them. It's a place because I can't fit very many people in a 1,200,000 square foot apartment.
I can't really have a party or have a social engagement.

Speaker 2 So like I might be overdoing it a bit, but my plan is like, you know, people want to come stay the weekend. We never need to bump into each other.
Bring your family, go in the lazy river.

Speaker 2 We'll go shoot some guns in the shooting range, play a game of bowling, and to build, deepen, and strengthen relationships. And I think this concept is so strong.

Speaker 2 I think the problem with most people have, though, is they'll go to a meeting and they'll give everybody a card.

Speaker 2 I think what you should do when you go to a gathering is try to build one or two relationships and deepen those rather than try to get to know everybody. I agree with that for sure.

Speaker 2 I think that's a lot of people, man. And it's so hard to even keep up.

Speaker 2 I get people because this podcast is almost 400 episodes and they come give me a hug and sometimes like a guy rolled his window down yesterday got a roofing he's got a uh the tesla cyber truck and i was with uh raul my driver but i was like dude i'm gonna drive we're gonna go to a restaurant then we're gonna go to a movie he's like never drove with me when he's a passenger and uh dad rolls down his window and he's like do you know this guy i'm like

Speaker 2 i look over it's a wrap truck roofing truck and i'm like no and he's like tommy what's up He's like, I knew that was you because the TRX. I'm like, what's up, man?

Speaker 2 And he goes, How have you been? I'm like, great. How have you been? He's like, great.
I was like, hey, it's great seeing you, brother. I'll see you later.
And he's like, how do you know?

Speaker 2 I'm like, I don't.

Speaker 2 I don't know.

Speaker 2 I feel bad, but like, dude, I like, I didn't recognize the guy. And it's like,

Speaker 2 it's a bad quality, you know. But if I had a dime for everybody that like gave me a hug or said, what's up? or saw them at the airport or I'm in Boston or I could be anywhere.
Bumped into a guy.

Speaker 2 I was telling Aaron, I bumped into a guy in

Speaker 2 Bora Bora. Really?

Speaker 2 that's crazy he's actually out of uh i he lives in um ohio yeah i mean it is it is actually strange so i'm from ohio and you know it feels like and the buckeyes are big but wherever i travel i said people are wearing and i'll be in the most random places and i'll see people wearing oio state like oh yeah ohio state stuff like i was doing the running of the bulls and the guy's wearing an ohio state hat and i was like what we're in the middle of spain you know that's that's awesome you know you guys took us to an ohio state game and we had the time of our lives we're going to do that more often that's one thing is trying to get back.

Speaker 2 I never heard anybody say, Man, I wish I worked more.

Speaker 2 We've always heard that saying of like, I've never really heard anybody say, I wish, wish I worked more, but I also never met anybody that looked at somebody successful and say, they must have not worked for it.

Speaker 2 You know what I mean? So there's this happy medium of like, if today was your last day, well, it's not my last day, I don't think. So I got to work hard today.

Speaker 2 And I'm going to take a little sacrifice, put a little bit more in today so that my future self has a better life. What are your thoughts on that? Yeah, I think it,

Speaker 1 you know, I have children and you think about what kind of life you want for them. Do you really want your children to be happy?

Speaker 1 I don't know that, like, I'm not sure that I need them to be happy, but I do want them to live a life that has purpose and that they feel like, you know, I'm doing something that's important.

Speaker 1 I feel that way when I come to work every day. So to me, it's like

Speaker 1 this is something that I'm doing. to show the appreciation that I have for my team that's out there every day.
I mean, you guys have nice weather here.

Speaker 1 It was negative, you know, five degrees in Ohio yesterday.

Speaker 1 So, you know, that they're out there every day. They're working so hard.
They're, you know, in these trades that are really helping their community. And I want to see people win big.

Speaker 1 And so, and I want to see people get celebrate things in their lives.

Speaker 1 And so, you know, as long as you're feeling content that you have a sense of purpose in what you're doing, it doesn't really feel like work to me. I've never been good at separating work in life.
Yep.

Speaker 1 I should be probably maybe somewhat better at it, but I really like both aspects of it.

Speaker 2 And I do travel a lot.

Speaker 1 So I like to get out and have fun too.

Speaker 2 Yeah, I know you do. We've had a lot of fun.
How do people get a hold of you, Mike?

Speaker 2 They want to reach out, they want to learn more about CFOing a $91 million company or just got some observations or questions.

Speaker 1 Yeah, the best way to get is my email. It's mike at get eco.com, G-E-T-E-C-O.com, or hit me up on LinkedIn.

Speaker 2 LinkedIn, there you go.

Speaker 2 How do you spell your last name again? I have it right here, but.

Speaker 1 Barnhart, B-A-R-N-H-A-R-T.

Speaker 2 And if you had a couple books, not the Bible, not the e-myth,

Speaker 2 not the most common ones, Napoleon Hill Del Carnegie. Maybe some books just that aren't so common.
What would they be? All right. And why?

Speaker 1 Yeah, a few of them.

Speaker 2 You know,

Speaker 1 I always pick like a book for my favorite year. So like in 2022, I loved the almanac of Nabal Rabakant, you know, talking about wealth and happiness.

Speaker 1 2023, I read this book called Unreasonable Hospitality. And for, I mean, so I'm always the bougie one in the company, right?

Speaker 1 I'm the one that like likes to buy, you know, crystal to celebrate, you know, if we're winning a month or something like that. Like, I like nice things.
I like fine dining.

Speaker 1 There's a book called Unreasonable Hospitality. It's really good.

Speaker 1 It's about 11 Madison Park, which these two guys got really obsessive about food and customer service and, you know, being the best at what they do.

Speaker 1 They were an unknown restaurant, and they became the number one rated restaurant in the entire world for two years in a row. And it only took them about seven years to do it.

Speaker 1 And that was a really cool journey of their story.

Speaker 1 You know, if you ever just need an audio book, you can't go wrong with green lights. You know, it's just a

Speaker 2 fun one. Yeah.

Speaker 2 All right. And we talked about a lot of stuff here.
I mean, a lot of stuff. And I bounced around a lot, but I wanted to do this this way way

Speaker 2 because I only had you here for a little over an hour. So I just wanted to hit a lot of topics, and we've been meaning to do this.
We'll have to do a part two, but maybe something we didn't hit.

Speaker 2 Maybe there's something that the audience needs to hear.

Speaker 2 You know, you've seen this company grow in the last 12 years from a little over a million to almost 100 million.

Speaker 2 It doesn't need to be about work. It doesn't need to be about business.
It can be about whatever you want, but I'll have you close this out.

Speaker 1 Just my thoughts on that?

Speaker 2 Yeah, just anything.

Speaker 2 We talked about a lot, but anything you want.

Speaker 1 Yeah, I mean, most off, i just feel a deep sense of appreciation um

Speaker 1 you know i love the partnership that i've had with aaron i've loved you know the partnership that i've had with a lot of you know as you become bigger it's it's really hard to build those relationships but you know whether it's jack or elliot or barbara or yeah different people that have come and gone on the team you know just building those relationships with them has been a

Speaker 1 you know, great experience.

Speaker 1 And I feel really proud of what we've accomplished. So there's a real sense of pride.
And

Speaker 1 I don't really think necessarily about like, I have this abundance mindset. I always have like I'm the eternal optimist.
I don't really get like, all right, we need to protect it.

Speaker 1 I just think like I like we're going to lose it. I just think like what's next? You know, what are we going to do next? And how are we going to keep innovating?

Speaker 1 How are we going to keep like modernizing? the home experience for the customers. How are we, you know, just going to stay on top of our game?

Speaker 1 Because whether you're acquisition whether you're greenfield you know the the world is ours to go take you know like there's no reason if for a hundred million today it can't be 500 million in five years or whatever it is you know whatever you want to do is is possible if you're willing to put the effort in and do it well that was a great closing but i'm not going to close now um

Speaker 2 because

Speaker 2 What if private equity changes that? I mean, I know, I don't know when that moment's going to come. It could be a year.
It could be 10 years. But eventually, like built to sell means that's real.

Speaker 2 You hear the horror stories and you also hear my story, which I love our relationship with the PE guys. Like I really like Mike.
I really, really like Doug. I really like the whole team over there.

Speaker 2 They still give me control. They give us, they ask us the right questions.
But do you still, are you worried?

Speaker 2 about potentially when that day happens down the road or it could be strategic it could be anybody for all i know but when that does happen what do you think life's going to be like what are your your

Speaker 1 kind of swat analysis well i mean i I certainly agree with you that you should build your company to sell it.

Speaker 1 Like, even if you are planning a transaction, like you should never say, I'm going to operate my company differently because I plan on transacting in 12 months and I'm going to cut all this stuff.

Speaker 1 Like, you should operate your company like you're going to continue to run it forever, but it's going to become a profitable, it's going to be a profitable company.

Speaker 1 Like, at any given point in the next, if we want to sell sometime in the next 10 years, at any given point of that time, I should always be happy with where I'm at and to sell it.

Speaker 2 Right.

Speaker 2 Build a sell at any moment of any time. Yes.
Yeah.

Speaker 2 I disagree a little bit with a couple of things.

Speaker 2 The only thing I'll tell you is like, if you're going into the 12 months of the rolling 12, you better have a conversation and talk to the team and get them, especially if they have equity

Speaker 2 or they have any type of P units or whatever it is, have them push a little harder that year. Yeah.
Because those, that, that, that year counts the most. So, but, but don't cut things.

Speaker 2 I agree with you. Don't cut things.
Set yourself up for failure the year after it sells. Because that's a bad deal for anybody.

Speaker 1 But even when you look at the reports that are out there still, I mean, both our industries are so heavily fragmented.

Speaker 1 You know, it's like even with PE coming in, they still only own a very small percentage of the total.

Speaker 2 What do you see the percentage being? I'm just curious.

Speaker 2 I haven't looked at that recently.

Speaker 1 Yeah, I mean, there's some reports that come out each year. You have to usually pay for them to get them, but they're usually pretty solid reports.

Speaker 1 And, you know, it's about 12% in the HVAC plumbing electric industry. You know, for us,

Speaker 1 we do have a little bit different strategy. Like, we know we're really good plumbers and we're learning HVAC and electric.

Speaker 1 So we have a little bit different strategy of how to to grow there than maybe some other PE groups do. But

Speaker 1 overall,

Speaker 1 I just think that it's still a very open market to do whatever you want to do.

Speaker 2 Well, I've heard the HAC Plumbing Electrical is about a little shy of $200 billion market cap. So that's why there's a lot of people getting into it.
It's just a huge market cap.

Speaker 1 Yeah. And I heard your podcast.
You're like, can you open a company with $20,000? Well, probably not anymore. You know, you can, but you're going to spend 10 years trying to build that thing.

Speaker 1 You do need some investment.

Speaker 1 And these guys can provide great investment.

Speaker 2 Well, Mike, this was brilliant. I'm sure you're going to get a lot of follow-up questions, but thank you for being here and doing that.
Sorry you had to come to 76 degrees today. Thanks for watching.

Speaker 2 Thank you. Great job.
Hey there. Thanks for tuning into the podcast today.
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