Owned and Operated #119 - Surviving and Thriving in HVAC with Rich Jordan

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In this episode of 'Owned and Operated,' host John Wilson and special guest Rich Jordan look into the specific challenges and strategies for home service businesses and HVAC, to navigate and thrive during the shoulder seasons. They explore Rich Jordan's journey from operating a business with $800,000 in sales to achieving nearly $20 million through strategic acquisitions and effective scaling techniques. His tips include the importance of memberships, the concept of proactive buyers, and tactics for managing the off-peak, mild weather seasons that typically see a decline in HVAC system sales and installations.

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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 #119 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: Service Scalers is running a promo right now, where if you sign up for a year of service, you get a free website, which is awesome. We just did this in one of our businesses and it really helped a lot. It was a brand new look. Plus we got great SEO with it and PPC to help. So make sure you check out service scalers.

John: com promo code owned. Welcome back to Owned and Operated. Today, I've got my friend, Rich Jordan on. Welcome, Rich. Thanks for having me. Yeah, dude, this will be good. Long time no talk. Yeah. Yeah. Yeah. Good one. Yeah. Rich and I talk almost every day. Yeah, you're, I'm trying to remember the last time you were actually on it almost a year ago, probably.

John: I think we talked about marketing or something at the time. And we recently re kicked Your origin story up, which was funny to relisten to we should probably say cause that was a recent one. So if people just listen to it, they're like, oh, rich Jordan, 800, 000 sales.

John: Do you want to like, 2 minutes on what happened in the last couple of years?

Rich Jordan: Yeah. Yeah. So I guess that we did that origin story about 3 years ago. This time I was in 21. It's like spring, early spring of 21. Yeah. We're sitting here April or May of 24. So, yeah, since then, so back then I just had, we had the 1 company in New Jersey.

Rich Jordan: We had bought it at a million in sales. And when you and I talked, we were probably at run rate 1. 6 or something like that. And since then we've bought another like platform company in New Hampshire. That company was doing three and a quarter million when we took it over. It's spring of 22. So two years ago and we've done a couple of little add on customer list acquisitions and one significant acquisition in New Hampshire.

Rich Jordan: So four acquisitions in New Hampshire total. And now, right now we're on pace to do 12 million in New Hampshire and 5 to 6 million in New Jersey. So 17 to 18 million this year.

John: Yeah,

Rich Jordan: so quite a lot of growth. Yeah, since yeah, we're at 80 about I think we're at 80 employees right now When you and I talked three years ago, we were probably at 12.

John: Yeah. So yeah, that's crazy. We Sometimes I think about the like who I currently know who there's like a, there's all the OG names from 20 years ago. And sometimes I just think about who do we currently know? That's going to be like an OG name. And I think you'll be, I think you'll be an OG name.

John: Cause yeah, zero to almost 20 million in four years is nuts. And and obviously you just like me are eyeballing a lot more than that, which makes yeah this will be interesting to see the next couple of years, but I think it's fun to watch people's like wild transcendence or like Jack moving from like, under a million to five and like 20 months or something like that is like, all right, this is cool.

Rich Jordan: Yeah. It's, and what's cool is, again, I don't think it was true for the guys, in the late nineties and early two thousands is we have, we're like capturing all of it as it's happening. Yeah, you can go back to that movie from three years ago and see my thought process at an early stage versus where we're short two thousand.

Rich Jordan: It's cool.

John: Yeah, it is. It is wild. Sometimes I try not to, but I have an interview that I still have to relisten to from service Titan and it was like late 2020 and like our big thing was, we were like, we got to break 5 million. And the next year I think We acquired three companies like a few months later.

John: Yeah, I don't know. And you felt like a

Rich Jordan: ball because you're about to break five.

John: Yeah. Yeah. Yeah. I'm sure I said things in there that like now I'd be like, Oh my God.

Rich Jordan: But yeah, that's the tough part about doing these is sometimes you listen to the old interviews of yourself and you're like,

John: Oh my God, I was such

Rich Jordan: an idiot.

John: You knew nothing. You knew nothing Jon Snow.

Rich Jordan: Yeah. In a couple of years, I'll listen back to this one, I'll think the same thing. Yeah,

John: probably. All right. Today today we're, we're, it's May 1st and we're talking about shoulder season, which I felt like we did okay this year. And shoulder season, for those of you that like, don't really know, it's like HVAC has a couple seasons where the temperature is too mild to really do anything productive as in you don't sell a ton of systems.

John: So you tend to have to get very creative with how to keep things moving because you have install crews that rely on your comfort advisors to still sell stuff. In the spring, that's usually like. March, April, sometimes February, like depending on how weird the season is May, again, depends, it's 80 degrees right now in Ohio.

John: So that's not shoulder. That's 80 degrees. That's hot. And then the other one is like September August, September is when it gets weird. So yeah but the spring, we talk about this a lot spring, like shoulder season is the hardest one. Cause it's just, it's a long time, whereas you can still have ACs and stuff in August, September a lot of the stuff that we've done really well, we got from Rich, so I'm excited to talk to Rich about how he's helped mitigate his shoulder season and make it better, so, you want to talk a little bit about the, I think a lot of what you did was last year, like you implemented a ton of stuff, Last spring, and it really carried you through two shoulder seasons now.

John: So you're like, you've proved it twice.

Rich Jordan: Yeah. So I think it's maybe useful to talk about what the solar season used to look like versus what it's looked like over the last year. It's we used to, like you said, like September, October, even November, first half of November. And really like late August, like back half of August, first half of November and everything in between would be weak.

Rich Jordan: And then February, March, April, it would be weak as well and weak meaning like difficult to fill the service board for HVAC, certainly difficult to fill the board for like things like sales quotes for replacements and stuff like that. But but really feeling it in HVAC service and then after we've put a bunch of things in place, like we, and we really started putting things in place, I'd say March of last year, we have not had on the HVAC service front.

Rich Jordan: We haven't had what feels like a shorter season in 12 months. That's, like the team, like at one point I think it was like getting into November. The team was like, we haven't had a break. And really for us, a huge part of it is memberships, um, and, for us, like memberships means like annual maintenances.

Rich Jordan: We went on a big blitz to fill or to sell memberships in the spring of last year, we've continued to carry that through 1, 1 of those things was adjusting our membership to be more, desirable to the customer and like easier to sell and then also opening it up for the office to sell it out of the office, a lot of companies and ours before, like really the technicians are just the ones that kind of offer it in the field, maybe it gets the customer a discount or whatever and technician conversion on that for like best in class companies would be like 40%.

Rich Jordan: Non members that's best in class. Most companies would be 10 percent or less.

John: Yeah.

Rich Jordan: We do a pretty good job and we're at 25 or 30 percent

John: but my

Rich Jordan: office crushes it. I also sell as John well knows. I also sell you 200 a month. We had a competition

John: for a couple of months of who could sell the most and I'd stop playing anymore.

Rich Jordan: No, that's a huge part of the story. As it grew out, like the overall revenue growth and the shoulder season mitigation is the memberships.

John: Yeah, so we memberships are like, I used to hear the metric of a thousand to a million which obviously we don't, I don't know anyone that actually lives up to that membership or that that metric.

John: But we like, that's been a huge part of our growth too, especially in HVAC. Like HVAC is gonna two and a half times last year. And one of the biggest things we did was like hone in on memberships. And that's, that'll put HVC, like eight figures, like low tens, which is crazy to us from 4 million last year.

John: And like much of the work was like, how do you, like you said, you didn't explicitly say it, but I'm going to repeat back. If there's jobs on the service guys, then almost everything else will be taken care of. If you can keep the service guys full, you can keep the sales guys full and keep the installers full.

John: And the way you keep service guys full is memberships.

Rich Jordan: Yeah. And I think people get it wrong. Like people not in the industry or maybe people who haven't added memberships get it wrong. They think about, Oh, HVAC is a great business to be in because you get these recurring maintenances and it's recurring revenue.

Rich Jordan: It's MRR.

John: Yeah. Yeah.

Rich Jordan: It's look, it doesn't make a big dent. Like maybe less than 5 percent of my revenue comes from my monthly memberships, less than five. My company on monthly membership revenue, it's almost like negligible but it's the recurring opportunity. It's the recurring, like customer interaction, customer visits, because maybe we can, this will be freestyling and some nappy math happening, but maybe we could talk through this a little bit, John.

Rich Jordan: So if you, and if you're doing it, if you're doing things correctly, it's like my dispatcher, my call center manager, they know like we want to stack, we want to stack the board. And for us, what stacking the board means is we have a sort of basically a bedrock of membership maintenances that get booked on a certain day on any given day.

Rich Jordan: So we might have 33 percent of the board stretched out for a long time as book. We can throw all that up and down based on the season, how much service we're expecting to come in. And then of the overall calls that are booked. So say we have 100 calls booked on the board we want for the day, we want 33 percent of those to be for equipment that is aged, right?

Rich Jordan: So like equipment is 10 years old. We want at least 1 3rd of the board to be that because we know at a certain percentage that aged equipment is going to flip to. Replacement.

John: Yeah.

Rich Jordan: So for us, um, again, the XR benchmark is 60 percent of those flip to replacement that's never really been true for us.

Rich Jordan: It's more like one third. So 33 percent of the board is aged equipment. And then a third of that is going to flip to replacement. So 10 percent of the calls on any given day, if you're stacking the board correctly, it's like now you can start to really think about and forecast. We're like those revenue opportunities and the different, closing rates and all that stuff.

Rich Jordan: So yeah, like keeping the board full and then strategically stacking it with each equipment, which if you have those monthly, if you have those like homeowners who are members with you, you have all their equipment data, because it's not like just, it wasn't just an inbound call and these are, you have a relationship with them.

Rich Jordan: So you have the equipment data, how old their stuff is, you can, play the shell game of making sure, You don't have too much age equipment on today and not on tomorrow and all that stuff. For us that's like the whole game. That's the varsity level of maintenance.

John: Yeah, I think I agree. Something that we've struggled with. And we were talking about this last night but something that we've struggled with HVAC service is like staffing it. And the reason staffing is hard, isn't because of recruitment. We don't really have a recruitment problem.

John: We struggle to make that department profitable on its own. So like we, you have enough, so like we're going into peak season and one of our concerns is like, Hey, we probably need 11, 12 HVAC service guys. Right now we have six and we've bumped up to nine, 10 during like peak, peaks and we should probably be at eight right now.

John: But yeah. Yeah. But yeah, it's just getting the guys, it's like getting them to pay for themselves. Cause I think as you're talking through this, I'm thinking about all the different things that had to happen for all that to work out. The way it did and not work out obviously you did it, but it was like, yeah, memberships for sure.

John: But you just dove into each equipment, you just dove into like effective dispatching and to do all that, your guys have to know how to flip a system and you guys have to know how to offer options effectively. And like you said, that's varsity level dispatching. And to me, that was varsity level, everything, like everything that you just described was like, not what a 3 million company is doing.

John: Right. It's hard to do. Yeah, it is. It's hard to do. And it it takes, yeah, it takes like focus and but yeah, I'd say it's, it was more than just dispatch because obviously dispatch, it's more than just memberships. Obviously, memberships was a really big part of it, but their proactive planning of like, when to schedule them seem to be a big part of it.

John: Hey, how do we schedule in the down season? That's one thing that we did really effectively this year. We didn't have a slow season. We actually only got slow for two weeks in HVAC this year, which like, that's insane. And it just, we just got out of it. We were slow for the back half of April and then literally we went into this week and sold I don't even know.

John: We're like 70 grand in HVAC today and that's been in the last few days. But like the, the last two weeks we didn't sell anything basically in HVAC, but we only had two slow weeks and I'm convinced it's because we pushed on we pushed on lead flow. Now I was talking to somebody from Logan heating and cooling down in Dayton.

John: And she was awesome. And she's the president there. And they're a pretty big company. Like about twice our size and almost all HVAC. And I just asked, cause I was like, Hey feel like we did the stuff you just described, right? Like our memberships killed it and our, um, just like we were intentional with dispatch, like our service guys never missed a beat.

John: Now, maybe we didn't have service guys because we missed options. So we totally missed on that part. But like on the dispatching and like setting them up for success part, we did. We just didn't do well once we got there, which that's our big project now. But anyways, one of the things I asked is I can like HVAC.

John: I'm only dealing with this for two weeks. And it was hard, like it was a real challenge. And this is the thing that HVAC gets so much flack about. But how do you deal with this when your HVAC department's 50 million? Like how do you withstand the shock of that? And it was really interesting because what she said, which really hit home for me in another project I'm working on in, in a different part of the business is she said that they got really good at dealing like a lot of their business growth came from the proactive buyer.

John: Which I think is really interesting because most of HVAC is based off the the uncomfortable buyer, right? They're too hot, too cold. Like I have an emergency, so I'm going to buy. And that was a, that's a paradigm shift. And we're working on a project that involves that same philosophy over in plumbing right now.

John: We're like, how do we get in front of the discerning proactive buyer? Because we think. There's that's a larger TAM than the people with active water leaks is the people that might, want this solution. So how are you thinking about that with HVAC sales? Thanks for checking out owned and operated wherever it is that you listen to the show.

John: If you could take a second and give us a five star review, it helps other people find our stuff.

Rich Jordan: HVAC sales is hard, I think. Um, like we certainly,

Rich Jordan: We do provide like a repair, renovate, replace option. All are like service calls and maintenance calls. And that renovate option is typically like, Hey, you can do this, but you could also, you could renovate your system, prevent, certain issues, whatever, get more life out of your system.

Rich Jordan: If you. Go with this option, which is significantly more than a basic repair. So we do generate some decent revenue that way, um, plumbing. And I think this is what you're referencing, like we're thinking a lot about water quality right now, water quality for drinking water, and also water quality for protecting equipment, like scale and stuff like that.

Rich Jordan: And, we think that's going to help out. We never really put a lot of emphasis behind that. So that's something that we're just now

Rich Jordan: attacking. Yeah. Yeah, I think we could do a better job around that. We do really well on, maintenances and turning it into. Hire ticket revenue and flipping through replacement, but proactive buyer is an interesting concept that might help you leverage. Did she go into detail as to what she really meant by that on the HVAC side?

John: She did. Yep. We'll dive into it. So what she was talking about was like this time of year, If someone's actively shopping or like the last couple of weeks, right? It's 60 degrees. Nothing interesting is happening in HVAC. So the people that are calling and it was driving me nuts, right?

John: Because the schedule was full, like our, we were full on opportunities. But our close rate was down. So we're trying to figure it out. And. Her feedback was the type of people that are calling in marketed leads this time of year are proactive buyers. There are people that probably don't have an existing problem and they are wanting to get ahead of it or they're wanting to find a discount or they're, They're, they want to be rewarded for thinking ahead was the phrase that that she used, which I thought that was, I thought that was really good.

John: And now I don't have it dialed in on how to put that into our business, it's a lot of the stuff that you see other competitors doing, like the BOGO the half off this, 3, 000 this, yeah, pick a thing. Now, I do think, I remember reading Did you ever read HVAC Spells Wealth by Ron Smith?

Rich Jordan: I've not read that one.

John: That's interesting. You should, but it's like Ron Smith's an OG. Like OGs. And it was that's where I got the metric. A thousand clubs per million years ago. So before I knew about CertainPath and before I knew about Nextar, I knew about Ron Smith and Ron Smith wrote this book called HVAC Spells Wealth and he literally lays out the HVAC business model.

John: This is it. This is how you do it. And I need to re kick it cause it probably talks about this exact problem, but he was running 20 million companies back in the nineties. Like residential HVAC service replacement. Like he's no, he's an OG whiteboard. Yeah. Yeah. Yeah, dude. He's legit.

John: So what he talked about was, setting up a partnership and he's look we succeeded during slow time because we proactively six months out went to our vendors and started working on big deals and big promotions. That we could both win because like manufacturers need to move equipment during slow time to no one wins in April in HVAC.

John: So the goal is how can you start, like what promotion can you get to just for 30 days? Hey. Hey, train. Hey, Lennox. Hey, whatever. I need an extra 30 percent or 20 percent off this equipment because I'm about to do this. Like, how can you help me help you just in this month,

Rich Jordan: like I'll do to it for the next year for this month.

John: Yep. Give me 30 days. Give me a promotion that's going to work that I can help you move equipment and we can move equipment and. And that was something that he talked about in a book that I read eight years ago. And it just hasn't really been as relevant because HVAC just has been like a smaller part of our business.

John: But now I'm going to recrack that maybe open and dive into that section again. Cause I think, That was one of the things that she mentioned. And I was just like, man I remember reading that in 2016 that exact like solution. But yes, proactively going to your vendor and working out like a deal just for that month.

John: So we retroactively went and did it and we're just like, Hey, we need some help moving equipment. I know I'm in the middle of it, but what can you do? And Dan who's great. He listens to the show and train and Ferguson came together and gave us something to help out. And that's going to help us move more systems, which is going to help them and help us and help everybody.

John: But now we know, okay I need to be talking about August, September, October promotion in June. So in a couple of weeks, I need to start like working proactively and really like, how do we move, half a million dollars a units each month ahead of time. So that's something that we're trying to think a lot about to get ahead of the next one.

John: Cause I think the, we nailed the lead flow section of like our service guys, like never had a slowdown. Yeah. They just have consistently run. It's honestly been one of our best recruiting tools. Hey we don't slow down. That's not a thing that we experience.

Rich Jordan: It's the replacement, it's the replacement quotes and the closing on the placements that has slowed down for us.

Rich Jordan: That's where we have felt the slowdown. It's like services pumping, they're flipping the leads, but they're not closing. And the market leads have come down in this time and close rates are even on those lesser amount of market leads. Has gone down. So it's like company revenue has dropped. Because installs are down,

John: That's what happened to us in April, revenue was down. We've had a really consistent first three months of the year and revenue was down like two, 300 grand in April, almost exclusively from HVAC install. Yeah. So really big drop.

Rich Jordan: Yeah. And when HVAC install, this is probably, this is less true for you because you have larger departments outside of HVAC, but for an HVAC company install is going to be like 60 to 70 percent of revenue.

John: Yeah.

Rich Jordan: So when you see a big drop and install, it really impacts the top line for the whole company. One thing I've been thinking about this since you mentioned it, sorry, I just a million dollars, a thousand members per million dollars. That seems like such a crazy number to me. But I do think it works.

Rich Jordan: I just had to get this out. I've been thinking about it for the last four minutes. But it does make sense to me too, because we think about three, about 300 members per service technician.

John: Yep.

Rich Jordan: And you think about the service technician, a good one, you want to bring in 250 to 300 K for HVC.

Rich Jordan: So that is about, it's 900 to a thousand members per million of HVAC service.

John: Yeah.

Rich Jordan: You know what I

John: mean? Yep. Yep.

Rich Jordan: Which is about where we're at as far as our members to HVAC service revenue. Cause, cause when you mentioned a million to a thousand members, I was like, whoa, that's that's a lot of numbers.

John: Yeah. That'd be 26, 000 for us. Yeah. It's crazy. Yeah. Yeah, nobody has that. Only a hundred, 1 million companies have that. Chris only has, only, but I think he has 16, 000. Yeah, it's like 69, somewhere in there. Yeah, you could be right. Yeah. I'm curious. I'll crack that open.

John: But yeah, I think the big yeah, we had the same issue. And now that's just the next project, like we nailed down. Okay. We nailed lead flow. Which is awesome. And now we've got to make sure we nail the service options and sales for next year. And I think I really do think this is a proactive buyer.

John: The only reason they're talking to you is because they're thinking ahead and they're going to get they're shopping and like you have to

Rich Jordan: introduce some level of urgency or some level of reward for being proactive.

John: Yeah.

Rich Jordan: Yeah. Cause you're right. It wouldn't be cool if they don't. It's not a competition.

John: Yeah. Yeah. So it's gotta be, a lot of the phrasing we started using at the end was like, Hey you do want to beat the heat, which like was true because what, what happened was, Hey, if we quoted you last week, like our price is different this week because we sold a hundred thousand dollars in, like a day and a half.

John: This week, so like we just don't, we had capacity and now we don't like now we're booked seven days in install, which we always want to be same day next day. So being booked out seven days isn't a good thing to us. So yeah, so we have to now we're now ramping to increase production in order to catch back up.

Rich Jordan: Yeah, this idea of the proactive buyer is interesting because it's actually, we're actually. Getting bit by that right now in a way we, we actually had a good, like 10 days of sales this past

John: 10

Rich Jordan: days after a little bit of a dip. But they were all now that I'm thinking about it, they were all these proactive buyers.

Rich Jordan: So I have open install days. Tomorrow and Friday, Thursday and Friday this week,

John: and

Rich Jordan: I have a bunch of closed sales, but they're all like, yeah, like we're going to get this done in the middle of May or get this done in June.

Rich Jordan: And I need tomorrow, Phil. Yeah, it's because we're not, because we're not thinking about it the right way.

Rich Jordan: We're actually getting bit by that.

John: Yeah, I think we're in the same boat. I think there's a way to attack it because the problem is the way our team wants to attack it is let's obliterate gross margin. Which like, that's not the answer because all of our competitors are basically just selling at cost or like cost plus one or whatever.

John: And I don't think that is like the answer let our competitors, like we're beating our competitors. So why would we want to play by their rules, right? Like we're going to play a different game because we're going to a different destination than they are. So we have to still protect gross margin.

John: I think we do that through, yeah, partnerships. We do that through like different. Promotions that other companies aren't capable of doing and just driving better urgency. So I think there's a way to beat it. I don't think we did a good job of it this year, but we're also blessed because it only lasted two weeks.

John: That's that is crazy, most of our, we were very fortunate. We had a really great Q1 for HVAC. Yeah, this was I don't know, any closing thoughts on surviving and thriving in your shoulder season in HVAC?

Rich Jordan: No, I think we talked about it pretty well there. There's obviously a bunch of detail we go into on the actual dispatch and how to and the board. Stacking, the stuff I've got behind me on the dashboard and stuff. But no, I think the the point about partnerships is interesting.

Rich Jordan: It's not something I've really explored.

Rich Jordan: Cause yeah, we, if we have open install days, we will slash price crush, gross margin to fill. To cover costs, labor costs and stuff. So to, to figure out an alternative way to attack that is, is useful. Yeah. Stewing on that right now.

John: Yeah. And you could do secondary brands, you could do partnerships, you could do, there's, I think there's a lot more levers than we can pull than what we did.

John: We pulled in one of

Rich Jordan: the things, secondary brands, one of the things we did last year that I think has contributed quite a bit is we've, we have added. Secondary brands at lower price points. We used to be like strictly a premium carrier shop. That's all we, that's all we sold carriers, like top market cost being onboarded manufacturers like Goodman, like builder grade stuff to access a different point in the market.

John: Yeah,

Rich Jordan: Have opportunities for people. So that's helped a lot.

John: Yeah. Yeah. We had, we added run through, which is like train secondary and same thing, it's like 40% cheaper. So we're able to come in at a totally different price point. 'cause we're trained, same thing like top of market like carrier, it's it just is what it is.

John: It's good equipment, so it's expensive. Yeah. Sweet. Yeah. Thanks for the deep dive. This was a good convo on, surviving and thriving in shoulder season, HVC. We've got you for one more up. So everybody make sure they pay attention to the next one. Rich is back. All right. If people want to connect with you, where can they find you rich?

John: Or just don't just don't connect with me.

Rich Jordan: No best way to connect is on Twitter. You can hit me on LinkedIn too, but Not getting back to people there. So Twitter is the best spot. Sweet.

John: We'll link you below. All right. Thanks for coming on today, man. Yeah. Happy to be here,

Rich Jordan: man.

John: Thank you.

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 Wilson companies.

John: I'll see you next time.

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