Owned and Operated #103 - Navigating Marketing Challenges and Expansion in Business

Big Challenges Ahead?
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In this episode, John and Jack address the marketing challenges faced by home service businesses. John shares insights from a marketing planning workshop, emphasizing a common issue businesses encounter: reaching spending limits on demand channels such as LSA (Local Services Ads),  regardless of their size. Jack also expresses his excitement about a recent plumbing deal, detailing the integration and communication strategies needed for merging businesses.

Episode Hosts: 🎤
John Wilson: @WilsonCompanies on Twitter
Jack Carr: @TheHVACJack on Twitter

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John Wilson, CEO of Wilson Companies

Jack Carr, CEO of Rapid HVAC

Owned and Operated Episode #103 Transcript

John Wilson: I'm John Wilson. Welcome to Owned and Operated. Twice a week, we talk about home service businesses, and if you're a home service entrepreneur, then this is going to be the show for you. We talk about our own business in residential plumbing, HVAC, and electric, and we also talk about business models that we just find interesting.

Let's get into it.

Jack Carr: This episode is sponsored by Service Scalers. They're a brand I've used personally, and after almost giving up on PPC altogether, I gave it one last shot with them. They were able to not only reduce my cost per click, but also drive consistent and high quality leads. If you're a home service company, they specialize in PPC and digital media just for you.

I would highly recommend giving them a call today.

John Wilson: Welcome back to Owned and Operated.

Jack Carr: Welcome back. What's going on, John?

John Wilson: Welcome back. Man, I'm back at it. Last week I was at a training it was a marketing planning workshop. So that was pretty cool. We went to cold and snowy Minneapolis. We got instructed on marketing. Which was really interesting, honestly. Marketing is obviously, we talk about it a lot on the show.

And I've been getting like a feeling for where we are, which is we've capped out our demand channels. And I don't know if I've said it in that way on the show before, but we've capped out our demand channels, which means that like LSA won't spend anymore. And I think that's interesting.

And when I've talked to other businesses that are larger than us, what we've been finding is that dollar for dollar, they're spending exactly what we're spending on LSA. Which is like, okay, so there's basically a hard cap. That's really interesting. So, one, that's been borderline confirmed. So this you know, training had companies from all over the U. S. Bigger, smaller, and everyone was roughly spending the same amount dollar for dollar in LSA. No one was able to get above 40 or 50 grand a month. And that's companies that were doing 100 million or 50 or 30 or 20s. All of them were capped market didn't matter. So that was really interesting.

And what that's pushing us to believe is that branding and other activities is going to be the key to the next stage. So then what we spent our time and that's what we've been leaning towards

Jack Carr: I mean you've talked about this for a few weeks now in parts and pieces

John Wilson: it's been on the brain a lot as we've started to really understand the scope of the problem.

Jack Carr: Mm hmm.

John Wilson: Now what we're trying to do is the cap on demand channels was kind of a surprise. So what we're trying to do is figure out what's the cap on the next thing. So as we dive into branding or more broadcast or whatever, you know, if demand channels cap at half a million maybe 700 or 600 total with PPC in there, does branded channels cap at a million of spend?

And then you've saturated the market. So right now we're trying to plan our advertising for this year and next at a 1. 5 to 1. 9 million advertising budget. And what do you do once you cap out brand branded spend? That's the current project. Because anything beyond mass media takes a while to get that partnership set up like six to 12 months.

So we have to start working this summer on the things that we'll put into place next summer to move us above, the 1. 5, 1. 7 million range.

Jack Carr: I like it. That's awesome. This is a bit off topic from what we're talking about today, but that's really awesome that you've actually hit that, like for an internal goal, you've hit the max cap on PPC, you've hit the cap on LSA, you've hit the cap on all these things.

That's got to feel good. No. Or just feel shitty because you're like, damn, I wish I could just put another dollar in and get six out.

John Wilson: Yeah, so one with PPC, there's no cap, right? It's just what's the cap on efficiency. And I find that the cap on efficiency is low. So we find that around 10 grand a month. Some people do more. We used to spend like 40 grand a month, so I think that there's a cap on efficiency for PPC.

But I do think it's an interesting challenge. Like, we're a few steps ahead, which was kind of like a pat on the back, I guess, of we're starting to think about things that other people aren't thinking about. A lot of businesses were built on the back of LSA in the past four years.

So businesses don't know how else to drive demand outside of LSA. And we've talked about that here. Like, they don't know how to run outbounding to their own customers. They don't know how to run postcard campaigns. They don't know how to do a lot of the activities that we're doing. And they really don't know how to do anything outside of LSA.

Because LSA was the easiest easy button ever, like put in dollar, get phone call, like it awas so easy. So now all these companies are struggling, and I mean 30 to 100 million dollar companies that have built the majority of their lead gen through LSA. So we have declining demand. We have more competitors ever in LSA and people are just really desperate trying to figure out what to do.

So we're maybe four months ahead to a year ahead of some of the larger players in the room of how we're thinking about navigating the next stage of our lead driving.

Jack Carr: Yeah, I mean, I think we talked about it a while back. You told me to stay away from a business because that was their only lead source was LSA. And so they ran into that issue this year and ended up spending like they matched last year to this year. They matched the same revenue total. But their net was like a million lower because they had to dump another million to try and keep that line the same.

And they just didn't have any other levers to pull because they didn't understand it.

John Wilson: That's everyone's you know, people are going from 10 to 15 percent in marketing spend for less leads because LSA has gotten so much more competitive But yeah, like do I wish I could dump more into LSA? Sure, like it's the easiest easy button in the world and as far as like customer acquisition cost it's low like in comparison to branded activities like branded activities it might be three to five hundred bucks to get that customer in the near term. You hope in the long term it's cheaper, but in the next year it's probably three to five hundred bucks. LSA, you know, fifty to eighty bucks.

Jack Carr: Which is why we tell smaller companies like 1 to 3 million that you shouldn't be trying branded plays because you do not have 500 bucks per customer to wait two years for. It's just, that's terrible returns.

John Wilson: Yeah. I think Hoffman is a really good example of branding done well. Where, I talked to companies last week that were spending a full ten percent. And they were 30 to 50 million and they were in the same sort of cycle that we are, which is like, oh, we need leads, oh, we need leads, oh, we need leads.

And they can't get out of spending 10% desperately trying Angie's List and all these other things to keep busy. Whereas branded activities, those companies seem to spend 4%. So it just creates a bigger wave.

So that was last week. It was good. We took a lot from it. Really good stuff for this year and really good stuff moving into next year as we think about marketing the business.

If you like what we talk about on our social media, on Twitter, on this podcast, then you should be signed up for our newsletter. Go to OwnedandOperated. com where every Friday we break down our business, we break down insights, things we're learning, things we're working on, and it's good stuff. Check it out, OwnedandOperated. com

How about you? What have you been up to?

Jack Carr: The week was good, man. We closed on a plumbing deal, so we're really excited about that. Yeah. Yeah. Uh, 1. 6 million plumbing deal. Which we're extremely excited about because plumbing has been doing amazing right now, especially through the hellscape of terrible February HVAC.

So plumbing has been awesome. We've been getting re pipes and sewer jobs and water heaters, and it's just It's beautiful. I love plumbing. I'm going to keep saying that until I don't love plumbing, but so far I've been amazing. So we're really excited to expand that business, but definitely nervous because this is the first time that most of us have been like small one man, two man shop tuck ins like this is a business merge, like it is technically still a tuck and we're keeping the original brand, but it's going to double, not double the size of our business, but it's going to add a huge chunk. So, we're really excited, but also nervous on what that looks like, what that process looks like, how to get them over on the service Titan, how to do all the steps versus previous ones.

It just was like, Hey, grab the phone number, entered into the system, grab the GMB. And then maybe hire one employee. Now it's like hire six employees, put a manager in place. I'm glad we have all the groundwork from having a plumbing, like startup, like we have it in Service Titan. We have the price book, we have everything there.

But we still have to change like business models for six people.

John Wilson: Yeah. big deal. What did yours look like? Because I know you've purchased quite a few of these, right? I guess my big question today for you was what does week one month one look like from a really high level?

Jack Carr: Like what are you focusing on?

John Wilson: Yeah, I think there's two different ways to go about it. And maybe it's a percentage of revenue, but, we did a deal last year where it was like a million three of revenue. So the way I attack that integration is very different than how I would attack a ten million dollar deal. How big is it? So, for us the way we would attack a small deal as a percentage of revenue and I think that's the important part cause like, your deal would be small to us, but as a percentage of revenue to you.

Jack Carr: Yeah, 30 to 40%.

John Wilson: Yeah. that's a lot. And I'm giving that caveat because I'm sure I've talked about it on here . And I know I've talked about it elsewhere, but at this point, the way we integrate small companies is like, day one, you're just a Wilson employee.

By the end of, like, day ten, the brand is gone, and, truck's potentially even re wrapped. So it's like kind of quick. So that's, maybe like customer list, five or six employees we just slide them in. If it's a large percentage of revenue, You go slower, or you don't have to, but we would go slower.

So, I would argue that we usually ran it out too late. We used to let them run for a year or two. But the big things that we focus on is one, just like paperwork. That first week is confusing. And you just have to really accept that you're not going to have good data. Which is tough to accept and sometimes even the first month, depending on like what their current software is.

So you're not going to have good data. You're not going to have good sales data, maybe not good cash data, definitely not good expense data. All that we care about in that first week is did we get the employees onboarded correctly? Did we get all of the logins? Do we have access to their softwares?

Do we have access to their financials? Did we start communicating with vendors? The HR side of it, and the purchasing side of it, and that's really most of the first month. Depending on the size, it's just like getting your arms around the business.

Jack Carr: And that's in particular for a business that you're going to let run as itself as it has been versus an immediate conversion. Correct.

John Wilson: Yeah.

Jack Carr: Yeah. Cause part of me just wants to rip the bandaid off and run with it and say, nope, your brand's gone, man. Let's rock and roll.

John Wilson: You can, I really don't know that there's a wrong way.

Jack Carr: Because you can avoid a lot of that like vendor relations and letting them know like hey this is actually this company and you just like hey tuck them in.

John Wilson: I think that's a viable way to do it. I really just think, like, how big of a mess are you gonna make? Running two separate brands, running different payrolls, running all that stuff, is much more confusing than just running one. So, I think you can transition it as fast as you want.

Are you buying it inside the same entity? Alright, so that makes half the decisions for you. They're already going to be on your payroll, they're already going to be on your benefits. So at that point it's just how fast we want to segue the brand. One of the mistakes I made a lot was I didn't communicate well enough with customers at the time.

We thought we did because we sent out an email or two. But like, what we're finding is, deals that we did three or four years ago, we're contacting their customers and they're like, who the heck are you guys? like we've communicated with you like five times who we are at this point.

So like maybe we should have done more mass media or maybe we should have done several individual letters. There's probably more that we could have or should have done.

Jack Carr: That's funny you say that because even on some of our small tuck ins we've had like it's been one of our first little tuck ins room mechanical, We still get like the message. Hey, Jeff, you did my HVAC two years ago, or three years ago, and I'm just like, man, I can look back and see the 12 texts that we have sent you over the last two years, letting one, we're new and two, it's time to schedule your maintenance with rapid response and now I know why you didn't respond. Cause you still think it's Jeff. So we are going to really be intentional about how to reach customers this time around to make sure that they all know

John Wilson: I think a mailed letter, that's what we're doing next time, is a mailed letter

Jack Carr: I'm going to give that a try. I think that's probably the best way.

John Wilson: I'm gonna say it's not that much, but like, let's say it's 20 grand. And I know that 20 grand's a lot. But like If you think of it as a marketing campaign, that makes it easier. So, that's 20 grand to introduce yourself and give coupons in a medium that people will likely open. Sealed letter. So, if you look at it, like, and you don't need to do 20 grand all at once, it could be like a grand a month for a year and a half or something. Or however you want to budget that out. But, that's how we're planning on doing it next time.

Yeah. And I think it's like 60 cents a letter.

So maybe it's even less. It really depends on how big the customer list.

Jack Carr: I think they have like 3000 customers.

John Wilson: Oh yeah, so it's like 2 grand.

Jack Carr: Why not? Yeah.

John Wilson: Yeah, you could send that a few times. We're still working through this, so the way we used to think about this is just like get the existing staff and the old data in and then we were not very good at like using that customer data very well. So for us, like a big customer database, didn't actually hold a lot of value. Not because it didn't have value, but because we had no idea what to do with it. Now we have a lot more of an idea of what to do with it. So, customer lists start to look a lot more attractive.

If we were onboarding a new business today, we would be putting them on a 6 to 8 like letters a year campaign similar to our lapsed customers And just continually communicating with them. One about the acquisition and two about whatever promos we currently have so I think you could do something really interesting with it.

Jack Carr: I think that's great. That's a great advice. Yeah.

John Wilson: Thanks for tuning in to Owned and Operated, the podcast for home service entrepreneurs. If you enjoyed today's episode, please hit the like button and subscribe to the podcast. If you have any questions or topics you'd like us to cover, feel free to reach out. You can find me on Twitter at at Wilson companies.

I'll see you next time.

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