The Home Service Expert Podcast - KPI Growth Strategies to Scale Your Business from the Ground Up

Episode Date: July 28, 2023

Tom Peregrino is the President of Service Nation, the US's largest home service best practice organization. He has over 25 years of experience in the home service industry. Tom first started out in sales in the mid-1990s and then eventually owned and operated his own company, Daffan Cooling and Heating. In 2021 he sold his company and joined Service Nation to create Alliance Premier, a large-scale coaching and training platform. In this episode, we talked about KPIs, recruitment strategies, contractors…

And more often than not, I would argue that what we quickly uncover is it's fear. It's fear of losing their people. It's fear of making that transition. And what we need to do is we need to walk them through implementing an execution to performance-based pay. Now, it may not be a full jump from hourly to performance-based pay. We may say, hey, let's take the first step and let's go to a hybrid and start seeing what difference the hybrid makes. And then after the hybrid, then we'll make the move to performance-based pay. When we can address the fear that they usually

have, because that's typically the objection we get. Well, I have a hard enough time finding guys right now. And what if I do that and I lose the guys? And we start unpacking how to address their fear, how to start filling their pipeline in advance before we start executing a change in their pay to performance. That instills confidence. And then the confidence just spills over to how they lead their team. You know, there's way too many people in the trades that are held hostage by their people because they can't figure out another way to compensate their people other than hourly. And that's unfortunate. 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. Before we get started, I wanted to share two important things with you. First, I want you to implement what you learned today. To do that, you'll have to take a lot of notes, but I also want you to fully concentrate on the interview. So I asked the team to take notes for you. Just text NOTES, N-O-T-E-S, to 888-526-1299.

That's 888-526-1299. And you'll receive a link to download the notes from today's episode. Also, if you haven't got your copy of my newest book, Elevate, please go check it out. I'll share with you how I attracted and developed a winning team that helped me build a $200 million company in 22 states. Just go to elevateandwin.com forward slash podcast to get your copy. Now let's go back into the interview. All right, guys. Welcome back to the Home Service Expert. You guys know me, Tommy Mello.

Very excited about this episode because there's a cool event that this guy's throwing on and just huge, huge, huge advocate for the trades. His name is Tom Peregrino. He's an expert in sales management, HVAC and plumbing. He lives in Grandbury, Texas. In the past, he was the owner of Daffin Cooling and Heating. Right now, he's the president of Service Nation. He's the president of Service Nation, the world's largest home service best practice organization. He has over 25 years of experience in the home service industry. Tom first started out in sales in the mid-1990s and then eventually owned and operated his own company.

In 2021, he sold his company and joined the service nation to create Alliance Premier, a large-scale coaching and training platform. Tom, great to have you here, brother. It is good to be here, Tommy, man. I've been looking forward to it, as I mentioned, all day long. Yeah, I think it's going to be great. Thanks for having us. It's an honor. I love podcasts, man. You know, it seems like everybody and their brother is doing one now, but, you know, the difference is they're always promoting themselves all day. And, you know, a lot of people that come on, of course, we're going to talk about Service Nation, but I mean, it's like they have the wrong motives to come on. So I really like

guests that just share all their business wisdom. You've got a lot of years of experience. So let's talk a little bit about who you are, where you've been, why you decided to do what you're doing today, what the future looks like. Man, I got to sum all that up in a few minutes. All right. So I got into the trades in my mid twenties. So I was cranking out babies with my wife, having a great time. But when my second daughter came along, I saw my bills. I knew a new baby was going to be expensive. And so I was working in the banking industry at that time. And I told my wife, I said, man, I got to make more money. I got to figure something out. And so back in the mid 90s, there was a classified ad in the newspaper for a comfort consultant position. And I didn't know

what the hell a comfort consultant position was, but all I saw is it said at that time you could make up to 75,000 bucks, no experience required. They'll do all the training. And I was like, I'm going to give it a shot. And so I think my wife was like seven or eight months pregnant at the time.

And so I quit my banking job that was salary, benefits and all that. And I went a hundred percent commission. And within 12 months, I doubled my income. And I never looked back after that. I mean, I wish more and more people knew about how awesome the trades are. You know, it's just such an awesome opportunity, especially for me in my particular case. I didn't have a degree. You know, I just had a high school diploma. I tried college for a couple of years that didn't work out too well. And so from 2010, my partner and I built up our HVAC company. And then in 2011, he gave me an opportunity to buy him out. And so I took him up on that.

He had a nephew in the company that I gave a minority share to, to keep him on board. And so me and his nephew just continued to build the company from 2011 till about 2016. In 2016, we joined Service Nation as a member, and we just took off from there. We just took off and just had some great, great results. And then over the years, Tommy, I fell in love with coaching and training our fellow members. And I just had a heart to just do whatever I could to help them out so they wouldn't struggle as hard as we struggled. And so as I fell in love with coaching and training, I wanted to give my partner an opportunity to continue running the company. And so we crafted the deal where he was able to buy me out through an SBA loan. That went really well in October of

2021. And then shortly thereafter, so I retired for about 30 days. And then the original founders of Service Nation came to me and he goes, hey, can you help us build out a coaching and training platform that's scalable? So I did that for a year. And then in October of 2022, they pulled me in and they said, hey, we're getting ready to retire. You want to go ahead and take it over? And so I said, man, I'm not scared.

I'll give it a shot. Let's do it. And so I've started to run the company. Got 50 plus team members here at Service Nation, and we've just been rocking and rolling. So if you don't mind, 2011, 2016, you have five years there. You were probably doing a lot of the wrong stuff. And then you kind of had the light for the next five years. Was that just in Texas? Is that where the company was located? Yeah, we had our first original location in Granbury, Texas. Over the course of years, we opened up two separate branches. So by the time I exited, we had three separate branches, including the home office. But yeah, you're absolutely right.

I mean, even when I took over with all my bright ideas and energy, I had made so many mistakes, screwed up so much stuff, tons of turnover. Yeah, yeah. Until I found the resources, the mentors, the books. I mean, it really didn't start having traction until that point in time. And about how many employees does he have today, your nephew or your ex-business partner's nephew? Yeah, yeah. Probably close to 40. That's awesome. You know, there's a lot of money in HVAC. I've studied HVAC, I've studied plumbing, I've studied electrical, and that's kind

of what I've done in the garage door industry. I've learned service agreements, how to use financing, how to pay right scorecards, how to match up your price book to how you pay the people so you win when they win. It's so many things that you don't get to know about. You think I'm going into this blue collar industry. I don't need to understand finances or leadership. And there's so much to it, isn't there? Oh, absolutely. Yeah. I mean, the first five years on my own without using any outside resources beyond Service Nation, just trying to think that I could figure it out on my own. I just thought, well, if I could just run this business to make a little bit of money, that'd be great. You know, but when you really dial it in and you realize that you can make,

whether it's HVAC, garage doors, when you can professionalize it, automate it, systematize it, then you have the same opportunities that all these other industries have to get double digit net profit, you know, to drive your business professionally and get the results that I would argue anybody in the home service business is due. They deserve it. Every contractor out there, regardless of what trade they're in, deserves double digit net profit. The mistake, the mistake that you and I know about is that most of home service businesses started out from an employee that was good at their job. And they started to make a living instead of run a business. I'd say now there's more private equity.

There's more funds getting into the business because they say, man, home service is essential. They run a really good business. Leadership culture, the things that banking, it service is essential. They run a really good business, leadership culture, the things that banking, it was important to. And they're starting to understand these things go bad every five, 10 years. And so you're back out at the home. It's almost like calculated income. And I just love it now because now we're getting respected. Now, I don't really believe blue collar, white collar. I believe this is just the right color for me.

I just love this industry. And what you guys teach is the basics. And you guys go pretty in-depth. What are some of the things you see a lot of people struggle when they come in to Service Nation? Well, I think in no particular order, you know, they hadn't been exposed to running their business through KPIs. You know, they're very reactionary. You know, they're flying by the seat of their pants. They're making emotional decisions. They don't have a plan by any stretch for the most part. In terms of annual planning, we see a huge deficiency and

them not having that skill set to map out what the next year or three year or five year is going to be. And then going back to running your company through KPIs, I mean, now that I know what I know, there is no other way you can run a company than through KPIs because KPIs don't lie. KPIs don't care that you're having a bad day. KPIs don't care what the weather is. KPIs don't care. You got to deliver the numbers. The numbers don't lie. And the beauty of KPIs is there's high-level KPIs, departmental KPIs. There is individual team member KPIs. I mean, I love it. You know, the more and more you run your business by KPIs,

the more and more you're going to crank out that double-digit net profit, and you're going to sleep good at night. What about, you know, there's always one or the other. There are always the yin and the yang. There's always, I need more leads, or I need new great people. Like, I've seen people say, I've got more leads than I can handle, especially through the

pandemic. I need more great people. And now people are back to, I need leads. And it always seems like it's one or the other. It always is. I've never seen a perfect equilibrium. What are you hearing right now? We're in the summer of 2023.

What are you hearing out there? You know, this COVID for the home service industries, I don't want to call it an anomaly, but man, we enjoyed a great two and a half, three-year ride. We did. You could not, you couldn't lose. You couldn't lose. I mean, who would have ever thought that that would happen in the middle of a pandemic? But now that we're in 2023, it's more business as usual. And the ones that really lost their focus or just assume things would continue to go as they had in the last three years, they're finally coming to terms with the fact that, oh, yeah, yeah, yeah, yeah, I guess I need to go back to dialing in my processes and systems. Oh, yeah, yeah, yeah, I guess I need to go back to having really good culture in my organization to retain my people.

So 2023, so far from what we've seen with a lot of our members and even outside of our organization, we've seen a lot having to go back to the basics of what it takes to build a healthy company. And you know what I'm seeing is just, it is pre-COVID times. And I think people just expect that we're going to have, summer was late this year. And I know a lot of people are like, we just thought this is going to be another record year. And they said, things are going to keep going great. And we're just going to kill it. And we're buying new things.

We're setting up training centers. We're investing in the company. You know, unfortunately, they're buying houses and buying boats too, instead of stacking cash for the bad times. And I think that's like 90% of people, if not more, they say, it's going to be like this forever. And now you've got to be a very, very good business person. Like I have a guy I invest in with commercial real estate, mostly multifamily. And this morning I made a huge investment and

he said, I had 21 competitors in Phoenix during COVID and pre COVID I had five. He goes, now I only have three. They're all giving it back because they all had these arms. And I'm telling you, you're going to see a lot more consolidation because these businesses, number one, baby boomers are over the next five years, I think there's going to be like 1% left. So you're going to see a mass exodus of baby boomers and next to kin sales come through and number two you just the interest rates are up you can't expect like in every economy there's waves there's ebbs and flows there's good and bad there's ups and downs there's peaks and valleys and right now i think it's just kind of smooth it's not good it's not bad but i'm warning everybody right now. You better

sharpen things up. I see a lot of people, they go, you know, we're hiring for what we're going to become. And, you know, I've got some experience with PE money and they say, listen, you need to write ties today and you need, oh, we'll grow into all these people and stuff, or we'll pay these minimums. And I'm watching them, and they don't really care about their budget or making money, because they're saying, oh, things are going to get better.

What if they don't? What if they get worse? Why not plan on tomorrow instead of next year? We're only halfway through the year, you know? That's a good point, Tommy. It reminds me of a lot of the work we do with our members. We set an expectation that regardless of what size they are, their company should be cranking out a double-digit net profit. I don't care if you're

a $500,000 company or a $5 million company or a $15 million company. To your point, you can't have this pie-in-the-sky spending habit where, hey, I'm just going to keep buying stuff, hoping that it's going to pay off in the future. Each step of the way in your journey as a contractor, that company should be dialed in to be cranking out profitability. And it should be running efficiently efficiently regardless of its size. You talk, I've seen you speak now and I've heard you several times talk about KPIs and give me the framework. If I'm listening to this podcast and maybe, maybe I'm not HVAC, but I'm in the home service industry, what KPIs do I need to really be focused on?

Give me your top five or what you guys focus on. Well, I like to drive the KPIs from the bottom up. The more and more I ran my HVAC business, the more and more I realized that the sustainability, the long-term effectiveness of my company was driven by my net profit. And so the first thing I like to do is start looking at the KPIs. Let's just say we're visiting with somebody in the trades, whether it's an HVAC or plumbing contractor. And we look at their P&Ls, their income statement, and we look at the percentage in each of their categories. Start from the bottom. I start with the net. Is it cranking out double digit net profit? And so let's say we're looking at month to date. Let's say we're looking at

quarter to date, year to date. We're looking at year over year. And we see that it's not cranking out double digit net profit. Then what we need to do is figure out what the heck is going on. It has to crank out that net profit. And so we start working up. And so the first thing we start unpacking is what the heck is going on with your overhead? What are your overhead KPIs? So that's the next one we start diving into. Overall overhead? Okay, what is owner's salary? What is office salary? Is it in alignment? Or could you have possibly made the mistake that a lot of contractors have made where maybe they were just too nice, for lack of a better word, and kept increasing people's pay within the office year after year after year when basically salaries

got out of control? And so it's not uncommon that as we look at their salaries, whether it's management salaries or office staff salaries, that we see that that's out of alignment and that has to be corrected. And then we've got to figure out how the heck do we do that? Because anytime you mess with people's pay, they get upset or they get nervous or they leave. And so you've got to be very strategic about getting that back in alignment in terms of a healthy KPI. Sometimes we may see that their rent is just way over bloated. Let's say, for example, that they own the property, but they're charging five times the market rate of what it should be. Well, that's going to skew all your numbers in terms of how

to track it and compare it to other healthy organizations. And so, you know, if those kind of games are being played, you know, we need to make those adjustments. You work further up the P&L and you start looking at your gross margins. You start looking at your gross margins by department, by class, and you start identifying, do you have healthy gross margins? And more often than not, we find that the gross margins aren't where they should be. And then you've got to start working with the owner's mindset. Because the owner's mindset, more often than not, they're like, I don't know if I can increase my pricing. I don't know if I can get better deals on equipment. I don't know if I can change the compensation for my field staff. And so those high-level KPIs, ultimately what it starts digging into is tough decisions they've either not realized they need to make or they need to start making. They don't know how to do that.

You know, more often than not, you find contractors in the trade, you know, their level, their proficiency and implementation and execution is poor, and that has to be improved. Once we can help them on their implementation and execution as we identify what KPIs are off, in this particular case, we talk about net, overhead, and gross margin, then we can start mapping out pathways in which they can start improving some of those big KPIs. You know, if you dig down a little bit deeper, then we start looking at average ticket KPIs. We start looking at closing rate KPIs. We start looking at lead turnover KPIs. And we just begin having very candid, very tough conversations about we got to get these numbers to where they need to be. You know, in terms of what I love about running models with KPIs in terms of closing rates and average tickets is you can run historic numbers where you go, listen, if your average ticket KPI

is this now, but it should be this, then let's run the numbers on how much money you lost in the last 12 months because your average ticket wasn't what it should be. If your turnover rate is X, but it should be Y, let's run the model on how much you lost in the last 12 months because your turnover rate wasn't what it should be. Tommy, I can't tell you how many times we have run those models against the KPIs and showed these contractors that they have lost hundreds and hundreds and thousands of dollars at a minimum because they weren't drilling into those deeper KPIs, much less the higher level KPIs.

And I think, well, the upper level comes from your financial tool, whether that's QuickBooks or Intuit, Sage Intact, whatever it might be. The other ones come out of a CRM, which is a service titan, or there's Housecall Pro. There's some new ones coming out. I'm curious. You mentioned lead turnover rate, and all that means, ladies and gentlemen that are listening, is you start a service call and it gets turned over into new equipment because, quite frankly, it's the right thing to do. Would you be repairing this 10-year-old unit for your mother when you know there's a more

efficient, better unit that stays cooler, that has more sensors on it to tell you when they're not home and actually is way more efficient, better air quality. Let me ask you, you've seen a lot of businesses, obviously, where is a good lead turnover? And I guess some of that's what markets you're in and what's over eight to 10 years old, but where do you see kind of a common mean of the percentage of leads that you go out to should be turned over for new equipment? Well, there's a couple of different KPIs on that. And again, my background is HVAC. So I'm familiar with HVAC turnover KPIs. The lead turnover KPIs. So on the HVAC

side that I can speak to. So if it's a demand to service call that they run, so if a customer calls them out and they say, hey, my unit's broke and stuff like that, you know, you should be at a minimum of 20% plus, depending upon the skill level of the service technician on the demand call. So a demand service call, you know, you're looking at 20 plus percent, depending upon the skill level of the service tech, you know, you may want to look at it on aggregate. If you look at, you know, maintenance turnovers, you know, we'd like to see three, five plus percent, you know, if it's a maintenance call that they're on. And again, the better and better you have them trained, the more and more levels of accountability that you have set in place, the higher and higher expectation you can have on those lead turnovers.

I love that. I think that more people need to really understand and just internalize the fact that they're wasting their time most of the day at the office unless they're not managing the numbers and taking action based on what needs to happen right now. What's the most important thing? What's the one thing? If my booking rate was 55% and I know the industry average is 80% and I could pick up 25% more customers, then that's where I should be spending my time. And I need to fix one thing at a time. A lot of entrepreneurs think they could go and we're just going to do all of this stuff.

And the numbers will set you free. They'll tell you where you should be working on, how you should be coaching, who should be doing ride-alongs, who becomes a trainer. These things are so important. And I don't think they get managed enough in most businesses. And I don't think most people, especially when the business is not evolved, they come in and they say, I'm just a firefighter. I'm going to find the next big thing.

I'm going to find the angry customer. I'm going to deal with the one-star review. I want to talk to the vendors. I'm going to have a meeting and talk about what I hate about my company. You know, you guys need to work on this. You need to work on this. I find that owners and founders and managers that bark at meetings, the guys roll their eyes are like, it's not that easy. You know, we need to really think about how to be positive in these meetings. The one-on-ones will change people tremendously.

You could have good, bad, and ugly in the one-on-one, but you should never be doing that in public. And I just don't think, unfortunately, a lot of people that come in here, we do shop tours, I've coached a lot of people, and they're like, I'm just not sure what I need to be working on. And I'm like, first, can I pull good numbers out of your system? Do you have your conversion rate? Do you have your booking rate? Do you have your cost per acquisition? What's your average ticket? Do you understand your turnover ratio? And I'll tell you what, I thought

we were really good last year until I understood what PE wanted us to report on. And now we have analysts internally and we're looking at things. We're looking at expenses. We're looking at buying from different vendors. We're looking at expenses. We're looking at buying from different vendors. We're literally finding money everywhere every month. It's to the point now that I thought 15% was good. Then I thought 20% is good. Now I think 25% bottom line is good. And I can tell you this,

within the next three to five months, three to six months, I think I'll tell you 30% is good. And it's through efficiencies. It's through scalability, through economies of scale. And I think for a normal business in one market, we're in 40 markets now. We keep finding money. But you have the right to make money. I had a guy who we had to send home because he thought we were charging clients too much. And I said, well, would you rather us charge them half every eight months for the next five years? And it's just one thing I find that I can't change is the mentality of someone that's poor

because they don't want to charge it. They don't have the money. They never do it, but they don't even own a house. And you work with those technicians. They're just, they're there. And they're like, listen, there's no way I just, I can't charge those prices. And I'm like, and I learned this from Alan Ferguson a long time ago. He's on a podcast. He said, add up all your numbers and figure out how much your guys could work and figure out your hourly rate and then add your 20% you want to make your 10%. And then reverse engineer your price book. And guys don't work all the time.

There's drive time. There's going to pick up parts. There's meetings. There's certain times you got to get gas. There's all kinds of stuff that happens. And you got to account for that. And you said something interesting. You said 75 grand, no cap commission only when you

started in the 90s and i think it's performance pay is key because you get out what you get in what you put in yeah and how many people that you've had come in and worked with are still just dead set on i only do hourly hourly is thely is the way to go. Is that something that you still hear a lot? Yes. Yes. And when we work with them, in particular one-on-ones, we'll bring a bunch of people in for our boot camps, you know, and we'll identify the ones that are still hourly and we'll start pulling them aside. And a lot of it goes back to what you touched on earlier is their mindset. And we start digging into their mindset. And a lot of it goes back to what you touched on earlier is their mindset. And we start digging into their mindset. And more often than not, I would argue that what we quickly uncover

is it's fear. It's fear of losing their people. It's fear of making that transition. And what we need to do is we need to walk them through implementing an execution to performance-based pay. Now, it may not be a full jump from hourly to performance-based pay. We may say, hey, let's take the first step and let's go to a hybrid and start seeing what difference the hybrid makes. And then after the hybrid, then we'll make the move to performance-based pay. When we can address the fear that they usually have, because that's typically the objection we

get. Well, I have a hard enough time finding guys right now. And what if I do that and I lose the guys and we start unpacking how to address their fear, how to start filling their pipeline in advance before we start executing a change in their pay to performance, that instills confidence. And then the confidence just spills over to how they lead their team. You know, there's way too many people in the trades that are held hostage by their people because they can't figure out another way to compensate their people other than hourly. And that's unfortunate. You know, it's interesting. I was talking to a company who's part of my garage door association. There's about 50 companies in it.

And he said last night to me, he said, you know, Tommy, I've been doing this 30 years. My son's helping me out in the business. Two months ago, we switched to performance pay. He goes, we were averaging 5% bottom line on a good month. He goes, the last three months since he switched, we were averaging 5% bottom line on a good month. He goes, the last three months we hit 20, or since he switched, we hit 20%. And he said, we're making over 100K a month bottom line. He said before, he said, I'm starting to have fun now. My people are making more money.

We're able to buy new trucks. There's so many great things. We could finally afford to buy the tools great things. We could finally afford to buy the tools we need. We could finally afford the person to answer the phones right. And I said, it's just the beginning because you've got to make a profit to be able to invest. You know, I'm on performance pay. If the company makes no money, I don't make anything. The owner gets paid last. And guess what? There are many times in my business where I went into my checkbook to write checks back to make payroll a decade ago. And I don't think people understand what that means. But I'm telling you, if you're listening right now, you just got to listen.

The numbers don't lie. You're absolutely right. And when there's no, what's in it for me? Wait a minute. You're just going to give me hourly no matter what? There's nothing we can work on that will help me get your goal? What if I go recruit an all-star? What if I sell a bunch of service agreements? What if I get you a five-star review from every client? It's just so much easier to do in the field because those are easily trackable KPIs. I understand it might be hard to put your janitor on a KPI.

And there's certain jobs. How do you do the account? Make sure the numbers are right. But overall, you know, high level CFO, they're going to create a really good budget and they're going to do a lot of things in the company, help you move the company forward. So there, once again, most people that work with me are on performance pay because I want to be able to rejoice when they make a lot of money and we don't make it hard for them to make money. We make it good, but we've got big goals. And it's fun when we're all

running in the same direction. There's a management exercise that we do with our members that talk about the pros and cons of performance-based pay, the pros and cons of hybrid, and the pros and cons of hourly. And now more than ever, contractors have to move away from hourly. And the reason why I say that, there's a couple of different reasons. One, the only way, in my opinion, to hit the KPIs with an hourly-based model is to drive your people into the ground. Be the tyrant. Be abrasive. Threaten. Push, push, push, push, push, because there's nothing in it for them to go faster. That's going to cost them money. So there's too many cons nowadays, especially in the new management style we all have to adopt. We can no longer manage the way the old baby boomers

managed, and even, I would say, the older Gen Xers managed. You can't drive your KPIs through an hourly model. Performance-based pay is liberating because, to your point, it fully actualizes what a team member can achieve. They self-manage. It doesn't require beating them over the head and threatening them. There's definitely more alignment between what's in the owner's best interest and what's in the team member's best interest. Everybody's on the same page. And so walking people through the pros and cons of each one, a lot of times, again, it

begins helping with their mindset. Oh, you're right. That's why when I have my hourly people, that's why I get super frustrated with them and yell at them all the time because I'm trying to get them to work faster and offering them the pros and cons of performance-based pay. Usually they'll see the light. Hey, I hope you're enjoying this podcast interview. Before we go ahead, I wanted to remind you that these are the last few days to get your early bird ticket for the Freedom Event. In my latest book, Elevate, I shared the ideas that helped me grow my garage door business

to over $200 million in revenue and lots of profit. But at the Freedom Event, I'll take it to the next level by giving you access to the people who actually helped me turn these ideas and systems into processes. These experts helped me build an amazing and systems into processes. These experts helped me build an amazing culture at my company and recruit the A players I have with me today. So if you want to learn from the source and connect with the people that can truly elevate your business, make sure to get your tickets at freedom event.com. The deadline for the early bird tickets is August 1st. So get your tickets at freedom event.com before it's too late. Now let's get back to the interview. I'm going to dove off and do another subject here for your former company.

You guys were voted the best AC company in hood County for over 12 years with an A plus the better business Bureau. How did your leadership style shape the growth and success of Daffodil Cooling and Heating during the 10 years as your partner? Well, you know, maybe, you know, we've been talking a lot about mindset quite a bit. And as I matured as a leader, there were some key team that produced more and more effective results. And so in no particular order, for example, you know, I stumbled upon the book, Seven Habits of Highly Effective People. And so for my particular organization and even in Service Nation, now that I'm leading it, Seven Habits of Highly Effective People is the Bible, so to speak, on how to interact, how to treat people, how to respond in situations. You can't beat that book. It's great. It's been

around forever. Stephen Covey, right? Yeah, that's from Stephen Covey. And then he wrote The Eighth Habit. Yes, exactly. The Speed of Trust. You got it. The other book, Dave Ramsey came out with a book called Entree Leadership. So Entree Leadership shows you how to develop how to build a high performance company and i love it because it goes by department by compensation hr it covers how to run a high performance company similar to the way he runs his well-oiled machine as well and so those two books as an example became part of you hey, this is our operations manual. This book is how we're going to treat people, Seven Habits of Highly Effective People. This book, Entree Leadership, is how we're going to run our organization at a higher level, at a macro level.

Then coupled with that, I discovered the power of mentorship. I discovered the power of surrounding myself with fellow contractors that could rapidly change my mindset. The more and more I was mentored, you know, the more and more I surrounded myself with successful contractors, the faster and faster my mind changed. Now, what most people don't realize, and I didn't realize this to the full extent until I looked back, is the more and more my mind changed and the better and better I became as a leader, you have natural turnover. So now I tell people, prepare for that. As we begin taking you on an increasing maturity level as a leader, you're going to have turnover because the people that brought you to where you're at, they may not be the people that are going to go with you to the

next level because they may not be able to mature as fast enough. So every step on a contractor's journey, as the owner grows, they need to prepare for turnover. I really think it's inevitable. I had a couple different companies that have gone through some of what we do in the garage doors and they're in the garage door industry. And they said, we did everything you said. And now we have a completely new staff, almost from soup to nuts. And it's crazy because so many people are afraid of performance pay because especially like the mindset's off. Cause they're like, no, I need to make sure I make at least this, but the same people only

need to make that. They don't ever want anymore. The same person that says I need to make 65 grand to cover my ass are the people that when you give them an opportunity to make 80, they're like, no, no, no. I only need to make 65. It's funny. They have this bottom, but they also have their top. And that's why I love the personality traits that come in and understand. I hate the word commission. I love performance pay. And it shouldn't be solely on just what you sell because there's some things that happen on the 30th of the month when they got to make rent and they go to grandma's house and take

advantage of her. So I think there's a happy medium. We look at callback ratio. We look at their average ratings as far as the reviews, their conversion rate. We look at all these different things. Some of them are customer facing. Some of them are company. Some of them are customer. Some of them are company. Some of them are customers. Some of them are a company because we don't want it to all be about this tech makes a lot of money for us. We want to say they treat you right. They left you with a raving that you're a raving fan. Now they cleaned up after themselves. They didn't leave you in a position where you weren't getting able to get out of your garage. So I think it's, you got to think about both sides because if your company's not making money, it's not just you that get hurt. If your company goes bankrupt,

every employee does. But guess what? Payroll is something you can't file chapter seven. You still got to figure out how to pay all the payroll debt that you've accumulated and you're the one taking all the risks. So that makes sense. And I do say this, when people do succeed well in business, they should reap the rewards too because they took all the risks. They signed their life away. They might've put their house, the mortgage. They definitely, relationships and time

were sucked out of them. So I hate the people that sit on the sidelines that don't know businesses that go, oh yeah, well, how about the workers? Well, you're more than welcome. You live in the United States of America. Go start an LLC. I can get you an LLC done for a couple hundred bucks. If it was that easy, everybody would be doing it. We all know most businesses fail. So I don't know what your take on that is. So, you know, you mentioned that guy that did everything you told him to do and he had almost 100% turnover. Maybe he did have 100% turnover, you know, and we began seeing that in our organization and on our journey of getting better and better and better.

Another tool that I would highly recommend people in the trades utilize is some type of call it personality assessment, temperament assessment. In our particular case, we used a tool by Intermetrics. We called it the DISC assessment. We now have that service here at Service Nation. I brought that on board this year. But that type of understanding of how a person is wired, I think is so important on anticipating what their behavior is. When you know how somebody's, in this case, disc, if you know what is their temperament drivers, and you know the motivators behind the scenes that cause them to display their temperaments, then on an accuracy level of about 70 plus percent, you can anticipate how they are going to respond in most situations,

how they're going to respond to changing their pay, how they're going to respond to different type of customers, how they're going to respond to all these different initiatives you may launch. It also helps you with recruiting, retaining, all those dynamics. When owners and managers have a deeper insight into the behaviors of their team members and they understand how they're wired and what motivates them, they make a lot better decisions and they can lead them much better.

I think it's a really good tool for anybody in the trades to use. You know, I've done a lot of personality things. And I recently got with one of my favorite books is called The Sales Boss by Jonathan Wissman. And he's got a tool. DISC is great, I think, for understanding quickly what a client is, D-I-S-C. And we study DISC. In fact, today was the day my entire training team for the month, there's 20 some odd guys

over there, they're learning all about DISC. But when it comes to what Jonathan does is he actually studies your company, your people, and the factors that make a difference under your training. So there's nature versus nurture. Nature is how great are you? What did God give you? Nurture is what do we train on? Well, how well will they do in our company? Because I'll tell you this, 1A player move, it's like you see an MVP at a hockey team trade to another hockey team, and they won't be great because they don't have the coaching and mentoring from the other coach. So when I see Jonathan's Wisman's stuff, we didn't realize at the time how accurate it was, but the correlation was we've used 10 different tests over

time. And this one now tells us how long the person will last. Are they a job jumper? And are they going to succeed with our training? And I just think there's tools out there. It's just called perception predict. And it changed the way we do things. And I really, I think it's crazy, but you're absolutely right. Using the tools that are available. I think a lot of people, there's one of three type of people. There's the person that says, I'm going to go use every tool. I heard a new book, so I'm going to do this new tool and the color tests, and I'm going to do this and that. And then there's a second owner that says, I ain't using anything. This is the way we've always done it. This is the way I'm going to do it. And then

there's the third, which is the best that says, I'm going to follow a success. I'm going to follow all the breadcrumbs of the guys winning and find out what they're doing because success leaves clues. And I'm going to try new things, but not every new thing. I'm not going to try every shiny light thing I see. Even when I go to conferences and I meet new people or I podcast or I listen to an audio book, you got to find out how to have some restraint and not do everything, but also be willing to try new things. If you tried everything, you know, it'd be very tough. So one of the questions I had is if you could share some systems and strategies you've implemented to differentiate yourself and the cooling and heating, because it's a very competitive market. Yeah, a couple of things come to mind in my particular market, but I think it applies to

most markets out there, is we really didn't leave the grass moves guerrilla marketing movement. We continued to do guerrilla marketing even as we got bigger and bigger and bigger. And that definitely included community engagement. We felt the dividends that would pay from community engagement would just manifest themselves consistently. And all too often, we see a lot of contractors out there that think, if I can just make Google happy, it's going to solve all my problems. And they forget some of the basic guerrilla marketing tactics per se that are still relevant, still successful, and still give great dividend.

And I would argue that our participation in the community, genuine participation, made huge differences because the community will reciprocate. It's the law of reciprocation that is just wonderful. If you're genuinely pouring back into the community, they're going to do what they can do to help your company. And it was beautiful. The second thing I think that made a difference was we had a ministry. We had a nonprofit organization, per se, that was a little bit different than most.

But the principle behind it is to align. We coach our members to align yourself with a nonprofit organization that'll help change the heart of your team members that will also spur reciprocity. In our particular case, one of our core values is followers of Christian values. And so we had like a face-based organization. And so what we did is we gave free maintenance to all of the widows in our community. And so by the time I left in 2021, I think we had close to 500 widows that we took care of where we did their semi-annual maintenance. And my partner still has the widow maintenance program in effect. But I'm telling you, Tommy, what we saw happen over the course of years by having that type of ministry aspect, you think of what the Gen Zs and the Gen

Ys, what they're looking for nowadays, you hear it over and over again, they want to work for a company that has a cause that is more than just the money. And so we didn't realize that we would benefit from the fact that we were taking care of the widows. Imagine 10 to 15 service technicians on a daily basis, and they're knocking on the door, and they never know when they're going to knock on a widow's door. And what happens to their heart, and we saw that over the years, the softening of their hearts, it was really, really cool what happened when we built in, not only, as I alluded to earlier, the community involvement, we built in having a non-profit, in this case, us taking care of the

widows. That really made a big difference in our organization. That's powerful. When you say community service or diving into the community, is that events? Can you give me three things, for example, so I have clarity? And what does that mean to just be community driven? Yeah, it can be pretty broad. So if you look at what most do, most contractors, they sign up, for example, for the Chamber of Commerce, but they never show up to the meetings. For goodness sakes, if you're going to be a member of the Chamber of Commerce, show up to the freaking meetings. Oh, my word. You know, engage with the Chamber of Commerce,

engage with these other fellow business owners, what you can do to genuinely help them out. Now, you've got 5Ks happening all throughout the community, and it's not uncommon that you'll have the high school graduating club or whatever knock on your door and say, hey, do you want to make a donation for our little 5K, and we'll put your name on your shirt. No, don't do that. Get into the 5K. Run the 5K. That's what we did. We had a team of team members that ran the 5K. We donated money.

They took pictures of a big check and put it in the paper and in social media. Engage. There's local nonprofit organizations, whether it's Habitat for Humanity or Food Ministries, engage. It's one thing to give them money. That's okay. But when you actually get into that organization and help them out, that's what really makes the biggest difference all the way around. You know, a lot of times I'll tell members,

pull up nonprofit organizations in your city, and there's hundreds of them. Identify the ones, connect with, and go serve with them. Go serve with them. Give back and watch and see what happens. It's win-win. I love it. Love it. I love it. I love it. So we've talked a lot about how to create and achieve consistent growth. But what's one thing we talked about performance pay? We talked about knowing your KPIs. Is there any other really big factors? You know, I'll tell you one for me was not knowing that I could actually hire a busboy that had the right canvas, the right attitude and turn them into a tech.

I always thought I needed to steal good people from other companies. And then I started making great technicians for people that didn't know the industry. And my life was set free. But what's one other thing that you think really helped you achieve growth and success? You get good, and you just described it, if you get good at identifying good people and you create an environment where they can thrive in your organization, i.e., you're a good leader, pay fair, all that kind of stuff, it doesn't matter where they came from. It doesn't matter that they were, like you said, a waiter or, you know, they were working at the car wash. When you get good at identifying good people and you train them, it is on their shoulders that you're going to succeed and they will kill for you. They will. There's just way too many good people out there that if we drop them into the trades,

they will just help make your company more and more successful. So when you were recruiting, I mean, what were some of the tactics you used to identify great people? I mean, were you always recruiting? Yes and no. It depended upon the department. You know, certainly on the service department, we were always recruiting. Install department, we were always recruiting. Install department, we were always recruiting.

In the last five years prior to 2021, we perfected our culture. When you perfect your culture and then you promote your culture via Facebook and you educate the community in advance at how awesome your company is, when you need somebody, they show up. I saw it time and time and time again. You know, when my mentors told me, Tom, get your culture to be high-performing and watch how many problems it solved. One of the things that blew me away is how it solved my recruiting problems. When I started pumping out on social media how awesome it was working at Daffodil and Cooling, and then we posted, hey, we have this position open. The people just came.

It was awesome because they knew in advance they had been watching us. The wives of technicians had been watching us so that when we needed a position, the wife would go over to their husband who who was a tech for another company, and say, hey, hey, you need to come over here. I've been watching him for a long time. This is the company you need to work for. And boom, we would grab them.

For a long time, you know, I'd heard that that was possible. And I called BS on it years ago. And then I did it. And it works. It works. There are unicorns out there, you know, visiting with you over at our international round table. You have figured that out too, how to build a powerful culture that just attracts people. Yeah. You know, we've got a management meeting coming up with all of our market managers and a lot of leads and um i want

to tell them how i identify great people and what i look for and these guys know trust me they built the teams i mean we're up to we just bought another company it's like 800 people now because it's we bought two companies in the last six weeks but you know if you just find somebody that's just gravitates towards you they smile a lot their customer service their tonality their body language that's really hard to teach and when you see that and you're just like the conversation flows they're good listeners and they're great talkers and they can tell a great story. These little things that I look for when they're done correctly and you're not afraid to ask them, listen, would you come? Can I take a selfie with you?

You follow up with them and you're just your tenacity overwhelms them because they have no other choice but to go on a ride along. And you just know because they're smiling, they're happy, they're positive. Their mindset seems right. You'll find everything comes easier. Everything will break free. It's incredible what will happen in your business. And I think it's something that I wish more people saw because I don't care what you do to my business, KPIs or not. If you gave me all A players and I didn't even focus on the KPIs, if you put an eight player, like my eight players that I have and they were all eight players,

I wouldn't have to look at anything because they would work nights and weekends when I needed them to, they wouldn't be calling harassing me. They would show up every day, alcohol, drug free. There would be good drivers because they focused on driving. They leave every customer,

right? Raving fan. They get five-star reviews with pictures in them. They'd ask for two or three reviews instead of one. That's what I think is the missing piece of home service is that people say, I don't need anybody right now. And I call BS because I'm not saying you need to top grade all the time. What I'm saying is there's always an opportunity for a great person to join. Because imagine what they could do to your business. Yeah, yeah, you're absolutely right. You know, we do lots of onsite visits where one of the things that we can do for our members

is, you know, interview their people. And to your point, you know, you scale them. And in your case, you use the word A player. And so when we report back to the owner, this is the quality of your team members that you have in the various departments. You know, it's not uncommon. We'll have a conversation. Hey, you have a C player. Look what happened.

If we could insert an A player in its place, this is what we think is what the difference is going to be in that department's performance. And so it opens their mind to, oh, so I can benefit from upgrading? Yes. Yeah. To your point. Yes, absolutely. You know, keep looking for A players. Yeah, you're absolutely right, Tommy. You know, the A players that came into my organization, I mean, they moved up within my organization really fast. They made big, big improvements in my organization. And so we really wanted to just, to your point, keep maintaining and attracting as many A players as possible. And then moving out the other ones, moving them out, bringing in the A, just keep upgrading, keep upgrading. You know, unlike baseball,

when you hit a grand slam in baseball, what is it? Four runs, right? But unlike baseball, when you hit a grand slam with a great employee, or you hit a great marketing campaign, or you get a great trainer or an amazing recruiter, or the right manager, the right CFO, sometimes you can hit a thousand runs. And that's what's so incredible about business. And that quote is something similar to Jeff Bethos said something like that. And the fact is that I just think you always got to be looking for those brand slams plus, but you got to know what you're looking for and you got to identify those weaknesses in the business. And you got to understand that you're always recruiting. And back in the day, Glenn Gary Ross said, always be closing. I say, always be recruiting. Yeah. Visiting with you at our last

conference and hearing how you recruit, you know, and one thing that I remember is you immediately began showing them that you care by reaching out to them by, you know, just you were tenacious, you know, just, hey, I want you. I want you. It just doesn't happen like it should in a lot of contracting businesses. People want to know that you care. They want to know that they're valued even before you pay them the first dime. And it's pretty cool to hear that you do that right off the bat with your recruiting. I got two more questions and then I got a couple closers if you got a few minutes. Yes. Okay. So what advice would you give a home service company looking to implement or improve their sales coaching programs based on your experience and expertise?

Well, I'm biased to best practice organizations. And of course, I'm further biased to Service Nation. But the truth is still the truth. Owners need to be exposed, whether it's books or it's a podcast. Ideally, in terms of the spirit of good, better, best, the best way to move the needle is through mentorship with accountability. You've mentioned several people that have helped you every step of the way. And what I heard, the consistent theme I heard is this person helped me understand this to change my mindset, which caused this improvement in my business. And you said, this book did this that made this difference in my business. So reading a book is kind of like a safe way of being mentored. Not a lot of accountability.

If I can encourage anybody, I don't care what organization they're involved with or where they're at, if I can encourage them to get with a mentor that is at a level, at a place where they want to be, find someone to mentor them, it is a game changer. It is an absolute game changer. I love that. Okay, so many of Service Nation's training events are conducted by nationally recognized and industry-specific trainers via Zoom calls, webinars, and physical sessions. What are the advantages and disadvantages of conducting virtual sales training through Zoom webinars compared to conducting them there in person? Video is good.

If you're watching the sales training, if you're watching a series of modules on how to become better in sales, that's good. Better is the Zoom. That's more interaction. Okay, you're right. And it kind of is the way it is coming out of COVID. Zoom is here to stay. It's not going away. You and I are Zooming, so to speak, right now. But the absolute best is face-to-face

physical one-on-one, you know, bringing your team in with a coach to get that face-to-face training. I mean, how often have you and I probably seen over the years, I know tons of time, that you come in for training and then maybe in the evening you go out to grab a bite to eat with the trainer. And that's when a lot of the magic can happen. You know, you catch somebody in the hall and you're having that interaction where the trainer is talking to the one guy in class that he identified as, he doesn't seem very engaged. He's not up to speed or whatever. And then they can have a little bit more personal. So the personalization benefits that come from the physical one-on-one, I still think is superior. If you can't get that, I understand why you need to go ahead and do it via Zoom or what other platform, as long as you've got that interaction.

In the worst case, yeah, you could watch a video. That's fine. All right, Tom. Listen, if someone wants to reach out to you, you did a fantastic job. I learned a lot on this podcast. I probably took too many notes. What's the best way to do that? Yeah, if they could just go to our website, you know, go to servicenation.com. They can reach out. They can see how to contact me directly if they'd like to, or contact our organization. That'd probably be the fastest way to do that. So it's got my email address right on there too, and my phone number. So there, you know, that's probably the easiest way is via our website or come to our conference and I'll

meet them face to face. Yeah. Come to the me the dates it's going to be in phoenix arizona it's coming up soon tommy mellow's going to be there i will be there speaking october 3rd through the 6th yes october 3rd through the 6th in phoenix can't wait to see you again tommy it's going to be awesome let's tear going to tear down the stage this time. I'm curious, you kind of mentioned that, you know, I wouldn't consider myself young. I just turned 40, but I think I speak to the younger generation a lot better. And you said that's really what you wanted was just something new, something a little shake it up, seeing what the new mentality is in business. Was that kind of what you were

thinking when you decided to reach out? Absolutely. Absolutely. The culture of Service Nation, prior to 2023, we were a little bit baby boomer centric, more so than millennial, Gen X and Gen Z centric. And so we began in 2023 to look at every possible way we could begin making sure we appeal to the other generations besides the baby boomers. I'm not knocking the baby boomers, but I certainly think that, you know, they needed some extra love. And so who else better to give them some extra love than Mr. Tommy Mello? And so, you know, when I saw that we had an opportunity to get you there, I mean, I saw it at our last conference when you and I were

doing the Q&A. They hear you, you know, and they told me in the hallways, what he said, I was listening. I could hear him. I was connecting. And I consistently heard that from the younger generations. And that's what I was hoping to achieve. And I consistently heard that from the younger generations. And that's what I was hoping to achieve. And I think you're going to be able to achieve that again in October. I can't wait. You mentioned seven habits of highly successful people. I always ask, what are the three books that moved you in a big way? You said seven habits. What are two others? Well, seven habits, entree leadership. And for me personally, it was the Bible.

The Bible continues to be a big, big influencer for me, my family, my friends, and even in this organization. All right, Tom, here's how I like to finish up. I agree with every one of those books. My dad and I went golfing to Sedona last weekend. We went and shot pool Friday night. So I'm driving to Sedona, and he's telling me the whole ride, two hours and 20 minutes, about Abraham and Ezekiel or Ishmael. And, I mean, I pretty much heard the whole Bible.

And, listen, there's nobody better than my dad to tell me but he goes can you imagine that Sarah had a kid at 93 and he's just I think my dad was meant to be a preacher but I absolutely love spending time with my dad and then we went golfing I drove the 18th hole very proud of that because it was about 325 yards I was on the back end of it because we couldn't find my ball and I'm like i think it's on the green but uh that was uh a little side chat but you know we talked a lot about a lot of great stuff we talked about charity non-profit treating your people right performance pay kpis doing the right thing sometimes you got a top grade i just wanted to give you a few minutes to close us out. And anything you want to talk about, maybe we didn't touch upon something, but just a final thought for the audience.

On topic, off topic. Whatever you want. So going back to Abraham and Sarah, get a load of this, okay? It's possible so when abraham and sarah went to egypt because of the famine at one point abraham tells sarah hey tell pharaoh that you're my sister because i don't want him to kill me now at her age in our perspective she was 50 or 60. And so think about that. It says she was so beautiful that he was worried about getting killed. There is a probability that back then they didn't age as fast as we did. So it's possible that for Sarah, 60 for us, for her being 60, she may have looked like she was still in her late 20s and maybe 30s.

And again, you know, I love your dad. I don't know him, but I love he's a fan of the Bible. But it appears there's a high probability that as long as these people lived, they may have been aging much slower than we age. And that kind of makes sense to me because, you know, when you mentioned that, I thought, well, if Sarah was hot enough to be moved into Pharaoh's harem, even though she was in her 60s per se, maybe she just didn't look that as old as we look when we're in our 60s yeah he goes can you imagine having to give up your son and and he's telling me the story and he said your son's going to repopulate but it's not going to be this one and he said sarah started laughing when god said you're going to have another child and he the Lord said, why is she laughing at me? Because Abraham laughed too. But he didn't laugh.

He laughed because he said, we're having a baby. Thinking we're too old. But he believed God. But he said, when Sarah said it, she was laughing in vain, seeing there's no way it's possible. I don't know. I remember the whole story because I get really, my dad probably thought I was tuning him out.

But I think I got the whole thing. And it just talked about putting your, your son and letting him go into the desert. And then, uh, and just, and then I found out they made a movie and I haven't watched the movie yet, but there's supposed to be, I think it's called his only son. So, okay. Next time you see your dad, Tommy, go to him and say, Hey dad, what do you think it was like when Abraham had to go to all his people and say, hey, I got to circumcise all of you guys. Sorry. It is what it is. Young, old. I got it. I got to chop it off. Oh, I can't imagine that. I'm going to ask him that right away. He was just he stopped in earlier, but listen, Tom, listen, me and you can jam out about this stuff.

And I think there's a good chance in the future you'll meet my father. So this was amazing spending time with you. I can't wait to see you in October. Same here, Tommy. Appreciate the time. Thank you, sir. All right. See ya.

Bye-bye. Hey there. Thanks for tuning into the podcast today. Before I let you go, I want to let everybody know that Elevate is out and ready to buy. I can share with you how I attracted a winning team of over 700 employees in over 20 states. The insights in this book are powerful and can be applied to any business or organization. It's a real game changer for anyone looking to build and develop a high-performing team

like over here at A1 Garage Door Service. So if you want to learn the secrets that helped me transfer my team from stealing the toilet paper to a group of 700 plus employees rowing in the same direction, head over to elevateandwin.com forward slash podcast and grab a copy of the book. Thanks again for listening and we'll catch up with you next time on the podcast.