The Home Service Expert Podcast - Building A Successful Service Agreement Program

Episode Date: November 8, 2018

Jaime DiDomenico is the President of Cool Today, and Chair Of The Board Of Directors of NexStar, a training company designed for home service businesses. In 2004, Jaime acquired 41-year old cooling company, N&M, and rebranded it into Cool Today. Since then, Cool Today has expanded into plumbing and electrical services, and has grown its business with two new additional brands: Energy Today and Plumbing Today. In this episode, we talked about service agreements, customer service, pricing...

This is the Home Service Expert podcast with Tommy Mello. Let's talk about bringing in some more money for your home service business. 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. Now, your host, the home service millionaire, Tommy Mello. Hey there, ladies and gentlemen. Tommy Mello here with the Home Service Expert. I'm here

with Jamie DeMonaco. And Jamie owns a plumbing HVAC. They do everything from electrical to you name it. And he actually is a member of Service Titan. That's how we met. And he did a whole huge class. When I was in there, there must have been several hundred people about service agreements. So the main thing we're going to be talking about today is service agreements and how to continually make money with your business with the revolving customers and the lifetime value of the customer. So, Jamie, you're in Florida. Tell me a little bit about your day and how everything's going out there. Well, it's like Arizona.

It's hot. It's got one season. I made transplant from New York to Florida and loving life here in Florida. I was blessed to buy this company here 14 years ago. We were doing about $2 million in revenue. The company was called N&M Cooling and Heating, called Cool Today, Energy Today, and Plumbing Today. Three different brands for three different trades. We're having a great year. We had a great year last year. And we have great people and a great culture. So the business, you got involved 14 years ago.

How old is the business? When did it originally start? It started in 1963. It was a long pop company, and it just did heating and air. It originally started as a new construction, converted to retail services in the 1990s. It's got a very small market called Sarasota, Florida. I like that area. I go there quite a bit, actually. My cousins live out in Sarasota. So you're also on the board of Nextar. Can you explain to the listeners that don't really know the HVAC and plumbing and electrical world what Nextar is and what you do with them? Yes, thank you. I'm currently the chairman. I'm the the second year of being chairman of the board of Nexstar.

I've been on the board for three three-year terms. And Nexstar is a best practices coaching training organization designed for the home services business. And currently they're in air conditioning, plumbing, and electrical. And what we do is we have, everybody has coaches for different areas of the business, customer service, dispatch, marketing, recruitment, HR, and there's another one. Oh, well, now we have a technical coach. We have coaches, but the real strength of Nexstar is it's owned by its members,

member connections that drive the knowledge base of Nexstar. So I guess that's – it used to be called C2000 for all the oldies and goldies listening to your podcast. So I've got some training from Nexstar just talking to other companies in the HVAC world. I mean, everything – you're probably familiar from Parker and Sons to. Sure. Paul Kelly. I used to work with Paul.

Yeah. Paul Kelly. I usually hang out with them at the golf. Oh, yeah. When they get there, that big tent. They get all their guys together. And as long as I'm not too drunk, they'll let me in. Yeah.

Paul's a great guy. I remember Paul when he was a road rider. So Paul, and then I deal with the guys at, let's see here, Penguin Air. And then I talk to the guys a lot over that got out. Actually, we went and did a round with them before we got on service, Titan, at George Brazil. Yeah. Mark over there. at George Brazil. Yeah. Mark over there.

Mark Urbanback. Yeah. You know, it's a small world, especially if you're in the same niche. And a lot of these guys do a lot of the same things. What's the old software that everybody used to be on? It was called Successware. Successware, yeah, from Direct Energy days. Successware actually predated Direct Energy.

It was really started early on by Jim Abrams and the Clockwork Group, but that's before when they were airtime 500. They're the ones who really honed in Successware. So I went out and visited with Terry Nichols. Yes. Terry Nicholson. Yeah, Nicholson. So we spent a couple of days together talking about garage doors, but it's very interesting because recently the call center of direct energy just closed down here, but there was over a thousand people, less than a quarter of a mile from me. And so we work on lead gen with them because now they sell HVAC plumbing, electrical. Then they sell the policies of the, if anything breaks on your house, a service for everything.

Home warranties. Home warranty, yeah. So they're always looking for home warranties and it makes sense. So I always think about, how can I get into a niche with someone like you guys? Because you're already doing a lot and I don't want to do more than garage tours.

I don't want to do chimney cleaning. I don't want to do gutters. I don't want to do roofing. I don't want to do HVAC. I don't want to do more than garage doors. I don't want to do chimney cleaning. I don't want to do gutters. I don't want to do roofing. I don't want to do HVAC. I don't want to do any of that stuff. Because we're starting to get into garage door storage. We're starting to get into garage door flooring. We're starting to get into just garage doors in general.

So I don't want to do more than that, but it's a perfect partnership if someone like you and I can work together because you have 14,000 memberships. The cool thing about Service Titan is you can tell what the customer experience is like with the quick survey they take afterwards. And if I was to team up with someone like you or vice versa, if I was pitching plumbing or HVAC or electrical from another company, I just want to know that my customers are taken care of because the last thing I would want

is someone go in there with a huge sales pitch and say you need a new unit to every single customer. So it's a happy medium but I talked to Ken Goodrich at Gettle Air. Gettle Air and he was telling me that he wants to

potentially do something together down the road because I'll handle the garage door part. He'll handle his section and we'll get the roofer and we'll get the carpet cleaners in and it'll be a little network of like five niches. And it's true because if you're paying for the acquisition costs of that lead, why not try to sell the lead many other ways? So I just want to dive into it because I think service agreements, I talked to the venture capitalist the other day. Actually, when we were at service tight, and I talked to him, I talked to him on the phone the other day, he goes,

how many service agreements? He was licking his chops. He's going, how many service agreements? I was like, we're averaging about seven a day. I said, you know, we run about 130 calls. So my percentage is not what it should be, but there's not a lot of people doing it in the garage door niche. So we're working on, you know, tell me a little bit about why you cracked the code, I think. And you, you know, 14,000, and you asked everybody to put your hand up out there.

There was maybe two or three other guys that had over, over 5,000. If I remember correct. So how do you do it? And I said this in the training session. Just like the ring on your finger if you're a married guy or a married gal, it might have value in itself, like a piece of paper or a service agreement. But what it represents is where the real value is. And, you know, you built a really good garage door business. It's based on the relationship that you have with the customer. Now there's different relationships.

It's just a happy customer that got a good service. And then there's a customers that actually have a personal relationship, your customer service people, your technicians. Those are the relational customers that we look for. For me, the only way to measure my company's success in those relations, how many service agreements we have, how much is growing, how many are renewing, and how much we're selling. And what I find is nine times the most contractors that aren't doing very well on it, they say they don't focus on it, measure anything. They don't measure how many they're selling, how many they're renewing, how many their people are converting in the field.

It doesn't start without measurement. So we measure. It's a focus. It's part of my mission statement. So it kind of runs through the core. Mind you that those 14,000 are in a market size of about 600,000 people. So it's not in Phoenix, Arizona, where it's 6 million. It's 14,000 homes out of about 350.

So if you do the pure math on that, it's like 5% of total homes, probably a higher percentage of really what you would call homes that we really service, right? For you, it's garage doors. For me, it can't be apartments. So we have a very high concentration. That is nuts. I mean, it's crazy doors. For me, it can't be a price. We have a very high concentration. That is nuts. I mean, it's crazy to see those numbers that high. How many do you think you

guys had when you took over 14 years ago? We had about 1,100. So those relationships, you mentioned some key stats that I want to dig into. Number one, let's go back a little bit. Let's talk about when you took over some of the struggles that you've gone through over the last 14 years. Did you come from another home service business and know what you were getting yourself into with experience in that or not? Well, you know, interesting enough, I've been in this business about 30, 37 years. I'm showing my age. And I was in a lot of home services business.

I work for a consolidator. I work for Rotorooter. I work for a large home warranty company. So I have a lot of exposure to this business. Nothing like owning one. And you can know everything. Your skin's on the line. It's just a totally different story.

And that's for a separate podcast. So I thought I knew what I knew and I's for a separate podcast. So I thought I knew what I knew. And I found out I didn't know everything I thought I knew. I had a lot of experience. I had expectations of what I would do. But I learned a lot only. So I guess I'm answering your question, but in a roundabout way. No, it answers it. Yeah, there's so many things that obviously you run into. And I know that can can be a whole day's worth of, worth of information. You know what I hear a lot and I heard it in the garage industry is why would anybody ever buy a service agreement for that? And, uh,

I think you're an air conditioning, you got filters, you've got coils, you've got other things that need to be cleaned and maintenance. And it is, it's a lot of work and maintenance. What would you say to somebody with a gutter company or a chimney company or maybe another niche that isn't, they don't really have a service agreement? How would you develop that and how do you build value? Well, I'll ask the first question. Why not? To me, you should be able to sell a maintenance plan or a service agreement on anything that moves water, has water, has electrical, can corrode, or has any moving parts. So what does that leave in the home? Yeah, that's a great question. I can't think of anything. There you go. Maybe the driveway doesn't have a service agreement on it, but the irrigation does, right?

The gutter, is there maintenance involved with the gutter? If you keep debris in that, what happens? It oxidizes, it rusts. Your gutters aren't going to last very long. There's definitely an opportunity for maintenance. I've always been staring at garage doors, looking at the springs and the rollers and the chains and going up and down. We use, as a family, we don't go through the front door. We go through the garage door.

We go down eight times a day. I said, wow, this is perfect for that. Here's the biggest problem in not being able to sell service plans. It's the people, the people, the people. It's the people's beliefs, the belief systems of the people that work for you. And primarily, and I blame this in my training, the belief system of the owner. They consider it a product that they're selling just to make a little money on, and then it keeps the customer tied to them in some respect. It's not the intent of it.

If you're going to be a relational company, the product is like your wedding ring. It's a promise of things, and you have to have value tied to that promise, just like you have to have value in a relationship. I really try to teach that to people. That's looking at the agreement at just a way to sell them a replacement garage door or upgraded garage door opener or a brand new AC system because they cycle a little longer. It is an opportunity to that customer once a year, twice a year. It's an opportunity to mail that customer thank you notices and reminders and things. Today, don't remember, many of them do, who even serviced them a month ago. They don't remember the company.

They have trouble knowing the company. And they certainly don't. They might remember the name of the technician. But I've asked airplanes. I've asked people that approach me. Even within my own company, they couldn't remember the name of the service technician. How do you stay memorable to the customer? So this is the way to stay memorable because I've promised them.

Yeah, 14,000 promises. Yes, that's 14,000 homes. But within that 14,000, we have air conditioning, plumbing, and electrical. I have probably 11,000 of those are just air conditioning, and 3,000 of those are just plumbing, and then a mixture of electrical and some of commos. You know, one of the interesting concepts that we had, because you came to an advanced training course on the last day with us at Service Titan, was how many service agreements are too much and right now I have two. I have the one for the custom doors which is more about taking care of the outside of it and then there's the parts on the inside. Mine's 10 bucks a month. It's 10 bucks a month. I'd buy one. I'd buy one

from 10 bucks a month. That's a good deal. Yeah we give you a lot of stuff with it. We give you free rollers after 10, after four years. We give you a free bottom rubber after five. We give you a free strut today. We give you a surge protector today. We upgrade you to a lifetime warranty. We call you. Sold. Because you put value in your agreement. Too many guys out there offering things like 24-hour service, priority service? What does that mean to the consumer? And it also builds value for your technician. They're the biggest. They can turn around and sell a garage door opener for about $1,400.

Well, the Wi-Fi and everything else, but they can't sell a $10 a month plan because they don't understand it and they don't believe in it. Well, also, let me ask you this, because what I found with Penguin Air and a lot of these other companies is they pay pretty good. So what I do, and this is a good thought, I think, but you don't see the money today as much. First, they get that initial $10 for the initial sell. And then on top of that, every anniversary date, they get the 10 bucks. So if you sell 20 this month and 20 next year in August or September, you would get $400. And then the next year you get $600 and it's mailbox money. I don't know, but they say, so if you're here for five years,

you're typically going to make a thousand dollars in the mailbox each month, but they don't think, but they say, so if you're here for five years, you're typically going to make $1,000 in the mailbox each month. But they don't think that long term. So how do you get technicians buy off on a $10? I like $10 because you can remember $10. The audience out there understands $10. It's a simple number. We could use $100 or $10 or whatever. But how do you get the buy-in to say, you know, the old thing, what's in it for me?

So what's in it for the technician? Well, I really don't start off with that when I hire people. First off, when I hire people during their orientation, I tell them how important relationships are. I can point to my mission statement, lifelong relationship with our customers, our team members, and our community as being the core of what we believe in as a company. It's not a request for you to establish relationships and maintain relationships. It's a mandatory that you have to be a person that believes in it, right?

It always starts with the belief because you know, Tommy, nothing happens without belief. Not even money will work unless there's belief. So it certainly won't work very well. It'll get short-term results, but I also talked to a lot of companies that sell a lot of service plans and they're not moving, they're not growing.

So they have a bucket, they have a good funnel, but the funnel on the bottom is as open as the funnel on top. So that's not a funnel, right? So you have to have belief. You have to have belief by the owner, the president, the GM, the operations manager, whoever is responsible for driving that company's growth. There's two types of growth.

There's transactional growth and relational growth. Sticky growth, that's why you have private equity firms wanting to know how many customer relationships you have you got to have the numbers and the transactions and the marketing and all that stuff but they want to know how many customer relationships you have because a predictable stream of revenue more multiple value to an investor than a non predictable stream of revenue. Yeah, that's absolutely. Cause it's predictable because, you know, for a fact that these people are counting on you to do their garage door, they do for three years. Yep.

And you keep them out of Google. You keep them even from asking their neighbor. So you think about the benefits you get by that. You have lower acquisition of new customers overall because you're able to invest your money wisely because you have these returning customers. Right. So you could spend normally spend 10 percent to acquire a customer in the garage door business. And you have a large customer base of plants. Right. And those customers are loyal to you and they'll buy and they'll call you for service and they'll buy upgraded doors and upgraded openers so you could still spend uh that 10 but what are you spending that 10 on you're not spending that 10 just on retaining them you should spend a little

bit on that but now you can go out and get eating the other guy's lunchbox because you have much more presence because you're not fishing in the same fishing hole all the time. You know what I mean? You're not looking for another fishing hole. You don't have to worry about the phone ringing. You know, we're in Florida just like you are in Phoenix. We're primarily heating and air company. The thermostats go off in, what, mid-October and turn on again until, what, mid-March, right?

Yeah. We don't have a heating season. That's a pretty long time for service technicians to sit around and say, when am I going to get a call? Our service technicians are busy year round. It's summer, but they get their 40 in winter and I don't have to worry about, you know, having sweet floors. They're actually meeting our customers, maintaining the relationships that we had for years. I'm thinking a lot about service agreements. And I agree that in the off season, they make sense. And that's when you really want to fulfill that stuff. When I talk to another guy, I'm not going to bring up names right now.

For service agreements, he said, Tommy, we tag everything over 10 years old. And instead of having the maintenance guy that does the service on there go out, we send the salesman who knows how to do the tune up. And he said, we sell a lot of units because after 10 years, it becomes more economical to replace that unit between the energy savings and the maintenance you're going to have to put into it. He had a crazy close ratio. I mean, it was above 50% because they were long-term relationships. You even mentioned that your average sale of one of your membership clients is higher than a new Google customer. Can you talk a little bit about that?

Yes. I did a three-year study between 2012 and 2015, and I used a database expert that tore apart my transactions and looked at the customers that had agreed, predated a period of time and maintained it throughout the three-year period. And they spend on average two and a half times what the other customers spent. And based on the investment that they made, whether it be an investment in a new piece of equipment or a new plumbing system or a water heater, and we amortized it over the lifetime of those equipment. So non-agreement customer is worth about $660 per year. What they would spend in any specific buying trades,

because we combine a lot of trades. Whereas an agreement customer, and what I call a relational agreement customer, is about $1,640. You know, people say, well, why should I spend a lot of time selling $120 a year or $10 a month agreement? Because that's the only value your technician sees in it. But the real value represented is 10 to 12 times that once you get that customer at the relational point.

And that's tough, too, because we've got so many nice things we offer up front i think some of the guys i'd say half the guys sell on what's in it for me today versus this is why you should do this long term they sell them on the lifetime of the service agreement because if anything goes wrong and you're going to want to replace the story what you told me four to five years right now you got a big discount on. And you're also going to be able to transfer the warranty you've already got on these parts that you paid because they're high cycle. You're in the garage door business, right? Yep. You have trouble finding good technicians, qualified technicians,

experienced technicians? Yeah, we do an apprentice program. And then we have a field supervisor now program. So you have an apprentice riding around with your guy right right so imagine if you had 14 000 agreements across the country because i know you're you're in several states but 14 000 agreements where um a one location could have a thousand agreements and you could have an apprentice ride with a guy learn how to do the proper maintenance on a garage door, and then they're on their own. Are they producing revenue on their own? Yes, right? Are they learning by doing it? Absolutely,

because when they run into a problem, they can call somebody and they can learn on the job, paying for their way while they're doing it. We cry and we whine about a shortage in the trades, but then we have no entry for these people because we can't afford to just have them running around. And I said, so this is our, I'm graduating three plumbers that have been doing plumbing maintenance year and a half. And they're producing as much revenue as my service technicians right now. They're graduating the service and I'm bringing a fresh batch, green plumbing technicians, because you know, and I know that they don't have the prejudices that, you know,

long-term plumbers have. And they come in and they learn the plumbing systems of the customers and they deal with challenges and issues just like the plumbers do. And they learn the trade. So it's not only the fact that you're establishing and maintaining a relation with the customer, but you're training your people and they're getting paid to be trained. They're not dead weight. Yeah. And what we found that two thirds of the apprentices will make it through the program. We look for a really, really good person. The problem that I always tell people is when you're

looking for somebody for garage doors or air conditioning or plumbing, they're usually, they're unemployed at this point. And I'll tell you, my A players, my A plus players, we bend over backwards just like they do for us to make sure we're both mutually happy. And the only way I like hiring a guy is if he's coming from another state, but he got a really good reference letter and we'll take those guys on. But I typically try to just find new blood and teach them our way. I had a guy on the podcast a couple of weeks ago and he said, Tommy, guys that brought you to 10 million are not going to be the same people typically, unless they're in growth and they're continuing to change, that'll bring you to a hundred million Because the company changes, the dynamics.

And it's so hard for plumbers and garage door techs to change and go, now I've got to work on service type. Now I've got to do this checklist. Now I've got to start selling financing. Now they want me to monitor my gas more, and they want me to pass out flyers at each house. And it just keeps adding up, and they're like, when is this going to stop? But then the new guy comes in, and he goes, oh, this is the right way to do it from day one.

I'm adding a couple of things every once in a while. Tommy, don't forget, we used the term loosely guy, but there are a lot of women interested in the trades. I have female plumbers. I have three female AC techs and we're looking for our first female electrician. So don't forget, it's guys and gals. You know what? And we had a gal that didn't end up working out.

So in my business, I'm always about it. I'm about bringing in gals all day long. And the people listening, there's a lot of women business owners out there. And I'm so excited when I get one on the podcast just because it's got a cliche from back in the day. It's grunt work. It's a guy. There's just these old-fashioned views out there. I think it's normal. I buy from a woman all day long.

I think it's actually cool, especially if she came out and made a couple of recommendations that would look good at my house. I look fine to me, but what do you recommend? I look good with a good sense of that stuff. So, well, you know, um, to be honest with you, guys tend to be slobs. Women tend to be clean. Yeah. On maintenance, I feel much better having females do maintenance, uh, and inspections cause they're more thorough and clean.

And that's, I'm being a little sexist here, but I'm complimenting the females. No, it's good. I get it. That's a good characteristic. So, you know, I had a guy on, Darius. Awesome guy. Oh, I love him. Yeah. He talked a lot about finance. He's obsessed with financing and I am too. I mean, we're getting into it, but we come back to these things as, it's consistent and continuous training all the time.

And he says there's four types of people and there's four types of financing. So we talk about that, but we're also talking about service agreements. And I find that we saw a lot of service agreements when I focus on service agreements. Every morning, Morning Mojo calls service agreements. When I focus on financing, we sell a lot of financing yeah it's very rare that we get this hybrid of where it all comes together and we're selling the max life and we're selling the openers that we're focusing on it's one of those things where it's like and i know a lot of the people on the call that are listening to the podcast are going i'm having a hard time getting guys to even show up to the house on time.

The last thing I want to think about is all this other stuff. How do you balance that? What is this? I know you've done it. Is it a continuous just role play and training all the time? And it's the field supervisor program probably. I mean, tell us how you get there. Well, you know what?

You brought up a really good question because I know Darius from Fur Company in Alexandria area. They are really great at selling financing and they focus on that. But they started a little bit. I mean, they have a huge opportunity in D.C. to sell a lot more service plans. So and we could do a lot better on the financing sales, but we do a great job on service. You know, honestly, if I was going to have my if you forced me to pick one, I'd pick service agreements and Darius might pick financing. You know, we could figure out the other stuff if you have the relationship. So I have my guys focus on the relationships first and then we'll train them on the financing part. And service time makes it easy with the financing right through the tablet. Anyway, you just have to open their eyes to it. I think Gary's brought it to a whole new level of presentation in what he does.

I can't wait to learn more from him in that area because we all want to get a little better. I think at some point, you get to the point where you can afford the resources to do both. I don't even afford the resources to have somebody focus on financing and somebody else focus on the service plan, somebody else focus on service plan. Somebody else focus on operations. Supervisors, their heads are going to blow up by the things that you're asking them to focus on. So I think there are companies out there conquering both worlds. I'm not it, but there are probably companies that can do it.

And it's very difficult for the technician, I agree. Yeah, those service agreements. I mean, it's crazy because, you know, we're sitting here right now and Eric is working on getting everybody into Amazon Home Services. And when I was out talking to Terry Nicholson, he talked about air conditioning. People are just going to be ordering it online and having a company come install it. I mean, it's becoming more of a commodity. And he said, I'm just really, really worried. Not worried. He didn't say worried.

He didn't use the word worried. But he said, well, we used to teach people before it was one hour air. He said, we didn't teach them to charge $15,000 or $20,000. We taught them to make a profit. But it's becoming this huge, huge thing where it's becoming tough to, they're charging just a lot more money. And a lot of them are going to be turning to Amazon and Google to buy stuff. What is your thoughts on that as far as being prepared for when somebody just orders the grassroots springs online, want us to come install them? Well, a lot of times they order

the wrong stuff, but there will be a day and age where it'll be easy to order the right stuff. What do you think about all that? Well, I think e-commerce affected many businesses before it got to the home services business. Don't you agree? Oh, yeah. Crazy. Either that's a sign that technology finally caught up with the home services business or the home services business is a little bit more intricate than buying a pair of socks

from Amazon. The reason why it's crashing up now is because technology has gotten to the palm of your hand. And on the opposite end, like ServiceTitan, and there's going to be other softwares out there that allow the technician to have direct contact with the customer. And then in between, you've got everybody vying for that coveted spot of being connector, Amazon, Google, Home Depot. They want to be the connector of the end user and the service technician. Here's the challenge.

There's a lot of logistics in our business. And I don't know about the garage door business as much as the air conditioning, plumbing and electrical business. You have a lot of moving parts. And I could say that it's more complicated than people give it credit for. And I think simply buying a part online is not that simple. A piece of equipment online is not that simple, because if every house was designed the same, that'd be one thing, right? But every house is different. And then the beautiful thing about it is customers modify their homes. They change windows, they change roofs, they change side, which changed the energy factors of those homes. They changed the electric, which changes the requirements. I think there'll always be variables that require the homeowner to

need a local expert. The challenge is, is that box is a box. It'll show up at the house. And yes, we'll have to adjust our business. But we still have to make a profit because it's hard to find people. You're right. And I do agree that it's not all this commodity stuff. And, you know, I think there's certain people that think cheaper is better.

And I just, you know, my old saying is, and you've heard this before, they want it done fast. They want it done correct. They want it done at the right price. We'll pick two out of the three because you're not going to get all three. It's just, you really don't because the busy guy, the guys that are given a really good price that do really good work, they're booked out. Some of them are booked out for a year. I mean, if you look at like home builders and stuff, if you want all of it, the one that I want to negotiate on and be higher is price. I want to do a good job and I want to show up when we say we will. Most of the guys out there and gals, they bend on one. Like I can put cheaper parts in and still get it done on time and still give you a good price, but it's just not going to last as long. Or they'll say, yeah, I'm sorry I'm late. I'm just getting so many phone calls and warranty calls and customer referrals.

I just can't get out there when I say I would, and I can't work all night or I'll lose my relationships. So the one that's easiest to bend on is I can give you a discount, but the price is the two other things more than you're buying. What I found is the people that negotiate more on price, you get a really bad customer that complains all the time. They make big deals. It's like we get a customer that spends 180 bucks.

We'll get a one-star Yelp review and we'll just have them call in the office and tell us how bad stuff is. Then the next guy will spend 1,800 and just they love us. They'll tell us how great we are. So a lot of people think cheaper is better. Talk to me a little bit about that and how you've actually gone through the years and not been. You know, a great example is I just, I went out and saw a customer.

I met him at a community event. I don't, I didn't remember them. The salesman said, Hey, I just sold somebody that you met. And they got multiple quotes. They said the highest quote was 9500 and they said jimmy your quote was 21 000 we got to get our heads around that now this is somebody we've never done work for before you know jimmy is just an awesome guy he's a relational guy he spends time he walks to the customer they get to know him and he had a solution that nobody else offered but everybody else was offering and what he showed is they're going to have the same problem in the master bedroom, which you know, you don't want to have an air conditioning problem in the

master bedroom. The same problem in the master bedroom they've always had. You need a bigger return. Yeah, you need a bigger return, plus, plus. So he gave us a solution with zoning and with modifications to their existing ductwork. And we got the job, partially because Jimmy did a great job and partially because they met me at a community event and they felt a little connected. But they weren't using us. They had another competitor for five years.

So that goes to tell you right there, it's the person, it's the company, it's the representation. And the fact that we say, listen, if we don't do it, we'll pull this stuff out and give you money back and we haven't the customer signs too many contractors out there afraid to do that trust me tommy would never double the competition i mean in general we're about 10 higher 15 higher and then you'll have some guys that are 50 percent lower so i guess what i would tell the customer or even the business owner uh listening to this podcast is what you put in

is not done you're not done you have a responsibility to stand behind that product represent the manufacturer and to make sure your people are available for the customer when they need you otherwise you just give us all a black eye by slapping something in and disappearing, ghosting. That's what we hear about. And that's what customers coming from up north always say about Arizona contractors and Florida contractors. They stink. I hear it all the time. So invest in your business, make a decent profit so that your business can grow and you can take care of your people and then take care of your customers. That's the one thing I wanted to add is you get these guys that tell me I charge too much.

And then I say, wait a minute, let me do this. My top 20% of my guys are in the six figures. They get insurance. They get paid time off. I give them a wrapped vehicle to take home. They got an iPad. They get business cards. They get their uniforms. I cover all that. The gas, you name it. Insurance on the vehicle, personal insurance.

And then they say, well, I give my guy fourteen dollars an hour. He's a ten ninety nine. He doesn't get any paid time off. And I'm like, wait a minute. They don't do any background checks either, do they? No, of course not. And we do a very vigorous background check, a drug test. If you get in a fender bender, you're going to do a drug test that day. We've got certain rules, things for the customer to protect the customer. But more importantly, I think you've got to start with your employees. And I don't brag to customers.

I don't put that in my commercials, background check, because what I found was just the fact that you have to mention that makes people kind of think it doesn't equal a premium brand to me. And I used to have those in there until I saw a study on putting drug test and background checks on all your marketing. It's like, drug test and background checks? What kind of company? Where are we at here? We live in Scottsdale. But when they see a nice truck pull up, I think a lot of the smaller companies out there, their wife and their daughter is working for them. Their dad's doing their inventory. Their son's working for them for very, very cheap. And all of a sudden they're like, but you charge too much. And I'm like, I had a guy, he was in a magazine and they did a whole research article on him for the International Door Association. And this door is a guy that's a, he just hates

overcharging. He thinks it's so bad. And I agree, overcharging is bad. But he did this thing and the guy goes, yeah, he goes, I'm able to work out of my house. He goes, my wife is a bookkeeper. She does the work on the side. So I don't have to pay for that. My guys actually qualify for a tax credit because of this. And he figured out every which way to take advantage of every single thing possible. And then he says, that's why I'm able to get better pricing. But I'm like, that's not a real business. You leave for two weeks, the business falls apart. So I feel like a lot of these companies that say you charge too much. I'm like, how did you come up with your pricing? And they go, it's the industry average. I go, you don't even know what are your bills? The pricing is what a customer will give you and what you need to cover your bills and what is a good margin of

profit. And they don't have any idea. I'd say 99.9. And I know that's a lot, but 99% of small businesses don't know how to figure out the pricing of what they should charge. Yeah. You know, it bugs me when people say you overcharge. Well, first off, that's up to the customer to decide that. Secondly, what does overcharge mean in our business? Does the Ritz overcharge? Because Holiday Inn is a heck of a lot cheaper. Overcharge is that differential between perceived value and price.

I love that. And the only one that could say that is the customer, not your competitor. Otherwise, it's an opinion that doesn't count. That's the best line I've heard in a long time. Overcharged is the difference between perceived value and price. That's great. If you're charging more than the other guy and the customer has perceived value, you didn't overcharge that customer, did you? No, not at all. And some people say these parts didn't need to be replaced. Well, let me tell you this.

My dad owned a transmission shop when I was a kid. And when you got the motor out or the transmission out, it's easy to change out the motor mounts. The motor mounts will be in. They might be in good shape. And here's the deal. The transmission's out, and I can warranty this now. There's a little bit of a vibration. I'll make that go away. I'm doing it now. It's all a part. I can put this in and I can warranty it because it's my parts, my labor, and I can do this. So while I'm here,

would you rather just get this all done or would you rather wait for the next couple months, couple years? I don't know how long it's going to last, but I can't warranty because it's not my stuff. Some people say, why would you replace that when it wasn't even bad per se? Well, when you've got a closed bearing, it's very hard to say when that's going to fail. All I know is there's a cycle life and a bearing goes around a certain amount of times before it wears out. And I can't do a closed bearing or a roller of when it's going to break and be too brittle. Or a cable when it's going to start fraying. So, yeah, I really find it hard to say because you know what's bad, though, is you do know a couple of guys out there that are just ripping people's heads off and not selling anything good.

The good guys start looking at those guys going, it's pure evil, right? It's just rip off city. But then there's good companies that charge a good amount of money and do everything they say they're going to do. And I just feel like we get a bad connotation to those bad guys because we do charge more. You're absolutely right. And the guys that are doing that, here's the beautiful thing. I know sometimes you and I, we get a little aggravated when we get a bad Yelp review because we know we deliver great service for our customers. And usually the customer that you don't have a relationship with, they're the first ones to jump online and do that stuff. But the good thing about the online is that those guys are more exposed now than they were 20 years ago.

And the best thing you can do is educate your customer to look at all the reviews of the people that are competing against you. And if they see enough bad stuff, they're going to know that's why there's a difference in the price. It's about building value, but sometimes you have to build your value just by showing how different you are. Oh, yeah, I agree. The worst ones that I'm sure you get this is I went online and I found a capacitor for $22 and they charged me 220 or I found a fan blower or I found for me a set of rollers and I'm like, what you found it out. You know how much a pizza costs? It costs about 25 cents to make. I mean, between the flour and the pepperoni and the cheese. Do you see Domino's selling anything under a dollar for pizzas?

I mean, hell no. They're charging $20 for two pizzas. And, you know, a master kit for a transmission costs $120. Amco charges $2,200. Yeah. You don't see these people going, I could have bought the kit for this. And you heard that old story about the guy who this guy kept keeps calling out people. He gets this damn Creek and he's calling guy after guy,

after guy to get this Creek out of his wood floor. Guy walks in there, goes to the right wood floor, puts a piece of glue and says it's going to be $500. And he says, what do you mean? You were here for less than a minute. And you knew he goes, you're not paying for the glue. You're paying for my knowledge that I was able to fix it. And I knew the exact piece of wood to go to. And I just think that consumers, especially consumers that never owned a business, they

don't get that. And the cool thing is they're all homeowners. And a lot of them, they've done well and they've made money. And so it's not like you're dealing with people people that own a bicycle like kids that don't have any idea to be financially stable and go through a process to buy a home typically it's not a lot of people it's a tough one i mean how do you feel about those well you know it's interesting usually you run into that especially when it's your neighbor that pays that for that capacitor and they say how much money you're making i remind them i'm their

neighbor so i said well i'm your neighbor i couldn't i can't be making as much as you think i am so uh you know what i sell them is this i said terry john whoever the neighbor's name is to put a qualified guy on the road right now with his benefits and burden and insurance and all of the taxes that i have to pay him, it's $50 an hour. Fair. If they make $30 base, everything else on top is going to be another $15 to $20, right? So I round it to $50 an hour. It's $50 an hour just to have this guy.

But he only bills out a third of his time. So his cost to me is really $150. And I said, I got to cover that. And I said, then on top of that, my overhead is double the cost of him. In my business, if your field labor is costing you 20%, it's guaranteed your overhead, your marketing, your building, everything all in is 40% of your revenue. So I said, that's another $100 on top of that. Do the math, right? That's $250 before I even get a profit and parts. And when I tell them that, I get it. I try to teach that to my technicians. It's too much math for them. I just understand it.

The managers that see some of the bills, and I'll tell you, a lot of people, they put an article out on door and I'll tell you, a lot of people, they put an article out on door and access systems that you should be spending 5% of your revenue on marketing. And I talked to a lot of guys. I had a guy call me last week. He goes, I don't get it, dude. Your phones blow up.

You can't even get to all your calls. I said, I spend a lot of marketing. And he says, well, how much is the right amount? I say, well, it depends. If you go into a city and no one's ever heard of you, you got to spend more. And I like to spend 20%. I said, when you're established and you work with home warranty companies and you got the Yelp ratings and you're number one on Angie's list and all these other, you're on Groupon,

you're doing all these different platforms. I'm on HomeAdvisor and I rank really well on Google. Now you could come down to 10%. But theoretically, here's the thing. When you're in a city longer, you're starting to pick up referral leads. You're starting to pick up some of these free leads and these Yelp leads. And that's when you can start going a little bit less. But I talked to a guy that you might know for sure what his last name is. His name is Keegan, and he's in Florida. Yeah, best air conditioning down in Naples.

Yeah. And he said the way that he's been able to take market share is he goes crazy. I mean, he goes billboards, he does all these things that he joined kind of a, what is it like a best practices mastermind? Yeah. The Eagles nest group. Yeah. The Eagles nest group. And I was just speaking with him because I was golfing with a buddy of mine who runs all the Gannett pay for performance deals.

And he said, do you happen to know this guy Keegan? I said, no. He said, dude, that guy is like blowing it up in Florida. You should talk to him. So he and I talked probably about a month ago for a couple hours on the phone, just about different ways, different marketing. I love pay for performance deals. Although it's high, sometimes you might pay 15% depending on where they get you at and 15% after taxes. But if you think about this, sometimes you might pay 15%, depending on where they get you at, and 15% after taxes. But if you think about this, you're giving them 15% of any fulfilled ticket. So I'm working right now on a KPI calculator. And what it does is it says how much money you should spend on marketing. But when you raise your booking rate, you raise your average ticket, you raise your conversion, all these things come together.

All of a sudden, that number goes down in marketing. But 50% of only fulfilled deals is not a bad number. No, that is not a bad number. But guys get caught up on the percentage. Oh, they hate it. They don't get it. They don't get it. And they feel they have to add it to that particular transaction to make it work.

And then they become uncompetitive for that particular customer. I use a barrier, believe it or not. If I can convert a sale, I'll give a media up to 20%. It cost me 20% because I know that 20% will eventually come down because I'm getting referrals off those same customers and I got those customers for free. So those customers come in, I'm getting referrals off those same customers. And I got those customers for free. So those two customers come in and I'm paying 20% to acquire that customer. They refer their neighbor. That's a zero. I get 10%. Yeah. Now you're down at 10%. So, but the other thing that I'm going to remind you of,

because it was one of the points of our podcast is I don't have to go fishing as much as you guys do. My customers pay me to call them. And then my customers call me and I'm paid the whole time to keep the relationship service partner plans or through service agreements or through maintenance plans. You know, I don't spend what the 10%, I spent, you know, a little bit over half of my revenue on marketing. And I added two markets in the last two years. Wait a minute. Wait a of my revenue on marketing. And I added two markets

in the last two years. Wait a minute. Say that again. I spend about 6% of my revenue and I added Tampa and St. Pete Clearwater. You only spent 6% of revenue

on marketing? Yes. Okay. So that's another podcast, but these were transactional acquisitions I made. And I'm going to talk a lot about that at our next, our super meeting in next month in Mark Wiley. But there's different ways to do expansion. How's that? You do a greenfield, I think, and that's very costly. But the nice thing is it's all expense to your income statement.

Whereas mine gets recorded as goodwill and then I take those existing customers and I work on relationships. Because I got the contractor out there with these customers that are half loyal and then I tie them into agreements and then my revenue goes through the roof.

So I got a few more questions. I know we got to finish here. When I get this perfected of the service agreements, I'll just run through a few things I'm going to tell you that I do. Number one, you call the service agreement up, you tell me they're up for their annual tune-up. This old relationship that I just bought ABC garage stores. You get back out there, you sell the service agreement. That's my goal. So I want to take at least 10% of their existing clients in their database and convert them over. Number two, I run all their emails through Yelp, find a friend, and I see if they're Yelp members and try to get as many Yelp of existing customers that they have to monetize their list as possible. And if not, I want to get a Google review and a better business

and a home advisor. And I want them to recommend us get a Google review and a better business and a home advisor. And I want them to recommend us on next door, which is very, very powerful. So there's several things you could do. And I'm a big, big fan, especially buying a company that says, I don't really advertise. We've been around for 30, 40, 50 years. We get it through word of mouth. I got a national Val pack deal. I got a national money mailer deal, national clipper deal, my cost per click because I'm spending so much money and our quality scores are so good, it's probably cheaper than anybody's. Plus, I could make more money than the average grocery guy because I'm selling storage solutions

and other things. I'm a big fan. We're actually, what did they call that at Service Titan Summer of slowing down and getting caught up? Well, A1, we're in 12 states and I'm just slowing down. I'm like, I'm not going to grow to any new markets unless, yeah, I bought a list recently of every grocery company in the United States and Canada. There's 11,000 that are three guys or more. I'm going to be emailing them, voicemail dropping them, texting them and sending

a postcard every three months that I would love to buy your company. And no one might sell, but someday somebody is going to have a shitty winter in Ohio. They're going to go, my wife wants out. I want out. What can you give me today? And I'm going to be the guy that's always available to buy those companies because I'm 100% growing from nothing. You're right.

It hits the balance sheet differently, the income statement. But the main thing is it's going to take me two years to build a name in that town so if i buy this company i'm spending the same amount of money on marketing and finding the right guys and the training and everything else as i would just buy a company yeah you're absolutely right and tommy i'm gonna guess you're about what 35 36 35 okay i'm. I don't have time to F around with Greenfield. I just don't have time, right? 100%. And think about it. I have 14,000 agreements in the Sarasota area,

650,000 people, about 325,000 homes. And now I'm in Tampa and St. Pete, and now we're 3 million. 3 million people. Somewhere around 1.4 million. Now I have a big lake to fish in. And I'm going to build my service agreement base there like I did here. So if you have the right philosophy and you have the right systems,

it becomes down to acquiring the right company and having the right integrator to be able to merge them so you make sure whatever multiple you paid for that company is actually reduced because you grow that company. So instead of paying for a multiple, it's a two-multiple because you've doubled the size of the company. Right? Yeah, you can do that really, really, really quick. Really fast.

You can do that by doubling the ticket average. You can do that by raising the booking rate on the content center by 20%. So you think, my plan is I'll give you three times EBITDA over three years and I'll pay you 10% down today. But I want to get that paid off in the first 12 months. But I'm not talking about a $10 million company. I'm talking about like two to three to four million. Because once you're 10 plus million million your infrastructure is kind of set and it's harder to i go in and i put service they're more expensive yeah you're right the

multipliers go on yeah i want to touch on two quick things and then i got a closing question and then okay so one of the things i always hear about for the best companies in hvac they say i got i got a couple csrs that are just badasses and they close service agreements all the time. How is that done? I'm interested and I think a lot of the companies that could, you could take all, I've got 150,000 customers in my database. We started a service agreement when we started Service Titan, you know, two years ago and I got a lot of customers I could sell this to. So tell me, how could I do this on the phone? And I think a lot of the audience out there wants to know. Okay, first thing, don't tie your CSRs to turn a call in three minutes.

If you want to sell anything but the call. So they need a little more time. Certainly these days, if you're adding products and services for them to communicate to the customer, they need time. They need probably six to seven minutes a call. Secondly, make sure they're rewarded at the same rate your field is rewarded at. There's an old-fashioned Jurassic viewpoint that whatever I pay the field in a SPIP

or a commission, I'm going to pay the office half of it. Half, yeah. So when is that agreement worth half? And then set the rules that they have to sell the value of the agreement and have to collect the money before the technician gets there. So the technician really doesn't have to do anything with the customer without possibly having to collect the money, but the customer sold them. Our inside staff will sell more than our outside staff.

So you never call a customer back that you serviced yesterday and say, listen. Oh, yes, we do that. We do that too. We have an outbound calling staff. We call our quality control department. We call them and ask them if they were offered that either by the CSR or the technician. Frankly, if they're not offered that, we'll give them the opportunity to go through the value and we'll give them the discount against it. So if they spent $400 on a ticket and they would have gotten 80 bucks back or $60 back, and the plan is 180, we'll say, we'll give you that $60 back if you go ahead and go with the plan. So if it's a two visit plan, which most of them are, or well, most of the AC plans are two visits. We have two visit plans. We'll send a technician out there to do an inspection on the home, right? To make sure everything's in order while the plan is executing.

And then they get another visit at six months and 12 months for the first year. So that every time we renew, the customer owes me a visit. I owe the customer a visit. So half the time these guys struggle with renewals, they don't get the customer cycling right. Why do you have to get a renewal if i just get you on a continuity program that says this is what it is it never ends i mean your signature is held i just never understood that at least for my garage or businesses i don't say it as it's not one year at a time if this is ongoing this is maintenance

great question because that's all the rage in the ac and plumbing business it doesn't don't worry about the annuals just do okay, okay, you're 35, 36. You fling your debit card and your credit card around like it's no business. You're 45. I'm not slinging my savings account around for a direct draft. I'm not giving my credit card with no limit.

I'd rather, if it's $200, I'm going to pay right now. I'm paying right now. Don't touch it because it's getting out of hand with all the terrible causes I do. I can't track all the transactions hitting my credit card. I like a choice. If I want to do it that way, fine. And here's the other observation. I've been to about 130 companies across the United States.

I have been in this business a very long time. I have yet to see a monthly-only company with more than 5,000 payments. Yeah, I agree. I let them pay up front and I know the likelihood of them staying on with that next big charge that hits. It's not. They'll stay on if you show the value. If it's a discount club, they'll disappear. No, you're right and I agree with that. That's something that you guys have so much. I know there's guys that sell three and five years with it when they saw a new door and I think that that's a good thing. The problem is they discount this to get this, and that's how they do it.

So one thing I really want to, the last thing, and then I got the closing questions is KPIs for service agreements. What are your top KPIs that you think you need to just live and breathe when you're looking at service agreements? Okay. Well, one of the KPIs, I'm going to list them in order of priority. What percentage of service agreements are you converting to opportunity? That's like your call conversion rates everybody's measuring in the call center. You should be measuring how many agreements they're selling for every opportunity. And percentage should be 50 for ace vac because the customer's already in tune to that and probably 25 to 30 for uh electrical uh the second one is

how many i'm selling them right do i have a set target and is it growing uh the third one is my renewal rate and that can be calculated pretty, but I'm not going to go into here because it's a quick question. And my total agreements out there, right? So if I have 14,000 agreement this month, I want to have 14,010 next month. 14,900, I'm not a happy camper. Yeah, you're moving up. You're moving forward.

You're pushing the ball. I'm moving up. So those four KPIs. Okay, so one of the things I ask every person on here is if there was a book, it doesn't need to be home service, but I have 800 books in my Audible. And I've got three big shelves like this that I read a lot. And I've read every single book that everybody's ever recommended to me. And is there anything that really sticks out? I mean, yeah, The E-Myth is one of my favorite books, The Ultimate Sales Machine.

I talk about the same books, but is there a book that really helped you a lot along your entrepreneurial journey? Yeah, I'm a real fan. You know, I have different books I like. I like different leadership books, but when it comes to practical business management, I'm a real fan of Gina Whitman's Traction

because that's the baseline for a real operating system, your EOM system. And so I think if you're an operator and you're really trying to figure things out, traction is a great way. But our biggest problem is, is that we don't organize our team the way we should. So I'm a real fan of traction. And again, it's not your exciting motivational book, but I think it's a great practical book. That's what a lot of the people need. They need a book that they could just sit down, listen to, and know. I hate the books that don't give you, where do you start? It's a great book, but it really didn't tell me much. It's all theory and it sounds great,

but what do I do tomorrow to get going? So that's kind of what I'm working on with my book is look, these are the KPIs. Here's the tools you need to measure them. It's not service Titan might not be for everybody. If you're a two person, you got two technicians, maybe not go that way. One, you need to know your real call booking rate. You need to know your real conversion rate, because I can tell you, if you go to this KPI calculator, if you take a number from 56% to 86% on your booking rate, that lowers your marketing budget dramatically. And that's one of seven factors I put on there. But the next question that I wanted to just ask you is we talked about a lot of stuff and there's everybody listening from one employee to, to a hundred employees, service technicians.

What's something maybe we didn't get to talk about enough that you wanted to leave them just the last, leave them with this mental note to think about and really apply to their business in the next week or two. Great. Thank you for that opportunity. And I'm being thoughtful about this seriously. But about 10 years ago, I started a new process about eight years ago, a new process in how I market, which is really a storytelling brand unveiling to the consumer. In that, they did

my brand story and they asked me, give me the top three reasons what makes your business successful and what will keep you successful and I said here's the top three reasons the people the people the people great people good people overcome bad processes bad systems matter of fact great people overcome bad so if you build, if you surround yourself with good people, great people who believe in your mission, will always keep your company growing, learning, and moving forward. So business comes a lot easier when you have good people. And I know we hear that everywhere. If you focus on your people, person, on the relationship, your business is almost guaranteed to be successful. I love that.

You know, I always talk about processes because the process dictate the people you get, really, where you're looking from. You're looking from the right spots. spots but if someone wants to get a hold of you they got some questions or they just want to know more about uh maybe your business or maybe learn more possibly even about the uh the next star network what's the best way to reach you it's a best way to get to me is hi me jamie at cool today.com or you know what i'm on linkedin i am very present on the internet. You can find me many different ways, whatever is convenient for your listener. You can go to my website and contact the office and do an email there, which is cooltoday.com. So there's several different ways to get in touch. Just Google me. You'll find me.

Yeah. You know, I really appreciate you jumping on this. I think that service agreements, now that I'm talking to these venture capitalists and learning what they're looking for and just really understanding how much power they are. And you did a great seminar on it. It's like my mind, my whole paradigm of the way I look at the business has changed and it's become service tight. And it's great because it brings all of us together and you put on a damn good seminar. And I really appreciate you jumping on today. Well, thank you. And I'm thinking about garage doors today, by the way. Yeah. Thank you again. And we'll talk soon. Take care. Hey guys, I just wanted to say thank you for listening to

the podcast. And I wanted to talk real quick about the new book I have coming out in November. It's called the home service millionaire. and I discuss everything it takes to hire the right people, train your salespeople, how to get tax breaks. It talks about how to sell your company for the most amount of money. We've got a lot of great contributorships coming on. Everybody from Paul Akers about how to go lean to how you do sales from enterprise, how to get the best write-offs in the industry and save a ton on taxes and actually make your company look more professional. I got the CEO of Service Titan. I got the CEO of Valpak. We've got great people on here that know everything there is to know about marketing and

Google. And there's basically no secrets we left out of this book. Literally, there's people that have read it so far say, I cannot believe you're giving all this information away. And the reason I did that is I just feel like you guys could just take each one of these gold nuggets and run with them. I mean, the ultimate goal of the book is to make sure that everybody is successful and makes money. If I could contribute to your lives, then that would be amazing. And I feel like it's the least I can do. And I really appreciate you listening to the podcast. I hope you enjoy the book. Go to Home Service Millionaire. That's homeservicemillionaire.com and pre-order your book today. Thank you.