Owned and Operated #126 - Plumbing Dreams, Million Dollar Goals: How to Grow Your Home Service Business

It's Not Just A Pipe Dream.
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Join John Wilson and Jack Carr in another episode of 'Owned and Operated,' where they dive deep into how to grow in the home service business; specifically residential plumbing, HVAC, and electric services. John discusses the challenges of thinking too small, the benefits of having substantial goals, and the potential of raising capital to scale operations. With insights on securing C-level talent and optimizing business growth, this session is packed with valuable advice for home service entrepreneurs looking to elevate their companies.

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 #126 Transcript

John: 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.

John: Let's get into it.

John: Thanks for checking out owned and operated wherever it is that you listen to the show. If you could take a second and give us a five star review, it helps other people find our stuff on the internet. And

Jack: welcome back to

John: Owned and operated.

Jack: See, I like it better when I do it with your hosts. Yeah.

John: Yeah. John Wilson. John, John the plumber. Wilson. You know, when I was growing up my, do they call you that? My mom? Mm-Hmm. . Like she would like make up bedtime stories. She's a great mom. Is a great mom. And the bedtime stores that I love the most was this character.

John: named Johnny down the drain. So years later, years later, the

Jack: irony,

John: the irony, I am now one of my favorite departments is drains.

Jack: Look at that programming. And at its finest,

John: that's right. I've met Johnny down the drain. Yep. What's going on, dude?

Jack: So I have a question for you. So this, this kills me. I'm telling you right now.

Jack: And I'm, I mean, I've talked about on Twitter. Do you think that you're thinking too small sometimes, or is that even a thing? That's my question for the day from a personal standpoint, and then I'll, I'll explain what I mean.

John: I

Jack: mean, you got pretty big goals though.

John: I mean, sometimes I still think I am like a hundred million is a big fancy number. But like the reality of my life is that that number is very achievable. Yeah. Yeah. Like that's only four times bigger than we are. Like, if I was saying a hundred million and I was doing a million, that would be a lot, but I'm saying a hundred million and we're 26.

John: So,

Jack: Yeah. Do you move the, yeah. I don't know.

John: Like

Jack: do you think at some point you move the goalpost and then try to go Oh, a hundred

John: percent Yeah.

Jack: Of 10 500 million in plumbing, hvac. Yeah,

John: I mean, I don't know, like we just talked to Tommy Mello on the show and I think he,

John: I'm going to, I'm going to attempt to avoid being cheesy.

Jack: No guru here.

John: No, yeah, I'm going to try. That said, I do think it can be easier to think ten times instead of two times or five times instead of two times.

Jack: So,

John: because I think it's like, how do I grow 8 percent a year is more challenging for me. Then how do I grow 40 percent or a hundred percent or whatever it is?

John: Cause I think it opens up. I think it opens it up. So does that make sense to you?

Jack: Yeah, that, that does. So that's my curiosity. And that's kind of where I was going with this is a lot of times I, I feel like I'm thinking too small. On the day to day. And I wonder, and you phrased your lake

John: house check.

Jack: You've already said that. I know, but my point is, is, and Twitter's hard for this. I think Twitter is actually, it has this great side, but the terrible, the terrible side to Twitter is you see all the wins from people. Like I'm just throwing this guy out there. Awesome guy, like no problems with them. Mobile home park, MHP guy.

Jack: And like, I think he's my age. He has a hundred million dollar portfolio of mobile home parks. And he's out there screwing around and like having a good time. And sometimes I think like, Is this path, because I'm thinking too small, harder? Like, if I were to go out and raise money, like, but Good Shepherd just raised forty million dollars for that, and then they spent four hundred thousand dollars on a website.

Jack: domain. Like, would it be easier to go out and raise 20 million? And then, I mean, don't get me wrong. I know raising is hard. Like everyone listening, like that wasn't Jack saying raising is the easiest thing in the world, but so, but breaking down vans is also hard. And like being throwing duck work at 9 PM because your installer quit.

Jack: And you got to get the job done is also hard just in a different way. And so my wondering is like, is thinking too small in like, Hey, I'm only going to grow my singular business to a hundred million. Is there, is there a better way by thinking big, like. I have connections where, right. One of my best things that I think I'm really good at is finding deals.

Jack: Like I find a lot of deals, some of them good, some of them not so good, but I find a lot of deals. And so like, is the better route for me, would it be to go and like support a rollup? And then sell my business to the rollup and then get to 20 million in gross revenue by being a support function, doing the backend stuff, which is what I'm good at versus being a plumber or being a day to day ops guy.

Jack: And I don't know what the answer is. And so that's what I was curious to see, like, am I being an idiot and thinking that? And I think sometimes, yeah, I think the grass isn't greener, but I do. Want to know what you think about that long rambling diet? Yeah.

John: I mean, I, I don't have a big opinion on raising.

John: I've never done it. I don't know what seating control would look like. I think that I would struggle. So I don't feel like I'm a good, like conversationalist for that part of it. I do think this is like a choose your, it's a choose your hard. And like some, yeah, growing a business, raising is hard, staying small is hard, like everything's hard.

John: So it's like, do you think though, do you want,

Jack: Do you think, though, that thinking too small is harder, though?

John: Yeah, 100%. Yes. Yeah. Because, like I was talking, I was talking about this with my wife. We had a, a spontaneous quit last week, which was just, like, super weird. And I remember Like the reason we started growing the business for two reasons.

John: And this was like, you know, 25 year old, John we started growing the business for two reasons. Like one, we had two owners, like my dad and I were both owners and we had to be able to pay us both. And two, the departments only had like one person and we didn't know how to recruit. And that made me feel.

John: Like, I don't like, I'm paranoid, right? Like, I'm, I am in a permanent state of paranoia. And I always have been. It's how I work. Like, I'm the guy that walks into an arena, finds his exits, and looks for the active shooter. Like, that is me for like my whole adult life. So, small business ownership actually ends up suiting me pretty well.

John: Because I am always looking for the next thing that's going to punch me in the face. And that could be a recession, that could be whatever. I have tend to, I have tended to find we're able to react faster and protect our downside because I'm paranoid. So 25 year old John, we had, you know, like two or three texts or like four texts and there was only one guy.

John: That could do HVAC. And that was like terrifying to me because I was, I was like, what happens if this one guy leaves and I have no way of recovering that side of the business, because I don't know how to do it. And the only installation that I could find. Is growing the business like that was it. You just get more of them.

John: Okay. Well, to get more of them, you need more leads. Then you need more installers and you need, you know, all this stuff. And now, you know, 130 people later, here we are. But we had this weird quit last week and my wife and I were talking about it. And it was a department that was still small. That department only has two people.

John: So it was funny because we had this like moment where she was like, how do you protect yourself from that happening again? I'm like the way that I've done it for eight years is we grow the business. So that way that department has depth and it's more than just one person or two people. And it's 10 people or five people or whatever it is that requires for that department to have depth.

John: So I think that, you know, everyone's heard like Rich has a great story and you have a great story of like you buy this business that has like two people and then like the next day somebody quits and like you're in the field. Like that sounds awful.

Jack: And I think

John: that that is, I would, my problems today are very challenging.

John: I feel challenged every day, but I really am grateful for the challenges that I get to take on because I, because we grew, we thought bigger, we took on more, like I'm bigger than I ever thought I would be. Like I thought 10 million was going to be the cap for us and we passed that like three years ago and now I see a hundred million is the cap and I know that a hundred million isn't the cap of what we could do.

John: A hundred million is just like my next step. And I think, yeah, just continuing to think bigger as has helped us a lot and protected our downside and thinking small, like sucks. I think you just end up like, if you think small, you stay small. I don't know.

Jack: Yeah. So, I mean

Jack: yeah, no, I mean, that's a very good point and, and I think the problem right now is we are small, like we are that 3 million to 5 million company. And so inevitably we are small. And so that a hundred million mark, even the 20 million mark is so far off. that the wonder is like, are you thinking big enough to, to, to ease the pain in a different way.

Jack: So, you know, I don't know if it's grasses greener or what. You know what it is maybe it's just fantasy land. I know, I know it, it can be hard sometimes. But I mean, like, like I said, we made our first year's total gross revenue in four months this year. So like growth is great. I'm not complaining. I just wonder sometimes if I'm going too small.

Jack: And so that, that was the question. I

John: think like the way I think about this. I had this, like,

Jack: Like, have you ever considered a roll up?

John: Yeah, so we've thought about, we've thought about growth equity, which is like, we take on investor money I would either keep 50 percent or 51, and then we would, like, sell a portion to get cash to continue to grow.

John: So growth equity is like just its own version of P we've obviously not done that, but I thought about it.

Jack: Great example.

John: And

Jack: I said, great example. Like, this is exactly what I mean. Like, have you ever considered,

John: yeah, we've, we've thought about that a lot. Ultimately haven't done it for a number of reasons.

John: One, I didn't feel like we found the right partner. Like just bringing money to the table isn't enough because if you really start, like, let's flush this out for a second.

Jack: Yeah.

John: So like, we'll give my example, but like it can work for you too. So I decide that I'm going to raise 10 million bucks and

John: like capital is a constraint, but it's not the only constraint. And I think what we see. I'll get back to my example, but I think what we see in these big PE firms is capital is not a constraint, but like operationally, many of them are a joke, but capital is not a constraint. But like, so like my point is money doesn't solve it all.

John: And like, you still have to execute, like you still have to run a good business. And I think that in the, In the act of running a good business, capital becomes a non constraint. Like if you're running a home service business properly, then you should be running a negative networking capital business, which means that your cash is increasing faster than your business is growing.

John: Like that's how this should work. That's how the companies that run at a hundred million have gotten there. It's because they ran a good businesses with healthy growth, gross margins. They watch their costs and they reinvested a lot and they had negative networking capital. They didn't have AR. That's how they got there.

John: So like, what happens if I go raise this 10 million and capital becomes less of a constraint? I don't know. Like, I really don't know. What I would do with 10 million and many of the problems that I'm facing today would not be immediately solved by raising money like capital is definitely a constraint for us, like no doubt, like we don't have, you know, it's, it's me, we have to run a good business, but we, we also have talent constraints.

John: We have supplier constraints. We have market constraints. We have competitor constraints. There's like so many different constraints in capital is just like one of 10. So I think if, if I think just like be open, that like, but raising is not the only option. And it only solves one problem to me. Like it may solve a few others, but that's like, who's your partner?

John: Like, who are you partnering with and how do they help you solve your other constraints? Do they bring talent? Do they bring expertise? If we're flushing it

Jack: out, right? So smaller companies where we're, and what I'm, I'm actually coming from is like, what you're talking about is, is the key. I mean, you've hit the nail on the head is like our biggest constraints are capital, which I mean, your small company trying like a hundred percent rapid growth, a hundred percent year over year growth has a huge capital constraint on the business because you're, you're bloating to make it To prepare for what's next.

Jack: And so it's very hard to blow it and restrict and all this kind of stuff. And

John: we're in the same boat. Yeah, no, I know. You know, we're 70 percent up year over year and cash is tight because growth consumes cash.

Jack: 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.

Jack: They were able to not only reduce my cost per click, but also But also drive consistent and high quality leads. If you are a home service company, they specialize in PPC and digital media, just for you. I would highly recommend giving them a call today consumes absolutely destroys and consumes. And so that that's kind of law where this is coming from is like, if I think bigger and.

Jack: And in exchange for the, the thinking bigger and fixing that, the operational constraint for the private equity or for whatever group family office, could I, in return, remove my capital constraint, my I'm going to call it the CFO constraint, but like. We are so far off from having somebody who's really good at financials that it falls on to my back, which is not an area, admittedly, of strong suit for me.

Jack: I mean, I'm, I'm decent on the P and L and like numbers. past calculus one, two, three, and four. However, that being said, like that portion is just not a strength for me. Um, going into recruiting and having a full time HR recruiter which that one I'm less worried about cause it's coming soon.

Jack: Like if we grow a little bit more, I can afford it. But that's like the bloat and then it goes back onto the capital side. So we could, yeah. remove that constraint immediately with something like that. Thinking bigger, going and raising and then really blowing up a lot of that because none of our constraint, like yourself comes from lead generation.

Jack: Like we get plenty of leads. Like we get too many leads. I turned off LSA when I removed. the

John: yeah,

Jack: what I'm willing to pay on LSA today because we get too many leads. We're, we're overbooked. We have too much work. Recruiting's hard in this area, but we're not able to offer benefits because we have a capital constraint.

Jack: And so like it just ebbs and flows. And so I think like a lot of my problems are surrounding by that singular capital constraint. And I wonder if, if you go, I don't know. I don't know that they do

John: because like back to my example of like, if I got 10 million today, what would I realistically do with it?

John: Like, what would it change? In the way that we operate, like the business is already running at 70 percent year over year growth. So like, I'm not going to force that to be more. Because we're, you know, that'd be a lot.

Jack: but, but like, let's, let's play this out. Like just from a, it's kind of a fun thought process.

Jack: It's like, if you had 10 million towards your business tomorrow, what would be the first thing that you would do? Like, actually, if you sold a portion of your business for 10 million, what would you do with it?

John: I don't think that most of my day to day behaviors would change under like 20 million liquid because I had this conversation with last week and I, I, I, when I was talking to people, like,

Jack: pardon, Who'd you have the conversation with?

Jack: Did you say me? It's like, I don't remember this. Oh, okay. It's like, damn.

John: No, but like, if it was like 5 million, like, I, obviously that's a lot of money, but like, it really wouldn't move the needle for us. Like, we would pay off some debt, I guess, like, I don't know, it wouldn't be that interesting.

Jack: Because everything that we want to

John: do is, like, we're already doing it.

John: Like, everything that we have the capacity to do, we're already doing. So, like, maybe we're doing it lighter, so we could, like, push on my projects more. But, I also think I have a capacity constraint. So like, I can't invest more in lead flow because I have a capacity constraint.

Jack: But could you hire more recruiters?

Jack: I'm gonna, yeah, but I could

John: do that now. So it's sort of like, and maybe I'm not thinking big enough in, in this case, but I also don't think that like for us, 10 million isn't enough to make a real difference. Like it would have to be, like, I would start, I would start really blowing the roof off if it was like 20 million cash.

John: Then I'd be like, okay, like, sure. I, we can do something really interesting with that. That wouldn't put the business at harm. 10 million is not enough to do that.

Jack: Well then for the thought experiment, let's do 20 million. Like my guess, just outside in first thing you do is you try to increase capacity, you go on a hiring spree, get, you know,

John: first thing we would pass any significantly, no, we would hire the C level talent that we need at 50 million and we bring them in at our current size, That's a

Jack: good point.

John: Because, like, it is hardly any use to build these teams if the person that's running them isn't in the house yet. Who actually knows how to build them and run them. Yeah. Like, I've learned that lesson like 20 times now. Like, if you want to build something new, you go hire somebody that's really talented.

John: Do you have a CFO?

Jack: So, I mean, like, that's a, that's a great 10 million, right, right out the gauge, you'll get a really good CFO. Who's, I don't know if that's the area you're lacking though.

John: But like, we don't, we don't have enough, like a CFO is you need enough juice there for them to actually like be worth it, like they could help you with systems and stuff, but like, I actually don't even know that we'd be able to do really well with that.

John: I think a strong CMO. Coming in would be really helpful. I think a strong sales executive would be really helpful. A strong training and development executive would be very helpful, you know, between the three of those, that's, I just spent 600 grand a year. And it would be fun to take those swings.

Jack: Yeah.

John: So it'd be mainly focused on executives first, and that would probably consume a million to a million, two for that first year of like. Payroll, that's not really fully loaded yet. And then after that we could start building, but I still think it takes time. Like it's not like a switch.

Jack: I believe, you know,

John: it would take me a few years to run through a 20 million.

Jack: Yeah. I mean, then there's a training process, even with a C level executives, like you have to train them in the business, your business, I mean, don't get me wrong. There's the point of them coming in is with that level of knowledge, but still they need to, To get up to date on what your business looks like and how they can help it.

Jack: Yeah, that's interesting. I really liked that though. Like, that's a good point. Like, I really do like that. answer is like, my first thing that you would do is to put a seed suite team in that could help you grow so that when you have that cash to grow, then you can continue to increase capacity. So I'm not just dumping the capacity and have no one to manage it.

Jack: Like that makes sense. Yeah.

John: I mean, the, like the biggest barrier in growing a business and it's becoming more and more apparent every freaking day. Is like, who's the talent? Like if somebody handed you 5 million today, like the, the constraint that you would have is an expertise constraint. Like you don't personally have the expertise to make it just like I don't.

John: Like I also have that constraint, but like you don't have the expert. You've never taken a home service business to whatever they're trying to get. Just like I haven't either. So I, like that still has to be solved. So I think for us, we don't see a raise in the near future because I believe that a capital constraint.

John: ends up being good. Like, I think it is a net good for the business that we have a capital constraint. I think it forces us to be frugal. I think it forces us to hire effectively. We have to use our resources sparingly. And I think all of those things matter. Now, because at a hundred million, if there is a capital partner, like those muscles that we learned on the way up will be even more impactful when we're there.

John: Whereas it would be a much harder boat to turn if capital wasn't a constraint.

Jack: That makes sense. You built the systems in place so that when you do run into the actual problems again, which is why I think that people in the PE firm have actually had a lot of issues running. I mean, you hear the horror stories of them running HVAC and plumbing companies and.

Jack: And at the end of the day, it's because they don't have the systems in place for the growth that they're trying to.

John: Totally. Yeah, totally.

Jack: Trying to enact.

John: Yeah, I think the, yeah. This is just sort of, you could run this same thought experiment with any other constraint in your business. And I think everybody wants to run it with money because that's always the one that we feel the most.

John: But like, what happens if there's a lead flow constraint or there's an expertise constraint or a leadership constraint or a capacity constraint? Like, it is all solvable. And in the process of solving it, you're unlocking the next barrier to your next step. I think solving it forces you to build a good business.

John: And if your business doesn't have a path to a hundred million without raising, not counting BC, like, is that a business that you want to run? Like, do the unit economics make sense?

Jack: Let me be abundantly clear. If somebody wants to come and give me 10 million, John, I'm going to say yes. I'm just saying, all right.

Jack: I mean, the answer is

John: listening. There's a link to Jack's email. Hit

Jack: me up. HVAC Jack on Twitter. Let's talk, but to be, I think

John: with a finite, I think with a partner, like they have to bring more than cash because like, this is just back to the constraint problem, like I used to think that cash was enough because I had the expertise, and now I know that I don't have the expertise, and I also don't have the cash.

John: So, like, you gotta bring more to the table.

Jack: Yeah, so, I mean You have

John: to be able to, like, how do you help me unlock, and how do you resolve, like, these two or three constraints? How do you resolve the executive constraint?

Jack: And we're not sponsored by them. But I fully agree. And so we're not sponsored by these guys.

Jack: I'm going to shout them out. Leap partners, LEAP partners great group of guys. They they've done some roll ups and the alarm space industry before, and they've sold in the whole nine yards and now they're doing an HVAC plumbing and they're located in Nashville. So I've met with them a few times just to talk shop really nice guy, John.

Jack: And so. Yeah, though. Like what they bring to the table is they bring like all your marketing, all your HR, all your accounting, and they take all that constraint. And then they give you like, we're obviously the financial portion. And then you get purchased, purchasing power, trucks, purchasing power. So they do remove a lot.

Jack: And so I know there's people out there that are working to kind of fix that back end. Chris Hoffman would

John: be a good example of, he reduces, he's, I think his, the way his deal structure works is it looks like,

Jack: yeah.

John: Growth equity, and maybe I mean, talk to him, but he, they reduce expertise constraint a ton.

John: They reduce lead flow because they bring that they, there's a lot going on there. So that would be a good partner.

Jack: Yeah. I mean, Chris Hoffman, I have seen firsthand as he moved into our market and then moved into a adjacent market and has absolutely been crushing it. They have that lead flow constraint portion on lock.

Jack: Like they are, they went against like, I, I guess not go against, but they moved in similar times to Well,

John: Nashville's competitive. Yeah, they have Coolray. They have Coolray, yeah. Yeah. So they

Jack: moved in at the same time as Coolray and Coolray has dumping money. They've been dumping money as market, and in my opinion, I haven't seen the actual numbers on like either book They did.

Jack: Yeah. They

John: didn't do well.

Jack: They didn't do well and, and Hoffman brothers did. So like, it's just incredible. Like the, the amount of lead flow that, that Chris's team is able to been doing at Hoffman is absolutely phenomenal.

John: But

Jack: yeah, something like that, like I I'd be open to something like that.

Jack: And so, but, but my, my initial question was more so like, you know, too small, not necessarily going and selling out, but just like, how do you, how do you put that flame behind and is it, is it an idea constraint? Like, is it your mind constraint that I'm stuck thinking too small? So, yeah,

John: maybe. I think, yeah, there's a lot, but capital doesn't solve it all.

John: Because then it's like, what do you do once you get that money and you have no clue how to spend it? Because you've never, like, this is a brand new playbook that you're still figuring out.

Jack: Lamborghinis and Bitcoin. That's how we'll spend your money. Give me that 10 million, buddy. No, I'm kidding.

John: Good discussion.

Jack: That's fine. Yeah. I

John: appreciate you diving into it. If you liked what you heard, give us a five star wherever it is that you listen to podcasts and make sure you check out owned and operated. com where we're talking workshops, we're dropping newsletters, we're doing all the good stuff. Thanks for tuning in.

John: 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.

John: I'll see you next time.

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