The Home Service Expert Podcast - Ken Goodrich - From Losing $250,000 A Month To Making $100M A Year

Episode Date: February 14, 2020

Ken Goodrich is the President and CEO of Goettl Air Conditioning, and a renowned expert in the field of negotiations, mergers, and operations development. With over three decades of experience in HVAC, plumbing, and contracting business acquisitions and development, Ken’s specialty is in building up businesses by forming growth-oriented teams with excellent leaders and the right priorities. Throughout his career, he has established and sold eight successful companies. He is also a bestselling author, and a member of various local and national trade organizations.  In this episode, we talked about Customer Database, Marketing, 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. All right, today I got Ken Ditteridge with me. Ken is the owner of Gettle. He's been a big

inspiration for me. I saw him live speaking at this last event, Service World, where he had Michael Gerber, and he came out with the book, the E-Myth for HVAC contractors and then you did one for plumbing too right? I did yeah. So similar book we'll just dive into some questions I know that your dad did a lot of HVAC when you were a kid and you grew up in Vegas right? That's correct. Tell me a little bit about your journey to where you are today. Okay, so probably as most home service contractors, I was enslaved at a young age holding the flashlight for my dad

and holding tools and doing those sorts of things. And as every night and weekend and during the summertime, I would go help him repair air conditioners. He was a small contractor, worked out of his house in Las Vegas. And as time went on I became proficient at repairing, selling, installing air conditioners and and kind of when I got my driver's license at 16 I went out started doing service calls so that kind of morphed the direction after I got out of college I came back to the business and unfortunately my dad passed away soon after that and so I so I bought the business from my mom which the business consisted of a van myself and my mom, which the business consisted of, of Ann, myself, and my mom answered the phone and did the

books. So I went out and I had my, as Michael Gerber calls it, entrepreneurial seizure, and I went out and started my own company, and I had some big goals and everything I was going to accomplish, and I set out on that journey, and I was 25 at the time, And so, you know, as I tell the story in the book, you know, I started out and I had this perspective of being a business owner was, you know, you were living like an MTV rap video, you know, out by the pool with the dancing girls and all that stuff that's what I my view of success was is that at that time and so you know I was well on my way work in that direction and one day the gentleman shows up the office and he hands me his business card he's from the IRS and he said son you owe us $74,000 in payroll taxes. And I was so green back then, I said, what's payroll taxes?

Because I didn't know really what they were. And I went to my accountant and said, why aren't we paying payroll taxes? And she said, because you'd never have the money. And so through this whole process, you know, I began to learn the financial side of the business and understanding cash flow and how all that worked. And with some really challenging times, because the IRS figures out how to get their money, some challenging times, I went out and got this book, The E-Myth by Michael Gerber. And when I read the book, I thought, man, this guy had to be following me around for the last couple of years because it's, you know, he knows exactly what I'm thinking and what I'm doing and

all my mistakes. How does he know? And so I decided I was just going to dedicate my repairing of the business to this book. And that was my Bible, if you will, for that project. And so I began to implement all the teachings of Michael Gerber into my business, which essentially is the system is the solution. A business is a set of systems that you document, implement, and train your people so that you can deliver predictable, profitable services to customers so they like the work and they keep coming back for more. And so I went off on that journey and I got the business tightened up and it started doing well. And then I had the opportunity and I had acquired two more companies. So in Las Vegas in the early 90s, I had three businesses competing against each other.

And then I had an opportunity to sell them. There was a consolidation at that time going on in 1997. I sold the three companies. I took some chips off the table, if you will. I worked with that company for a few years, kind of got another perspective on how bigger companies do things and how to look at business and really tightening up my system strategy on building a systematic business. And then, well, at that point, I thought, you know,

I'm going to go do something different. You know, I was 33, 34. I was going to do something different. But then when I traveled around, I saw other home service contractors and other HVAC contractors doing it so much better than I was doing it and it kind of gave me that you know that uh drive second wind do it yeah second wind to go do it again and so I went out and I I bought I started buying some companies and putting them together after my non-compete. And I assembled them in Las Vegas and Phoenix.

And we built a company under the brand name Yes, which is a big company still operating today in Las Vegas. Well, as my journey continues, I was able to, the same company that bought me the first time came back and said, would you sell us that company and so they made me an offer I couldn't refuse and I was able to sell five branches of that business and I was able to sell that business in 2008 and then they said you know what we'd like you to do is we're going to give you seven businesses to fix and we'll pay you

a multiple of earnings like you own them between the years 2008-2010. So I took on that project. I put my team together. We went and attacked it, created our system strategy, implemented the systems, and we took these seven businesses from 30 million in sales to 80 million in sales from 3 million on the bottom to 14.3 million on the bottom in the toughest years economic conditions that anyone can ever do business 2008 through 2010 and we did that by applying the system strategy to traditionally mom and pop brand business. So we did that project, I sold the company and I got monetized those seven businesses and then I had an opportunity to buy Gettle. Now Gettle Air Conditioning was founded in 1939.

Am I getting too long with this? No, this is great. Gettle Air Conditioning was founded in 1939, and they used to, they've always been contractors, but they also manufactured air conditioners and all kinds of other products, HVAC products, bathroom fans, solar, water heating, garbage disposals, everything to kind of do with, you know, the HVAC and plumbing space. They manufactured it for their own use and they applied it in Phoenix, Arizona. As a matter of fact, Gettle built the very first residential air conditioner ever built.

And it was a residential air conditioner that would actually work in the high ambient conditions of Phoenix, Arizona. So the reason why I was attracted to Gettle though, was because when I started holding the flashlight for my dad, the first time I ever held the flashlight for my dad, the first air conditioner I ever lit up with a flashlight was a Gettle. And so my dad was a Gettle dealer. He always told me they were the best of the best and they were. And so the first air conditioner I ever repaired was a Gettle. Installed or sold was a Gettle. And so throughout my journey, you know, my dad passed away. Gettle was the only company that would give me credit to operate with. During the course of years that I did business, I always bought and installed Gettle air conditioners in Las Vegas and in Phoenix,

and they stopped manufacturing in 2007. But I was able to pick them up. Gettle fell on some hard times and had some challenges, and so I was was able to buy it which I kind of believe was my destiny you know I was getting I was getting trained all these years for this opportunity to take ghetto the very company I started with when I turned that flashlight on for the first time so I've taken ghetto and we you know when we took it over, it was doing $11 million in sales, losing $3 million or $250,000 a month. And we immediately came in. We, you know, we put our goals together, put our systems in place, put our org charts together, got the right people, the right pay plans, right position agreements. We trained everybody. We stopped the bleeding

immediately. And then we began to grow it. So I'm proud to say over the last five years, we've taken Gettle from 11 million losing three to well over a hundred million in sales and, and, uh, you know, uh, the, the proper amount of profit. What is the proper amount of profit? Because, uh, I've heard 10 is healthy. I've heard 15 is healthy. I hear other guys out of Florida saying you could do 22 to 25%. I've heard, um, Ron Smith say you should be able to pay yourself 20%, but that was in the 70s.

So I'm curious to hear your perspective. So I believe that anyone in the home service industry certainly should target towards 20% earnings. I have seen businesses in the 30s, the early 30s, maybe up to 35, 25% are very well-run companies. But I think you should be focused headed that direction towards 20%. And, you know, when you start to scale these businesses and understand where all the holes are in the operation, you can see if you really drill down into it, there's opportunity in every step and turn that you make on this business to increase your revenue and profits, decrease your costs. And so I don't think at this stage of the game with the technology that's out, I'm not sure that, you know, I'm not, I'm pretty sure that people are going to start heading towards that 30, 35% number, you know, with all the tools that are available to them now today.

It's really about efficiency and just you don't need a huge staff to do payroll anymore. I think biweekly we spent an hour on payroll where without the technology it used to take forever. And I'll tell you, learning how to work on Service Titan, see we always used to have these crazy ways and we do it, we don't do it that way that HVAC does, but when we switched to what Service Titan actually could do for us, yeah, we had to make some concessions but everything became better for us yeah so that's a very good point so you know so many times I've been into hundreds of contractors businesses before and they they create workarounds around a robust software because they want to do it a particular way well what

difference does it make whether you... It certainly is more efficient, more effective to pay the way the software works. There's nothing magic, really, in a pay plan that's going to incent somebody to do any more or less than what a typical software would have. So I think you're completely right. We spend a lot of time overthinking things. You know, you talk in the book about 50-30-20, 50% gross margin, 30% overhead, 20% net profit. When you're looking at those numbers, which one do you tend to, obviously, if it's over 50 or over 30, you're digging into profit.

Which one do you usually see is the biggest one you need to work on? So, you know, the one that you really need to work on controlling, obviously, is the gross margin. Now, that said, I will say, and I said it in the book, I've seen guys, you know, make millions of dollars a year at a 35% gross margin. So, you know, what I tried to get across in the book, here's a starting point. Here's where you need to think about it. And as you grow and get more experienced and understand the ebbs and flows of numbers,

you can change the number based on market conditions or opportunities that exist. Obviously, if you can run a business that produces a million dollars in gross profit dollars, and it's a 35% gross margin versus $500,000 in gross profit dollars at a 50% margin, take the 35. Right. So you said don't compare prices to walmart and some people think i've heard that the end of times are coming amazon walmart these big companies are coming in they're going to start selling five ton units at three thousand dollars just getting a guy to come install them i'm sure you've heard i've heard this from so many people i've heard it from our buddy in california ismail i've heard this look everything's gonna change it's all be gonna become a commodity

and i just i don't really think it's coming as fast you talk to uh you talk to terry nicholson that used to work under jim abrams he kind of thinks it's going that way but they said we wouldn't be carrying cash they said checkbooks would not be around after the year 2000. So what is your take on that? I'm curious to hear what you think. So, you know, I clearly see it as a threat to our industry. You know, but the one missing component is that we're not in the parts business. We're not in the, you know, equipment business. We're not in the equipment business.

We're in the skilled labor business. And so at a certain point we control the market. He who controls the labor wins. And so I don't think that Amazon's got it figured out. I don't think that I haven't seen any of these air conditioning

wholesalers that sell over the internet. They have not got it figured out yet uh but one thing's for sure somebody will so yes it is going to be it's going to change um i don't think it's going to change any time soon uh you know, I mean this year, for instance, but you know, we're always keeping our, our eyes on things and making sure that we see the trends and changes of the industry. But obviously there's going to be a different way of commerce. You know, what we're learning lately is we start off, you first get in business, you start getting on the sales process and you read all the sales books

and the Zig Ziglar books and how to sell and how to do all this stuff. Well, it's come to the age of the customer buy process, not the sale process. What we need to determine is how does the customer want to buy it

and then just fill that need as opposed to how are we going to use certain jargons and techniques to sell it. And so to your point, they might want to buy it that way. That's okay. But I don't see anything but opportunity in the whole equation. One, because we control the labor. And two, because the more sophisticated guys who can pivot and move to the new directions are the ones going to capitalize on it. And then the smaller guys are probably going to be left behind. And I think that's one of the biggest mistakes from Amazon. I think that's, I see these guys, they all say, we want to give the small guy a chance.

Here's the problem with the small guy. They don't answer their phone. They don't run their warranty calls. When they're out of town, their business doesn't run. They're not specialists. They take on half commercial, half residential. They do home warranty work. They do Home Depot.

I won't touch a Home Depot now to save my life. I got out of home warranties because I realized they don't, they're not the customer advocate. They don't want, they're an insurance company that says we want to pay out the least amount possible to make this thing work. So I looked at it as a way to get a sticker for a while and it does work to a certain size company. But this brings me back to a certain point that I really wanted to discuss is when I'm looking at residential buyouts, I want to buy somebody that doesn't do commercial. They focus on residential. Some of them are manufacturing doors on the weekend

where they'll go in and build a door or wood overlay. I'm just finding out, and you've been in air conditioning a long, long long time plumbing this my industry and a lot of the people listening whether it's window washing power washing christmas light hanging there's every single home service company acquisitions has not become a thing yet really and there's our companies that have sold and you could find one garage or company for every 100 hr companies but these people think their blood sweat and tears are worth something

and when i tell them there's only two things i look at ebida and a multiple the multiple depends on service agreements and the ebida yeah you get some ad backs in there because you've been living your life and paying your daughter's tuition and paying your wife to sit on her ass. We understand there's ad backs, but they're just you. I wanted to dive into how do you find it because you cultivate relationships to find them. You become an industry leader. See, some people say, why does Ken write a book? Why does he go on stage? Why wouldn't he run his company? But now all of a sudden you're the guy they call, right? You've done this. You post on Facebook, you go live and you're at the basketball game or you're at the NASCAR. I kind of wanted to talk about your strategy. I think you said somewhere, it might've been in this book,

that you don't really look for companies less than 10 million. Well, no, that's not true. What I said was that a $10 million company is a very sought-after business for investors to buy. So if you're going to build a business, that's a goal. That's a benchmark that you need to head towards. But I bought everything from a $250,000 business. Matter of fact, the business that I created out of Yes in Las Vegas, I bought in 2001. And it did 300,000 in annual sales the year before I bought it. From June 1st when we closed to December 31st,

we took that same business and we did $3.1 million in sales from that short period of time. We 10x'd it. And it's because they just, you know, the old owners, they just didn't understand the transition of replacement. We would talk about replacement air conditioners and the clients would say, we've been wanting to buy one from you for years. But to your point, so let's talk about acquisitions. Now, I've built a whole career in all these know, sitting back and letting them produce cash flow. I'm buying typically broken businesses. One, because most businesses in our industries are broken.

So not a lot else to find. Number two, I find that the bigger businesses that require management teams you know one if they're underperforming the management teams probably are underperforming as well number two the um there's a tendency for you know the for people to get disillusioned by change and obviously if you buy a smaller company or medium-sized company that needs to evolve, there's going to be change. And everything that you thought you bought was the continuity of the management team, the people itself, all the stuff tends to go away.

So I stayed away from that kind of stuff as well. So really in the essence of what I've been buying is customers. The true essence is a customer. And so, you know, I have specific methodologies I've developed over the years on how to evaluate what the value of a database is, for instance, and then methodology on how I go and grab as many of those customers as I can. But still, the fact remains that just like when you acquire a company and the management team gets afraid to change and wants to disperse, the customers do too. Customers get afraid to change as well. So if you bought a company that had a predictable call count over the last three years of 2,000 calls, you can pretty much bet on at least 25% of

them as much as 50% of them are going to go away just because the fear of the change. And I've developed methodologies to where you try to bond these customers to us faster, or bond these customers to us as opposed to let them get away. But that is a key element of it. So anyway, I've heard a lot of younger guys lately talk about that acquisitions are kind of this old school stuff you know they're relying on the internet this or that but i got to tell you here's something that's very important when you get an acquired customer from a you acquire a company and you get that acquired customer. When they call you, one, they clearly have a need. Two, they've gotten over the barrier of fear dealing with that brand.

So in essence, you're buying the relationship between that customer and that brand. And so you've got to treat it sacred, but that's a more powerful customer because they're gonna buy you have closing rates are much higher they called you they knew they're gonna buy it they trust you they're gonna buy you just have to make that transition not scary so you know like if i was your age i would be out here pulling as much money as I possibly could and I would be mowing down this industry these industries because you know they're all you know I'm the young end I'm the young end of all these guys who created all

these companies a guy with you and your energy and resources and the technology should be able to roll up a half a billion dollars in no time because they all want out we all want to. We all want to retire. We all got to get on with our lives. So let's dive into that because this is really, I love this, and I think this is more of a high level. But what's so nice is we're talking about so many different industries that could do this roll-up that I feel like you got,

I would go back to Jim Abrams' day because he did a mass roll-up that I feel like you got I would go back to Jim Abrams day because he did a mass roll-up with one hour air and it was the biggest one of the time sold direct energy then he did a punch roll plumber then he did Mr. Sparky stayed pretty close with what those guys done I don't know Jim but I know a lot of the people like Alan Rohrer that was around him. The approach. So there's a couple different approaches. So let's just say I decide I want to be in the going into these businesses game. I'll tell you a few things that have ran through my mind,

and I want you to correct me and tell me what I'm wrong with. So number one is I can come out with the best practices. I can say you could use my price book, you could get on service tight, and we're going to give you the relationships of our distribution centers. We're going to teach you, we're going to show you, we've got 20 manuals. We're going to help you. We're going to be your secondary call center. We're going to be your life support. Boom. Here's what's so nice too you get your key performance indicators to a certain height we'll buy you even in a higher multiple than you're worth because we know there's arbitrage there we know that if we buy you at a four we're worth seven eight nine ten twelve that's one way the other way is go into town have a huge town hall

center meeting and say we're interested in buying you. This is what we need. This is what we'd like to see. Here's how we could help you get out of your business the next two years. But we need you to hit some benchmarks. And the last way is I build a scraping tool, which we have now. We scrape the BBB. We scrape Facebook. We scrape LinkedIn. We find out all the owners or I buy it from a data company. We send them handwritten letters. We peak interest. We say, we're interested in buying your company. Let's get a mutual NDA. Let's just figure out where they're at. The one thing I hate the most though, is these small business owners. I can't tell you enough. I don't want your stupid crappy builder net 180 business. And you can keep your AR. I don't want

your Home Depot crap. I don't want the Lowe's. I don't want the Costco your ar i don't want your home depot crap i don't want the lows i don't want the costcos i don't want the home warranties i don't want that huge customer that you're making 20 on you're a ten thousand dollar door and you're installing it making two thousand you're like i made two thousand those numbers don't make sense so and they're all doing this so i guess the question, there's three different strategies there. If you were in my shoes or anybody listening right now that's saying, I want to grow my business and I want to buy the database. And I want to talk a little bit about the database after this because you've learned how to monetize the database. I love your stories about the white pages and the stuff you've done. But what's the best way?

I mean, I'm speaking at different engagements now i'm starting to get the attention people are listening to this podcast in the garage door industry and i'm glad to tell like you you share a lot what's the best strategy out of everything i said and what would you tweak about it in this type of industry okay the answer is all of the above you you go at it from every different angle i mean it's it's you know the new the new jargon of lead funnels right they're all different lead funnels you have to approach them differently but i bought i bought businesses in every one of the forms that you described now here's what I learned. One, if a guy has resided the fact he wants out of his business, which is his life, he's dedicated his life to it. One, you have to go in with a certain amount of reverence and respect for it.

You've fought the fight yourself. You understand him. You cannot put him down. You need to put him as equals. We own businesses together. We're businessmen. So you cannot disparage anything he has. If they want to sell the trucks and they want to sell their Home Depot account and they want out, take it and shut it down. Take it and sell the trucks off take take the burden off them most of them do not want to have any lingering yet to remind them of maybe their failure so take it all be gracious about it

yeah i'll never forget this story i think i wrote it in the book. So I bought this business in Las Vegas, the one I described earlier in 2000. And, you know, nice, good old guy. And he had these little milk trucks, these mini milk trucks, the ugliest things you ever saw. It had this teal green color to them. You know, the name of the company was M&S Air Conditioning. Couldn't be a worse name. Got a picture of a guy smoking a cigar in his lounge chair on the side of the truck, happy in his cold air. I mean, it was terrible. And then his business was old and, you know, had the brown paneling on the walls and had the piece of sheet metal. Epoxy to the to the wall with with magnets and the different calls for different times of the day.

You know, it was old school. And he came in and he said, he's shown me around. He's shown me the trucks. And I'm like, oh, I really like those trucks. They're unique. He goes, oh, everybody knows these trucks. You cannot get rid of these. These are valuable.

They're a valuable part of the brand. There was four of them. And then he showed the dispatch and how he invented that. And that was great. And then we went back into the warehouse and he would pull out parts. He'd say, you know, this is a, this is for a 27 year old GE furnace. And if anyone ever needs this motor, I'm the only one who's got it. Of course, I'm thinking if anyone needs that motor, they're getting a new system. Of course. But anyway, so I went through this process with them and, you know, made them feel good about it.

We did the transaction. And kind of what you were talking about earlier is, you know, we as business owners, it's our life and we expect to get something out of it. And my comments always, but you didn't earn it. If you have a business that doesn't produce cash flow and earnings, you're not entitled to a big price for it unless you have something really compelling, unique. Anyway, so I bought the stuff, we closed. And in my youth and exuberance at the time, the first day, two big roll-off boxes dropped off in the yard as soon as I closed. A car carrier pulled up, pulled off my brand new Chevy Vans that were all lettered up and everything done, and put the old milk trucks on and drove away. And then we had a few guys, and they took all that inventory

with the 27-year-old motors, and we threw it in the trash. We threw everything out of the building. We put a computer in there. We cleaned it up. You know, over the course of the weekend, it was a completely different business and we were in business right well the the guy the old owner he was supposed to work there a couple months for a transition period and when he witnessed that he well let me back up and say the next day on a Saturday I came by

the office and he was in the roll-off boxes pulling these old parts out. I said, well, if you don't want them, can I have them? I'm like, sure. But I could tell, you know, he was very unhappy, depressed, and you know, it just was bad form. So I guess the really point I'm trying to get at here is you got to be careful. You know, people ask me, how do you get a hold of all these businesses? It's because I put myself in their shoes. I talk to them like an equal, and we work out a good, solid win-win deal with them, where most people go in at it trying to act a little superior. They don't make a good connection with them. And they basically offend the man's life work. So, you know, there's an overall strategy to it.

So once I kind of learned some of these things, I, you know, I started to put myself out there a little more. I started to go to, you know, get involved in some of the best practice groups. You know, I'm involved at ACCA. I'm involved at ACCA. I'm involved with Service Nation. I've been involved in local groups like SNARSCA, the Las Vegas HVAC group, Mechanical Trades Association in Arizona. And I just, you know, I put myself out there and I talk to everybody. And just like you said earlier, I connect.

And then people kind of know me for buying companies and they kind of tend to come to me now now in the beginning it wasn't that easy because I think most people probably saw me as a corporate raider or somebody's are gonna take people's businesses but you know after a while when you know you prove to them that all your transactions, the buyers got what they, the sellers got what we agreed to, there was no drama to it, it was a nice transition, and we took care of the customers,

we tend to have a pretty steady flow coming our way. That said, we just acquired a company in San Antonio. I was just going to say that. And so we acquired a nice size plumbing business and we're going to add a Gettle air conditioning on top of it. You know, I think in a one year period, I can have a $25 million HVAC and plumbing shop based on this $10 million plumber and what I think I could bring to the table. But, but we, so we're trying to acquire some databases or smaller companies to, to get that customer count up. And, and so there we'll send a form letter and I'm happy to share the letter with you. You can share it with your,

your listeners. But, you know, we'll send out a letter and the letter is not like, you know, I'm a, you know, I'm a strategic buyer, blah, blah, blah. And I'm educated in Harvard and I did this. It's like, hey, I'm just like you. I understand the challenge of business day to day. They're going to look like this. Payroll, employee problems, customer problems blah blah blah you know if you if if you ever thought about maybe selling or partnering or merging or monetize anything to make your life easier and better you know please give me a call or let's just go to lunch and meet it's kind of a light letter like that just to try to get the introduction so again again but i can't stress to you enough like my expectation of you

is that you take these systems that you're developing you put your acquisition strategy and you mow through this country and have a billion dollar garage door business because the opportunity is here because everybody's dying. Everybody's at the retirement age who owns these businesses. What are they going to do with them? So that's where it gets a little tricky because I've talked to probably four companies in the last month, and they go, no, 1978. Now, here's the question.

Let's do a scenario. I'm going to be very dead on on this scenario because I'm not going to mention names and there's no LOI out there yet. So I'm just X, Y, Z, and we're just going to say Maine really far. That's not. So there's this company. He's involved with some new install, well, too much new install for builders uh he's on service titan his booking rates are 42 percent mine's an 84 percent literally double his costs to buy is literally he pays 10 more for everything um his average ticket is less than half of mine he's got 140 000 customers that he hasn't entered into service time yet now he wants about a seven multiple of what he nets but you can see this guy's life he's adding there's probably a lot of ad backs when we do the research but i know a strategic play would be

three at the tops you're trying to get it for two times. Then you hear this thing that says, well, if I get a good manager, I make that money in two years. Why would I ever sell for that? And you're still being nice to him and you're doing everything. But you're going, first thing I would have to do is go throw out the stuff from 15, 20 years ago that he still got brand new. Next thing, there's a pile like this on his desk and everybody thinks that if he does that it's okay look at all this stuff going man this is a gold mine well it's such a good company so many stickers so many loyal customers but he doesn't answer

his phones after 4 p.m he's not open weekends i mean it's like it doesn't get any better but it's like you got this multiple and it's almost like that's what, and he's got some debt, so he's going to use it to pay off his debt as well. So how do you even look at a situation like that? Because there's goodwill there, but how much can you give goodwill? Okay, so don't get too hung up on the multiple. People get all hung up on the multiple, but just look at it this way. I mean, I i bought ghetto for a

seven plus figure price tag and it was losing three million what's the multiple on that right it's you take a look okay what can i do with this you know what kind of money can i put in and what's my return here's the here's what i need to understand a multiple a lot of you know our businesses our industry is rolling up pretty fast right now, and so there's a lot of private equity money. They're giving multiples. But how they look at it is they say, to get the deal going, I'm going to give this guy an eight multiple.

And then we're going to do this, this, and this, and change this in the business, and we're going to double his profit. Now that's a four multiple. So that's how you need to look at it so what you know what's your near term multiple adjustment in the next two years i see what you're saying especially how big are you on putting something down and saying i'll stretch out the terms are you just like look i'm gonna get by it at a discounted rate i'm gonna write you write you a check right now. I never do that. I never do that. Because I try to give them some money down so the close, okay, I got something to close.

But I try to have owner financing. You know, for some reason I found out that owners like $83,000, $33,000 a month. Because that's $100,000 a year. i'm going to pay you out over three years you get a hundred grand a year to live on while i'm getting my business around but the reason why you need it is you know to hold them accountable for anything that pops up and you when you buy the business you know they might have you know the lightning liabilities that pop up and you have... Well, you do an asset-only purchase usually, right? Yeah. And then you have a right of offset on the payments.

And then why not? I mean, have them finance it instead of your cash flow or going to the bank. So I try to get that kind of project done that way. So you got what I'm talking about the multiple right yeah don't get too crazed about the multiple i mean i again like i said i don't know that i've really bought many businesses that ever made a profit and so i'm paying infinite multiples back to your deal let me throw this one at you three or four years ago residential new construction contractor in phoenix is going under the vendors come to me say and by the way i get a lot of deals from vendors you just put it out there give me a

customer's not performing not paying his bills let me see if I can help them or help you and we and we pull it together so they come to me this is a residential new construction company and I'm said well that's really not my thing but let me take a look at it so long story short they were 4.3 million in debt to three vendors. And I said, I will take the business if you give it to me and you forgive the 4.3 million in debt. It had about a million, after that had about a million and a half in working capital.

So I said, you take the debt off the books. I'll take it. And what I'll guarantee you is I'll put it on the course back to success. I'll get you an operator. And all your boxes will continue to move in the marketplace. You know, you're selling air conditioners. You know, I will buy the same percentage as they have been buying. So your business is not going to slow down here.

That's what they really care about. They already wrote wrote off the 4.3 million anyway in previous years so they swallowed a few times and then took the deal so to your point about this new construction company i immediately went in because what do i have to lose now i went to the builders and said, look guys, you've ground these guys down to nothing. I had to come in to rescue the company. Your margin is half of our margin with you is half of what it should be. So either I want a price increase and the price increases about 20% or I'm out. And half the business said, you're out. Half the residential new construction said, you're out,

which I'm happy for. I pulled out of a giant 80,000-square-foot facility, put it down to 10,000 feet. The customers who would take our margin gladly took it because we owned the labor. They took our margin. We implemented some replacement business in that business and we moved forward um and then i was able to get one of the the uh hispanic uh field supervisors qualified for an sba loan and i sold the business for him

for a seven figure price tag tag one year and one day after I bought it. Now, all of that business that I, that, that, um, all that business that wouldn't give me the price increase and went away eventually came back because they had nowhere to go. And so I called their bluff. I didn't have to operate with a position of fear, and I turned the business around that way. So what I'm getting at is to the extent of your creativity on how to put these things together, there's opportunity in every situation.

So one of the things I noticed is you've've got some we'll call them mvps you got a guy called the goat the greatest of all time uh you've introduced him to a lot of people it's not like you keep it a secret you posted that he closed over 12 million dollars so not telling anybody a secret here my goat did under two million he did about one and a half million but we're talking garage doors here it's way smaller average take it but still you don't find people doing those numbers um i came and looked at your operation probably two years ago you invited me in and you said look this guy has got something. And I guess it's the way that he sells, but more about the way people buy.

But you also said about your Prince Charming, don't wait for this guy to come and run your business or be your top sales guy or be your perfect accountant. The system's dictated. So tell me a little bit about this individual. But also, it's a double-edged sword. I know that he does a lot for you and he's an MVP for you. But also the systems. You also got a guy now in Vegas doing the same numbers. You got a guy in California doing the same number.

Not quite the same, but still. You've learned and you've built systems around it. So let's talk about that for a few minutes. Okay. So you're talking about Dale Steele and he's a unique individual. He relates very well to people. And if you have a ready thing like how to win friends and influence people, the first thing you do to form a relationship with somebody is use the acronym FORM that find a connection between family occupation recreation and material possessions and he just innately does that he doesn't do it out of it's not contrived he just does it and so he's able to relate i will say you know he was

i think from his former company that when we um when when we recruited him over he was, I think from his former company that when we recruited him over, he was probably pushing $3.5 million in sales. And so still a big number for even a comfort advisor today. But in his particular case, he's just, one, he's extremely good at connecting the customer. Two, he works seven days a week, late into the night when he has to. He's just a very, very driven guy. He doesn't have any bad habits. He's just a good family guy, and he's just the unicorn of sales guys, if you will. Now, that said, here's something very important everybody needs to understand. I have lots of $5 million sales guys, which in our industry is a big number.

And what the contributing factors are to that is the brand. And we have built a brand and we've built messaging to the public where they know our story and they know us and they know me. And after you hear the story long enough, the human being starts to believe they know me they know my flashlight story they know my dog you know my wife all these stories that we talk about and how it relates to the air conditioning they know some of our attributes like we're perfectionist we do things the right way not the easy way we replace the screws that the last guy left out of the system because it's important that you put all the screws back uh and you know all these things and it and it's really it's really

elevate our closing percentage i'm not taking any way thing away from dale steel he's one of a kind he's a unicorn however he's everybody in our business that sells is really teed up with our branding campaign we spend over 10 million dollars a year branding our company so do you follow me yeah well that's something that takes me to anybody that lives in phoenix or vegas or any of your other markets has heard your commercials on the radio. People ask me all the time, and I think it's out of vanity that they start with the radio when they don't do direct response. They don't have a website, but they think the radio is going to kill it.

They do this billboard with this phone number on it when no one's going to call that number. It's for branding. So you've told me many, many times you work with a guy in Texas, Roy, and you said over time what happens. I remember you called me one day. This was years ago. You said, what's your click-through rate? And I said, well, it depends on the search term. There's a lot of things we're talking about here.

But you said mine threw the roof now. The radio increased my click-through rate and then you told me a month two ago that i don't spend deadly on google except for my own name so you took a different approach to i'm a big fan of direct response if i could bid on a word especially in tucson northern arizona flagstaff you know kingman arizona i'm getting these at 20 30 good leads but in a big city like phoenix and las vegas and what part of california i'm in two spots in la so la you got to have a brand so tell me a little bit about the mentality behind that because i advise people stay the heck away from radio tv TV, and billboards to start with. Get a good website.

Get some direct response. Monetize the list you already have. Sell service agreements. Raise your average ticket. Increase your conversion rate. More importantly, fix your damn call center because right now it's garbage. But when you fix all that stuff, I really think that this is a good story. And I caution people because they

don't have ten million dollars to brand but if it's done right and you've seen you've heard radio commercial you're like dude that guy just blew the money right okay so first of all I didn't start off on ten right right off on half a million. But as we grew, the necessity changed. So now from experience, like if you were going to ask me, okay, how would you approach a day? Because I approach it like everybody else. We used to do a lot of direct mail. Then we got our website up. Then we started buying some pay-per-click,

then we got onto Angie's List and HomeAdvisor and all those lead aggregators. I mean, we've been through all of these journeys. But if I were to say, okay, here's how you do it now, I would say, one, get your website up. Then I would say, go ahead and start, you know, have a pay-per-click presence. It takes some time to ramp up and get your credibility and such with Google, so you might as well get it and spend a few bucks, but don't overdo it. I mean, I was spending $250,000 a month before I went into radio. My click-through rate, I was proud of a 3% click-through rate.

It's 62 today. So I would start out there, get all those in place, and then I would get with some sort of mass marketing strategies. I would go to two strategies. One would be mass, either radio or television. And then I would continue on the route of acquiring databases because it's the same situation. You go out, you put your brand out, you have a great compelling story on the brand. After a period of time, people believe they're your friends. They have a relationship with you.

And that relationship is very strong and important. Now when they need you, they Google your name. Now you buy your keywords on your name, which is the least expensive thing you can buy generally. Although I found a lot of people use my personal name as a keyword now. You'll buy it way cheaper than they could buy it. The brand ambassador, like Coca-Cola could buy Coke cheaper than Root Beer could buy it. They're going to pay $100, where you might pay $0.10. Because Google wants you to pop up. That's called a quality score.

So your quality score is through the roof of your own search terms. So you're just buying your own search terms. But yeah, everybody's going to bid on it. And then we all buy the typical ac repair and in the middle of the summer when we don't need it sure so anyway the get you understand the strategy okay i'm going to build a brand with a story that people can connect with so everything else i do can get the highest roi and so and the least amount of a cost. Back to your efficiency thing. Get the brand up and established, then buy a little pay-per-click, Google search, whatever you want to call it,

and then your results will be staggeringly better. So that's the strategy. I wouldn't say you start over here and do that and you evolve. It's like you can't do one without the other now. Well, here's what I've learned in maybe the last six months. I was at this event and this guy told me, I'm only in 10 zip codes in Dallas. I do over 8 million in these 10 zip codes. I do 2 million in everywhere else, kind of the effect of my heavy marketing. But I own these neighborhoods and here's his kind of his mentality was these houses are all 3500 plus that means there's two ac units on them

and he had all these things he goes they're affluent they've got the money they go to the kids schools that my kids went to all these things and what i've learned was and there's no right or wrong way but I'm not in front of Silverleaf I'm not in front of go ahead so I'm not in front of Silverleaf every day to these customers I'm not in front of everything Scottsdale

PV I hit Levine probably just as much as I hit Scottsdale so what I'm trying to do now is be in these gated communities be a bigger presence to where they're going to have. Silverleaf, everybody has at least six garage doors in their house or more. So what I'm doing, and I've got it on there, it's called multiple regressions. I'm studying where my biggest customers come from, trying to get in front of them more. Whereas, I mean, how important is it for you to be on the right radio station? Or you know, it's crazy. I'll change the radio station to three different stations,

whether it's country, whether it's rock, whether it's rap, and you're there. But I don't think it works for you. And obviously you work with people that make it work. The one thing that you're doing is I pay way less for Valpac than I know anybody pays. I'm in 10 states. I'm buying 900 zones.

I'm getting it a hundred dollars less per zone. So you're buying so much radio that they're probably just giving you shit left and right. They're like, look, we'll give you, cause they own a lot of them. They're probably getting a lot of bonuses.

So, but that's not why. So explain to me the thought process, because I feel like when I talk to people, they're like, I want to own the best customers. And you talk about that. You talk about owning the best customers and understanding your avatar, really. So there's frequency and there's penetration. So let's talk about that a little bit because marketing is important.

The strategy that we're deploying is not about looking for a demographic. As a matter of fact, Roy Williams, who's the wizard of ads, he's written a lot of articles that are demographics or for fools. And I won't go into the details of why, but we're not really focused on a demographic. We are focused on how do we reach half the population. How do we reach half the population in the markets that we're doing three to four times a month? That's what the goal is. And really it's about, it's, you know, it's about referrals in the community.

Call that Gettle guy. He's on the radio. I like him. I think he sounds good. That's the kind of thing that you're trying to stir up. Now, I've never found kind of a funny story back in the day. So, you know, I first got in business. I stumbled upon and I got, I stumbled upon this account.

And I got the Siegfried Roy account and Siegfried Roy had this beautiful huge house with 25 air conditioners and air-conditioned tiger cages and all kinds of stuff it's a big account for me and you know we kind of wore that as a badge of honor that we serviced the Siegfried Roy account well and I used to think we're the air conditioning company to the stars. But as I started to dig in, the business is, you know, it's the middle class, right? It's a guy that works, you know, guy that works, drives a front end loader and his wife's a school teacher.

And, you know know that's who our customer base is that's who relates to our stories that's who has in the graph i did in the book that's who has not a lot of time but has some money now i live out there where you're talking about where those houses are we We have a house manager. I don't pay attention to who he uses. I know the guys that come to my house and work on the house, never have uniforms on, no booties. They don't look clean and professional like ours. The prices are half of ours, and they get the job done, and they move on.

The house manager manages them, none of which is going to work with our models of a premier home service business, right? So I wouldn't pay attention to that. I would be known to those house managers as custom garage is, you know, they're very difficult to do business with. They grind down the prices to lowest margins. And let's face it, most of those people own their own businesses. They know the game and they're going to negotiate. So anyway, that has not, you know, I learned that years ago. We kind of stay away from it. Back to the messaging now. It's about that you heard of this company, Gettle. Someone said

it had an air conditioning problem. You told me about Gettle. That's a kind of a quasi-referral, right? That's the strategy. We're not pinpointing any particular demographic. As a matter of fact, in Tucson, we're playing in that, I think it's called Tejano, that Spanish music. Oh, yeah. How's that going? We get business, but we are not on any particular station to try to attract any particular person. We want half the population of everywhere we serve to know our name.

That's what we want. That's the goal. Number two thing is, you know, another recommendation is, so when I first got associated with Roy, he said, now look, I don't work with any, and I'm not going to tell you the word he said,

I'm not going to work with any wimps, but, so either you tell me you're going to Phoenix to be number one or two, or I don't work with you. And I said, what's number one cost? He said, a million dollar first initial spend. Now, at the time, I didn't have a million dollars,

but I figured, I guess the worst case, we could just cancel it, right? So, okay, let's do it. And we turned on the million dollar spend, never spent any more. I never spent any more money on marketing than one week at a time i would spend the week i would analyze the performance i would keep going you know i was very controlled about it so in this particular route we signed up for the million

we had a great message a great connection and frankly I started with a great brand that really had a foothold in Arizona. But, you know, we just went out right with the right spend. And I think that's another thing people need to think about is you can't say, you know, how much can I get for the least amount of money? If you're going to do this, if you're going to mass market, drive your PPC cost way down, make your customer conversions quicker, easier, and more productive, you got to go in and bark like a big dog from day one. So the next question is, I love the idea of buying databases. Here's the question.

I think everybody listening could do a little bit better job with the current database they have, unless they're already selling service agreements. When you buy that database, what's the first thing, what are the steps from A to Z to make that database worth a ton of money? Okay, so the first thing we do is we send a letter from the old owner that basically says, I have retired, but I didn't take my relationship with you lightly. So I went out and I interviewed many other contractors that might take over my customers is because I consider you more friends than I do customers. And I'm not going to jump on the cruise ship just yet. I'm

going to hang around and make sure there's a good transition. Here's my cell number that we gave the guy the cell. Call me if there's any concerns and i'll make sure that make sure we'll make this transaction smooth and as a for a special gift for you for all your years of patron is i have arranged for you to and i've done two ways to get a free tune-up air conditioning or free inspection on your air conditioning so it's no charge I paid for it or the other hand I arranged for you your first year of maintenance plan so you get that in place now I send that letter out three to five times you know first first three months one one one you know one month one month one month and I back it off a couple months and send it again. At the same time, we outbound dial those customers.

We outbound dial them, make sure you got your letter, you're part of our maintenance club now because Joe bought it for you, here's what we do, and you kind of pull that database in. Now you've got to watch that base right so you got a year to really bond them to you so you know that's the methodology that we've developed so you do so you're doing direct mail and you're doing phone calls yep have you ever done voicemail blasts or anything like that yes okay yeah and uh And we've done all of that. And we also make sure that, you know, we're digging every day,

making sure that we're in, you know, using all the technology that we can to augment. I mean, we've got some old school proven techniques, and we're melding with the new school technologies that seem to work. But the important letter today, the important letter and the phone call, have been the most effective and the free agreement to pull these people together. Like in your business, let's say you buy the one back in East, that'd be the first thing I do.

Complementary lubrication and blah, blah, blah, and bond yourself to those customers. And you factor that in as part of the price. I know I'm going to give 1,200 free maintenance visits is what's going to cost me. You make sure that justifies the price customer acquisition cost when you're doing that there's obviously a good payout though you're going i go do a tune-up i got 25 things on the door that we're probably going to see i mean the end of the day whether it's the bottom rubber where all those nasty scorpions are getting in or the noisy opener you just say look i've seen one of those things you hit your phone you can see

if it's closed or open those new openers but i rarely would be losing money on those i mean were you always losing money on those 1200 service agreements no no no we convert those to a good average ticket yeah i just want to you know i just want to let you understand that there's a cost. There's a cost to doing that. So now you need to clearly understand how to overtake that cost and make it a profit. So you have a formula. So 1978, we're talking 42 years ago if you've got a company that old.

You've got to assume, what is it? That seven years, the average time you're in a house, maybe the phone numbers, maybe they transfer their phone numbers. Maybe that'll still work. But how, what, what's better for you? They were the biggest eight years ago in the city and they just kind of fell off or they've been around for 40 years. But which one would you rather have out of those

two well there's a so so been around for 40 years is my first choice provided that they have a good solid management team that isn't made up of the guy and all his family because as soon as the guy goes so does his family it's just nepotism at its finest so you know that's what I cautioned against earlier if you got a good solid management team where the guy built a business from not relatives and people and people in their positions with their position agreements with their their pay plans, their organizational chart, everybody knows what they're supposed to do, that's a significantly more valuable business than one where it's kind of a mom-and-pop, family-owned operation because you're just never going to wrangle those people together.

I've not seen it work. So on the other case, I'd rather just go in. If I didn't have the perfect condition of the perfect management team, which they don't exist very often, I like the declining one because it's a clean slate. You come in, put the right people in place, and you move forward. I think personally, I look at these businesses and I go, okay, which one of these guys are moldable? Which one of these guys have to switch to an installer? Because installers are not salesmen.

And I could take a lot of these techs and make them installers and bring in my own crew to train the new guys to be the technician salesperson, which we're a lot like air conditioning. Service agreements, we sold seven yesterday,'m we need to become better at that and it's not become a big deal as big of it should be but uh i have so many things i just want to switch but let me let me let me address that point okay so your obligation as the ceo or president of your company is to maximize shareholder value. That's the very first thing that they teach you in business school. Your job is to maximize shareholder value. Now, shareholder value is created in many different ways, but one of the key ways is that really makes a more attractive business is club memberships, maintenance plans, service agreements, whatever you want to call them.

So if you're going to take your position seriously and maximize shareholder value, which I believe you are the shareholder, so you owe it to yourself, is you've got to get that system up and reinvent the garage door industry to whereby they have a maintenance plan on the garage door. And so maximizing the value of the company. Yeah. And I think it's like everything else. First thing I look at, we get the best call center in the business. I think we have the best technicians, the best salespeople, the best installers. We've got some of the best marketing.

We do a much better job with dispatching and the happy call, which is the service agreement sale. And then I'm starting to learn from HVAC because I'm not going to reinvent the wheel, but we're going to discount today's service by up to $120, which is proactive. So if you cancel six months, we're trying to create value where it never existed before. And the service agreements, like you told me one time, we come in, we clean the coils, we check to make sure you've got the right, you know, stuff.

And I don't know a lot about AC, but you build value. Hey, look, you got to make sure to check this, this, this, and this. But here's where I understand service agreements build value is we mark them over eight years or over seven years or over nine years, whatever industry you're in. And those become now the customer needs to replace. Those are just replacements coming through. Yeah. You're making a little bit of money each time. Those are not money makers. So when I sell a service agreement, when I sell a brand new door, I know that's not money in the near future. But when I sell it on a seven-year-old door, it tends to start being more money. Is that correct?

Opener, in your case. I'm sorry, air conditioning. Yeah. So that's correct. But let me give you a little twist on that. Every business I've dug into, and I've dug into hundreds in our space, better than 70% of their revenue every year comes from first-time customers. Better than 70%.

I challenge you to take a look at yours and see where it comes from. Of course, you don't have a maintenance agreement yet. On the other hand, though, the only businesses who grow and survive are the ones who understand they manage the shoulder seasons. So for us, depending on where I'm at, what city I'm at, shoulder season mean the winter, you know, where we don't have as much business how do you manage that so how do you how do you manage your labor force how do you manage your just some basic revenue coming in and so that's where the maintenance plans really really come in i don't know if you really have the we don't have an off season you In the winters, you're not replacing as many garage doors in, say, Michigan or Milwaukee or Denver.

It's just because there's snow. They tend to do it when they're using their doors more often. But there's no big off season. There's not this huge deal that there is in air conditioning. I love the idea of service agreements, and I know it's the glue. It's the stickiness of the customer. It's future revenue that's guaranteed for that private equity or venture capital company or new owner coming in. And I need to make it part of the culture here.

It's just you got to fix one thing at a time and make it. And this is the year we make service agreements to where, you know, I don't know if 20 to 30% is a real number considering we're creating it, but I'd be happy at 15. We saw 67,000 customers last year. So 15, if I get 10%, that's 6,700. Yeah, that's a real number. Yeah. So I want to talk about a few books here. This is called the automatic customer.

If you don't understand service agreements it's creating a simple subscription business in any industry fascinated by this book uh but then i want to talk to you about some other books so you introduced me to dan antonelli building a big small business brand um i was not disgusted by my trucks but they're definitely nowhere near where yours were and he's just really like simplicity just boom what do you do make it on there make it memorable usually likes the cartoon character type it's timeless um what do you really like about Dan and the business that he runs? Okay, so when I bought Gettle, I needed to go through some sort of brand update. And I made a mistake in the beginning.

I was worried about, it had some reputation challenges before I bought it. And so I thought, maybe I'll change the name a little. And we call it Gettle Good Guys. And, you know, just to get through this touchy time, and then we can clearly say that was them, this is us. Bad mistake. It just was not necessary a waste of time and energy. So as we come along and we meet with Roy Williams and we talk about his branding campaigns, you know, at the same time, I was talking to Dan.

I just met Dan and I said he did the vintage. He did a vintage kind of wrap. And I said, well, that's what we need because Gettle is a heritage company, 1939, all the stuff. We needed to look updated but a legacy brand. And so at the same time, we started building this whole brand around that I held the flashlight for my dad while I worked on an air conditioner. And the reason why we brought me in there is because I've had lots of companies that I've never put myself out there. But the reason we brought me in is because we had to tell the public there's a new sheriff in town. They had some problems. This guy came in. Here's what he's about. Here's where he's from. And here's what he's going to do. And so we built this brand around.

And Dan said, well, okay, we need to put the boy with the flashlight on the side of the truck. And so the thing that attracted me to Dan is, one, he's a branding strategist. He's not a graphic artist only, right? He's a great graphic artist. He's a branding strategist. You read the book here. He talks about colors and the reactions with people and the combination of colors and what that means and how it makes them feel.

I mean, you know, I've always subscribed to the notion, you want to get something done, you go find the best man for the job. And he, by far, was the best man for the job. And he took, I mean, he developed the ghetto brand which is the ghetto logo and it's it's not a diamond but it's a diamondish shape and he he made a logo and he had his neighbor kid put on a little cap and a flashlight and was holding different ways and we were taking pictures of him to figure out the best way to position the kid with the flashlight which was supposed to depict me and then we took a picture of my son at 10 years old with a little one of those little derby caps on and he digitized it and and it's incredible

what they did to create the shady and all that to make it look vintage and Norman Rockwell ish mm-, which is still my son. Matter of fact, my son asked me the other day, he's 19, that should he be getting royalties? Yeah, I was going to say royalties. But anyway, the point of it is that I picked Dan because he knows it's stone cold and he comes at it from a completely different place than the typical rap guy or graphic artist he's a true professional and i like dealing with people who know their

business as well as i know my business yeah well dan did a great job for me i'm sure you've seen some of my new ones or if not you will um tell. Tell me about this guy. This is Ron Smith. I have the real book. It's at the house. But one day I was talking to a buddy of mine in Florida, and I said, man, Jim Abrams. And he said, you know, Jim's great. I'll never discredit him.

But he goes, before Jim, there was Ron. Ron is the original godfather. And I met him on the podcast. Tell me what your thoughts are. This is HX Bell's Wealth. CD's got the book. What are your thoughts? He was at your, I guess, the thing when you were on stage with Gerber.

So I've known Ron for many years. Great guy. Certainly an industry innovator. Just for the record, yes, he is the Godfather. There was a Godfather before him named Doc Rusk, who did a lot of very similar things, but this is way in the 70s. But anyway, Ron came. He was the only first guy to scale, to really build a scalable business.

He created Service America, which is the first franchise in the industry. He did some very incredible things, and he's a brilliant operator. But just to give you some ideas, you know, there's so much information out there to make yourself better and your business better. When his book came out, I bought 25 copies, and I gave them to my top 25 people. And we had a weekly call and we read that book together and we discussed the concepts and which things would apply to us or not and which things could we implement. I mean, I would attribute that process that we did with Ron. You know, we probably, you know,

we probably jumped seven to $10 million in revenue just from his strategies and teachings and understanding the business. My hat's off to him. He was way before his time, and he created something that nobody at the time was even near at. And so anybody who's in this business and wants to understand at any level could benefit from reading that book. You know what Ron said, and this part sticks out to me, and I also heard this from several other people,

is they say, who's the biggest HVAC in town? And Phoenix is like the hottest area. You've got probably four or five here but you start naming them and you go well who's the most expensive and ron walks in the room with all of his other business owners because they created kind of best practices amongst themselves and they said ron i don't understand you're so much bigger than us but but you're way more expensive. And so he started thinking about that and he goes, I am more expensive, but I also have nicer trucks. I also could spend the money in marketing.

I could pay people. I've got way higher retention. I've got better products, better warranties, better internal customers. And I just, I think that really stood out to me is you don't have to be the cheapest to be the best. I think the biggest mistake that we say is people want three things. They want it done on their timeline, so they want it done fast, especially when the AC is not working. They want a good warranty. They want to know it's going to be there.

They want drug tested, background check, good people showing up with a good warranty, with a good product. And they want it to be a fair price or value, but you can't compete on all three of those. It's impossible. Because my mechanic that kicks butt and he's affordable, he's three months out. I had to go to another mechanic. a fair price or value but you can't compete on all three of those it's impossible because my mechanic that kicks butt he's affordable he's three months out i had to go to another mechanic you know he can't be on my timeline i need it done today i'm buried bro think about the person that cuts your hair perfectly that i can't get you in until two weeks from now well i need a haircut today so triple your prices i say and And why is that such a bad word?

Why is sales and price and charge enough money? People say, well, look what everybody else is charging. You say in your book, don't look what everybody else is charging. You need to charge what's going to work for your business. For your business and more importantly, the service that you deem appropriate that the customers want to buy, which is typically a little more expensive than what most contractors give. But, you know, I've served, I've had operations now in over 30 markets around the country. And I've been the most expensive in all 30 markets. And I've been number one, two or three in all 30 markets.

And so my strategy has always been premium provider, premium priced. And by the way, that's the only way you're going to make it in the home service business. In every single category, the premium price providers are the leaders actually in everything that we do, but certainly in the home service business, the premium price providers are the ones who own the industry, they own the market. And that brings me to this book. You posted this in a couple spots. The Power of Positive Pricing by Matt Michelle.

Tell me a little bit about this book. And, I mean, there's a lot here. Discounting, service agreements, installation, all the different type of pricing you can do hourly versus, you know, paying for complaints, all this stuff. So it's an excellent book. And Matt Michelle is certainly an industry leader. Been part of his group Service Roundtable since its inception.

I'm not even sure how many years now, maybe 15, 18 years. But, you know, here's something that I learned years ago, too, is pricing isn't about what the guy down the street is charging. Pricing is a mathematical formula, and the mathematical formula has to relate to all aspects of the business, right? I have this many people in the field. They're going to produce at least 50% of the day, 60% of the day, whatever FACA you use. They're going to bring in this much money. Here's what my overhead costs for the day. So I have to overtake that overhead for the day plus my profit motive. And there's mathematics to it. And people you know they uh they just ignore it you

know they they don't get it you know in our business certainly more in the new construction realm people talk about price per ton how much per ton well there's just so many variables to a job to be pricing it like that is ludicrous but that's how most of it's done and so you know i've been just trying to promote to my industry fellows that guys there's math here use the math there's tools that you can use to to make sure that every moment of every day you're over you're filling that old hole called overhead and fill in that bucket called profit. And so what the book does, it talks about several different formulas to use that you can use. I mean, there's, there's, there's just a few, there's,

there's a few proven ways to go about pricing your products and services. And this gives you examples of all of them rather than just asking the jackass down the street what he's charging and charging a little bit less i agree with that so this is positive pricing my man michelle this book is hard to find actually uh great book though um lastly you know this is the book you wrote we as a team first went through michael gerber's the original book and my team said why are you having us read this when the whole book was about the entrepreneur the owner and i said guys listen to this we all have the manager the technician and the owner that live in us we all have the fat guy and the skinny guy i mean you read the book 36 times

we all have these things inside of us, and the book really hits upon that. And then we started talking about a company I bought out, Luke's. He said, man, he goes, I wish I would have had this book because here the whole time I was working in my business. I never had the time to take a look at the numbers. Really let the numbers dictate my decisions. And understand it's the systems. One of the things i always ask i'm going to be on stage this week is if i was to pay for a vacation for you for the next three weeks

i'm bringing your wife your kids your dog we're gonna go alcohol you know food all the trips that we do swim with the dolphins all that stuff's paid for but you're not allowed to call home you're not allowed to look at your crm you're not allowed to check in what does your business look like when you get back and that's when you know you don't have systems i think one of my other good books i like is the ultimate sales machine when it talks about systems and systems systematic but so you've got right here the e-myth for hvac and plumbing contractors uh great insight you go chapter for chapter michael's got a couple then you'll have one and then you'll have a couple uh super cool stories in here definitely recommend picking up it's on amazon and then i always ask i've already put several of your books that you've recommended but is there any other

things that you'd recommend to the listeners it's a question i ask in every podcast oh you mean a book or yeah just a book a couple books that you recommend. I mean, How to Win Friends and Influence People. Obviously, yeah, that's Dale Carnegie and Napoleon Hill, some of the books they wrote. So I just recently finished What Got You Here Won't Get You There. I think it's the title. Yeah, I have that. So I've read Traction recently, won't get you there i think it's the title it's yeah yeah so i have read traction recently and

traction to me is a an evolved e-myth but the traction process i think is great and utilizing your business is going to catapult you so i like the traction series i like that what got you here is not going to get you there. I just read a book recently called The Convict, which was about David Allen Coe, the country singer. And the interesting thing about The Convict, and it's a tough read because he's describing life in prison, which isn't pretty, but everything in life's about really seeing your primary aim and your goal and keep focused on that goal and doing the right steps, disciplines to get there. And what he did was he made a decision. I'm getting out of prison.

He was there from nine years old to 27 years old. I'm getting out of prison. I'm going to become a famous country star. And he did. So it's really, it's a great book I guess if you're in prison it wouldn't be a bad book to have an instruction manual but I don't plan going there but it's good to see that this the theory of setting goals and having a big a big goal hanging out there setting goals and

working towards something is applied to and just about everything that you do. Yeah, you know, the automatic customer, I'll tell you, I go back to that because I listened to it on Audible and I haven't read it yet. The Audible is the same thing, but I just think about that. It's a paradigm shift to know that you're building wealth versus becoming rich. Rich is what you have in the bank. Wealth is what you make when you sleep. And I think that's the service agreements. Last thing I do, Ken, is we talked about a lot of stuff.

Let me jump in real quick. Yeah. Hold that thought. Here's something I want to say. Here's about my book. I believe the book, the HVAC book I wrote, is applicable to about any business. And so if you can read it and take, you know, HVAC, every time it says HVAC and say garage doors, it all fits.

It all works. Same numbers, same approaches, and how you're supposed to look at it. It's really about that we know our trade, right? You know, you're a young guy. You're like, I'm the best at what I do. I can fix any air conditioner. I can install anything. I'm good at it. I'm going to go into business. And like I said, Michael calls it the entrepreneurial seizure. But, you know, that's not what a business is. A business is not about how good you are at fixing air conditioners or garage doors. It's an organization of systems and a systems philosophy and an ability to create systems that drive customer satisfaction

and more transactions, right? And so if you look at the book, there's some journeys of my struggle, which I'm sure we all have had them. Mine might be a little shaded my direction, but that's all the same stuff, right? All our struggles to get up to the business and how I approached it. And it's a great tool, if you will, to say, to see how you can take the approach to build an enterprise as opposed to a job. And there is, you talk about acquisitions, you talk about job costing properly. I mean, you delve into everything, plus it's the original version into it as well. So it's the best of all worlds.

So great read. I want to give you one last moment here. One last thing. Everybody's got a lot going on in their business and i think one of the good books up on my shelf is called the one thing or essentialism both those books say you got to focus on something you can't have this we all know we need to do so many things we just talked about wrapping your trucks we talked about radio we talked about marketing pricing acquisitions if you could leave everybody with just one last concept or thought or something going on right now in the business just anything to leave them and leave them with a nugget what would it be so i don't remember which number of businesses i sold with my my told me. And I sold the business and I was signing on

to work with the company for a couple of years. And, you know, he said that, he said, man, you better get some, you better get your management routine tightened up because knowing you, you know, I've been able to live a pretty privileged lifestyle over the years and traveling and working from home and going to the kids games all the stuff that it's not it's contra to this 60-hour work week so he was right so what I did was you know we set up a system whereby we were tracking

everybody's KPIs right we've We've evolved to over 30, but we started with six key KPIs in the business. And to run these businesses and grow them, I literally got to a point where my check-in of the business was Tuesday calls from 10 to 11 and Friday calls from 10 to 11. On Tuesday calls we did we went over the KPIs we talked about cause and effect, what levers to pull when those ones down, what to push, why is he doing it better than you, let's use his technique and you know just focused on those few numbers. And then the Friday call we focused on the pace of the revenue, your break-even,

and your profitability. We call it the profit plan. And so those two tools, I've been able to build and run these businesses on autopilot for the last 20 years using those two things, keeping everybody accountable to the key metrics, the vital few numbers that run that business. It's powerful. I love that. I had a guy, Ross, come in from a $425 million company. He started out there at $20 million. And he said, what are your KPIs per department? I said, we have six as a company. He said, let's do this by department and let's make sure we stay accountable and we inspect what we expect. And let's make sure the data that we're analyzing our people on is accurate because the worst thing we want to do is tell them they're not something and then

find out that it really is. So we've worked on data integrity, making sure we have the right numbers to judge people and reward them more than punish them. Because I think people miss that part. But I think you hit the nail on the head, Ken Goodrich, ladies and gentlemen. Thank you very much, man. Appreciate it. Hey, I just wanted to take a quick minute and thank you for listening to the podcast. You know, most people don't understand this, but the way that the podcast has grown is when people subscribe and they leave a review. So if you would please, please, please, Wyatt's top of mind,

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