The Home Service Expert Podcast - Mastering Business Budgets: Insights with Lawrence Castillo

Episode Date: July 7, 2025

In this conversation, Lawrence Castillo shares his insights on building a successful business in the HVAC industry, emphasizing the importance of budgeting, recruiting top talent, and learning from mentors. He discusses the challenges of operating in California's market, the role of technology in business growth, and the significance of maintaining healthy profit margins. The conversation also touches on effective marketing strategies, the debate between acquisitions and greenfield opportunities, and the power of customer reviews in driving business success. Don’t forget to register for Tommy’s event, Freedom 2025! This is the event where Tommy’s billion-dollar network will break down exactly how to accelerate your business and dominate your market in 2025. For more details visit freedomevent.com 00:00 Building a Strong Budget   02:52 Recruiting A-Players for Success   05:57 The Journey of an Accidental Entrepreneur   08:37 Learning from Great Mentors   11:33 The Importance of Process and Accountability   14:39 Navigating the Challenges of California's Market   17:49 The Role of Technology in Business Growth   20:35 Understanding Healthy Profit Margins   23:30 Marketing Strategies for Success   26:11 The Debate: Acquisitions vs. Greenfield   29:04 Creating Demand in Home Services   32:01 Negotiating with Vendors Effectively   34:53 The Power of Reviews in Business   38:00 Final Thoughts and Advice for Contractors   

You have to know your business and be in it in order to build a good budget. It's more than just the numbers, talking to your vendors, talking to your friends in the same marketplace that will help you to build the proper budget. 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, note, 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. Long after due, we've had some technology problems, but I got Lawrence Castillo here. He's a expert in operations scaling and strategic planning. He's based out of LA. He's the president operating partner of Brody. Oh man, my eyes.

Now Heating and Air Conditioning Los Angeles, the most awarded HVAC company. With over 25 years experience in residential HVAC and plumbing industry. Lawrence is recognized as the top operators in the field. He has driven significant growth scaling companies like Brody Pannell from 7 million to 70 million in under four years. Known for his expertise in strategic planning, recruiting and building internal training programs, Lawrence has helped reshape multiple West Coast companies, making them leaders in their markets. Hey man, pleasure to have you on. Happy to be here and looking forward to our conversation today. You know this is

something I'm just gonna jump right into it and then we'll hear more about you but I think that the hardest thing to do is recruit A plus players. And I noticed in H-Check Plumbing Electrical, several guys do 10, 12, 14, 15 million dollars. What do you look for? How do you build up the workforce to find the people that are just going to crush it, that want more, that want to continue to grow themselves because the law of the lid says, you know, you can only go as far as you're ready to go. If I talked to myself 20 years ago, I wasn't ready for the information yet. I think that, you know, for us here, we bought a little company and had dreams of making it big, right? And, you know,

you just borrow a page from your past. And we did this at Service Champions, you know, some 15 years ago, just we had a plan, we wanted to be a big company. And we weren't that big, we were 10, 12, 15 million people, or 10, 12, 15 million in revenue. And so we wrote a plan and we had a recruiting budget and we built a training room and we built a book on how to recruit people. And we would bring people in from wherever and we would fill a room up with people. And we were very selective and we

would come out of a group of 70 people and we would choose two or three and we would do that every week. And before you know it, we had some training classes. So here at Brody, we're doing the same thing, just a page out of the past. What I've learned here recently is the demand for what we are doing.

It's tremendous. We do this class four times a year, right? It's a three-month class. And this most recent class, we had almost 4,000 resumes, and we took 20 people. And you know, so we are selecting people that we know that our customers, the kinds of communicators and the kinds of people that our customers will want in their homes. And that's always been the key for us. We can't, you know, we can always teach anybody how to turn a wrench, but you can't teach personality.

And so we recruit for personality and then we teach for skill. And that's been the recipe for success for this school. And, you know, we're in the middle of a class right now. We've strategically recruited people that we could deposit in each of our four locations, you know, which geographically, you know, it has to make sense. So we're recruiting people for each of the businesses, training them up for three months here and then we're, you know, sending them to the businesses for the next stage of their

training. So it's been a good plan for us and it's working. What would you say are the major characteristics? I'll just throw out a few. Number one, they need to believe in themselves. Eye contact, tonality, smile a lot. Some leadership skills, just being able to like have a fun story you could share.

And like, tell me a joke, tell me what, make me laugh a little bit. And like a little bit of humility. And then the fact that they're just competitive as hell, they aspire to be number one, they're never going to be complacent. When I see this type of person, I'm like, I need them on my team. We do these classes in the evenings and on weekends, right? Six o'clock, seven o'clock at night, we're here. And we open it up, you know, they these 3500 resumes come in and we filter it down, but we invite them in. And if

they have just been able to figure out a way in their lives to make it here in the evening, with all the distractions that they have and all the obligations that they have in their life, if they're willing to at least come here for a chance to change their lives, that's the first step, right? They have to have the desire. So every time we get a classroom, you know, a classroom full of 50, 60 people, I congratulate them on just taking the first step because most people don't do it. It's easier to just sit on the couch and watch the game, right? So the people that do show up,

you congratulate them, and then we start to filter from there. And they all have an opportunity to stand up and tell us their story. And the stories can be compelling. In this last class, we hired a kid who lived in Hawaii and where he lived burned down. And he moved here because it was the closest place to move and he knew a few people. And just a really compelling story, but you're listening to him tell, and you're hearing his communication skills and his mannerisms and his engagement with everybody. And you're starting to see somebody that you're like, yeah, that's somebody that can be successful in the home, right? You know, we're also looking for people that have longevity on their resume and the places that they've worked, or have meaningful customer service experience.

it works or have meaningful customer service experience. But sometimes we'll roll the dice on somebody. This is a panel interview and we make the decisions together. But sometimes you just go with the feeling about somebody. Some of these stories are pretty sad. A lot of good people have been washed out of a good job or kicked around, and maybe this is the place for them. So we try to take a measured approach. We're looking for communicators. We're looking for people who

really show the desire and they really want this. They want to change in their lives. So it's great. I love putting these these interview sessions on and we do it for you know in each of the four cities for all four of the locations. on and we do it for, you know, in each of the four cities for all four of the locations. So let's talk about the early days where you came up. What's happened since then? Where are you going? I'm an accidental tourist in this industry, right? This was, this was not on my, this was not in the plans for me. And I just sort of stumbled into it. And that was 25 years ago and self-taught, right?

Self-taught with the aid of a couple of great mentors. I started in the Airtime 500 company and all of that great rich Jim Abrams stuff was at my disposal. So that was my first education. That was my freshman year of heating and air conditioning. And I really got to learn it the right way. And then I was fortunate enough to work for Mr. Abrams

and have direct access to him. And when you think about great coaches in college football or pro football, guys like Parcells or Nick Saban, and they each have this coaching tree, right, where all of their assistants, they, over the years, they get an opportunity and they go find their own success, right? Nick Saban had Lane Kiffin and Kirby Smart and all of these great guys, same thing with Parcells. And when you look at Jim Abrams, it's the same thing. So many incredible individuals that went through his training

and developed their processes through the Airtime 500 and the success group and Clockwork Home Services, they've gone on to great success. And so that was how I started. I learned that stuff and then had the opportunity to be the general manager at Service Champions. And, you know, that was the second part of my education. And, you know, I walked in the doors there

and I think the epiphany for me there was process and accountability and procedure. Walking in the door there, that place didn't look like an air conditioning company, right? At least the kind of stuff that I was ever used to. I was used to an old shop with a bunch of old beat up vans, and you walk in there and everything is sparkling,

and there's manuals everywhere, and it looks like you're on the 70th floor of a high-rise downtown. I started to look at it through different eyes and, um, and the math part of it really became, you know, it played a much bigger part, right? I, I don't think early in my career that I understood the importance of the measurement of, you know, Mr. Abrams taught that stuff, how to have a great balance sheet and a great P&L

and what you could do to get there. But when I got to serve as champions, I saw a different level of detail. And I think that that measured approach helped me beyond in the rest of my career. Here at Brody Pannell, we found a small company here, and it was a rebuilding opportunity. And, you know, with a with a brand that had just been, you know, left to sort of on the side of the road and hadn't been

taken care of. And I think that in the last four years, we've taken that brand and we've, you know, we've given it the love that it probably should have had over the last 79 years. And we've restored it to glory and we're really happy with the results here. Right. So it's been a great career and this industry has been so great to me. You know, it's amazing. It's amazing. I feel like I'm going to sneeze. It's amazing. I feel like I'm going to sneeze. I. I spent a lot of time with Leland, and if I had to tell you, I think there's three types of CEOs.

There's the CEO that comes from a CFO background. There's the CEO that comes from a CEO background, and there's a CEO that comes from a CMO background. I happen to fit way more in the marketing side, way more on how to get great people in the door to work for us and how to get great clients to buy from us. What does that funnel look like? Leland reminds me a lot more, although I think he's a great operator, he's always looking at making sure his bottom line is 22%. It just seems like no matter what, he's always looking at the P&L, he's always looking at how do we just maintain this and he's brilliant at it. What would you say

are some of the biggest takeaways that you've personally learned from a guy like Leland Smith? I started there and one of the first things I started to notice was that his car was parked at the office on Saturdays and Sundays. And it put some pressure on me. I felt like, well, if he's trusting me to run his business, the least I can do is match his effort. And so on Saturdays, I was in there in the operations building.

He was in the accounting building. And when I started there, he was teaching me, right? He was walking around the parking lot, taking pictures of vehicles with trash on the windshield. And he was sending those pictures to me and just trying to get me in his cadence, right? The kinds of things that he was looking for, the kinds of things that he desired. And I think we learned that we were, similar in that respect. And so I think, and as we get further down the road, I see a lot more of him and me in the way that I operate the business.

We met constantly as a management group because he was involved, right? In the early years he was involved and we would have meeting after meeting after meeting and different departments, different KPIs, where are we with this? And he was always the smartest guy in the room, right? And we would sit at these tables

and the way that his mind worked, you know, he was an accountant, right? And he looked at it through those eyes. And he saw the stuff that we didn't see. And I think it just, you know, it made me such a better operator. But the, the math that is involved in running a successful business and the relationship part of it, right? He, and the relationship part of it, right? He, you know, he was a little softer touch probably than people will admit to. His, you know, people always liked to go to him to try to get what they wanted.

And he would try to point him back to me or another manager to make sure that they were held accountable. But everyone always liked to go to him. And that never stopped over the course of the years. But I just think process and procedure, you know, we ran a very tight, very organized business. Some people likened it to the military.

And in truth, it was a little bit that way. But the results that we got were incredible. And like you mentioned that 22%, we were higher, right? We were higher than that because we left nothing to chance. Everything was in writing, everything was accounted for, nothing was out of place. One of the things that I love that Leland did well and probably still does is he found himself

as the lowest one in the circle. People to look up to be able to share financials with. He told me stories, whether it was Keegan Hodges and some of the other guys he used to talk with, they used to have a lot of transparency. And he said, one day I started, you know, they said, why aren't you selling insulation, the blown-in insulation? And he goes, we don't really know what we're doing. And they said, just offer it.

And he's like, I'll be damned. I sold 30%. And we just subbed it out till we brought it in. And I love this idea of just this humility of saying, maybe we're not the best, maybe we could learn from someone else. And that's why I do shop tours. Last week, I did a shop tour a month before that. I was at Morris Jenkins.

shop tours. Last week I did a shop tour. A month before that I was at Morris Jenkins. I don't ever think we've like – we still got a lot to learn. Where else have you learned a lot that's helped grown you to what you're doing today? And I think before I answer that, I think that that's the mark of a great operator, right? is the humility and just saying, hey, you know, I may have a ton of success, but I've, I can learn from anybody out there, right. And he was always that person and still is to this day. I think that, I think the relationships, it's funny, as you get a little further into your career, you really lean upon the relationships and some of the most valuable stuff that I've picked up from. It's just

from those people that I've met along the way, you know, you just mentioned Jonathan Bancroft's shop, like so much to learn from a place like that, right? You know, back in the day, Kevin Comerford used to come down from Service Champions North and visit us in our shop in Orange County. And, you know, he would sit across the desk from me and he would say, teach me something, right? And I'd be like, man, what are you talking about? You teach me something, right? Like, you know, guys, the guys who are ultra successful in our industry, they're super humble and they understand

that they can learn from everybody else. For me, yeah, Leland Abrams, I think today just some of the people that I talk to, these are folks that even here locally, small operators. I have a shop tour here today in my shop, a $6M shop in the Inland Empire and heard a couple of things they're doing that I think would be great ideas. They came to learn from us, but gosh, we end up learning from them. So, just so many great operators out there. I think, you know, I love when I have a chance to go to these events and talk to the, you know, the Paul Kelly's and the Ken Haynes and, and, you know, these guys, they're just, they're, they're battle tested, right? They've seen it all. And so

I just try to speak less and listen more when I'm in their company. Trevor Burrus I call those guys all the time. There's a lot of mentors I look up to. You know, this idea – there's this book called Rocket Fuel and it talks a lot about there's extreme visionaries, there's extreme integrators. And I don't know this for sure because I never worked for Jim Abrams but it seems like Terry Nicholson was his integrator. Did you work at all with Terry?

What was that relation like between Jim and Terry and then what was that relationship like with you underneath that? Terry was the he was the face and the momentum and and honestly, you know, at this time right now, with their other venture with Praxis, Terry is still out there hustling, right? I see him at these events and sit down and eat with him and, and just, you know, talk about the past. And we used to have sayings that Terry would say, posted in the wall, and service champions about how you can't hide from the numbers. And then we'd have the numbers posted on the wall. Terry was just great at getting people excited and motivated. And I think that you know, I even to this day, I just enjoy talking to him. And, you know, I think that John Young and Jim Abrams

put together a blueprint that all of us could follow, but it was really up to Terry to get on stage and to get everybody excited about it, right? Because John and Jim were the brains behind it, but Terry was the face. And Terry would get you up there and he'd have you standing up ready to sign a check, right? So Terry's great.

Loved seeing him these days too. But yeah, he was the motivating force for sure. I spoke to a lot of people in the past that said those guys were not the easiest to work for. And I don't think any driver that's looking to grow at the pace some of us like to grow are easy to work for. Good is never good enough. I mean, I don't care, man. We're sitting a record.

Last week was a record week. We had a record day, record month for sure. And people are like, aren't you happy? And I'm like, yes, I'm very, very happy. Thank you all. And it sounds really bad. But I don't care if we're doing 10 billion. I've got bigger, a bigger vision. And it's hard because I feel like the top 1% of the 1% are drivers. What are your thoughts on that with still keeping a great culture, having a strong vision, but also being thankful? Gratitude is everything.

And as I get down the road in my career here and I look around at, at the people who have exited and they did so because, you know, they, they just accumulated so much success in what they did. Ken Goodrich's, the Leland Smiths, right? These guys, you look back at their body of work and you listen to them talk now, because I knew those guys when they, you know, 20 years ago when it was a different story and they were in the middle of it. But now that they're down the road, I hear a lot of gratitude in their voice, right?

For all the people, even Mr. Abrams. I spoke with him recently and the very first thing that he does is thank everybody. Thanks everybody that helped to make his organization a success and he hoped that we were able to take that success and grab a piece of it for ourselves. But I think that gratitude is underestimated. And I think that the people that I run into in the industry

that are in my age bracket, I think as you get older, life changes a little bit and you look back at the people who helped you to get to the success that you have. So I'm grateful every day for everybody that works for me and everybody that ever did. And I'll always lend my support and whatever I can for free. Like I said, I got a shop tour today here. I'm happy to help anybody who is looking for the help.

When you get, when you started at seven and you got to 70, what were the most crucial factors in driving such rapid growth? What do you think? Obviously hiring was a big one, but knowing the math and really knowing your numbers, but what are the things? California is a tough market, especially lately, especially with the marketing side, but what were the things that really stood out to you?

I think that we bought a small business that had a bunch of people that had been here forever. And just, you know, a lot of change was necessary and getting everyone on board for the change and to break the old habits because nothing's gonna happen if they don't have an open mind to change. So they needed to be able to step outside of their comfort zone and just open

their eyes to what could possibly become. I think that, you know, once we were able to do that, the first step was to let them know that we were there to grow the business. You know, this was a business that had had 30 people for the last 10 years of its existence before we bought it. And in just Brody's location here in Culver City, we have 180 here. And our other locations bring us up to about 300. But the recruiting effort was massive, right? They had never recruited anybody into this business. Everybody had worked here forever. So a school, processes, teaching customer service, you know, there's no way that a 75 year old business should have 250 reviews, right? So we had to, and that's what it was. We bought one of the oldest

companies in Los Angeles and there was no online presence, right? We had to build that. We had to tell our brand story and be proud of it. We had to, we have, we're bumping up against 4,000 reviews right now, which is more than anybody in Los Angeles, but that doesn't happen without a plan and a process and accountability. And we made sure that it happened. And we made sure that everybody that was in a uniform for us walking into a house every day was gonna get a review. And you put these processes in place and before you know it, you've got momentum.

And here we are four years down the road and we tacked on 65 million bucks to what we started with. And we're just still out there battling every day. What do you think? One of the things that I've been very, I guess, I've said this a lot to a lot of people. Have a five-year plan or less to take some chips off the table. I think AI, I think there's a lot of disruptors. I don't think there's going to be a robot fixing garage doors, doing gutters or fixing

HVAC units anytime soon, but I do think there's a lot of innovations happening. I mean I look at 10 softwares a week, not CRMs but different things to help the company out. We just implemented one yesterday. It's constant. I think we're running around 28 different softwares, which sounds like – I always say we're a software company that has garage doors and I think we're in the – like A1 in general is in the beginning of the first inning.

But this mentality of, man, what's he going to bring on next? And I've got a massive technology team that we're looking at things to give us the competitive edge. But what do you think the next steps are for you as far as where do you want to take it? You know, I think that – and I was talking with somebody about this recently but I really feel like there will be a lot less overhead inside of your office here than the next few years, right? I think that we can, you know, and it's already happening, right? There are booking calls with AI, you know, your installation department. I just think that many of your inside staff, we will be able to do this in a much smarter

and more efficient way. So I think our overhead will change. And there's a lot of these softwares that are testing things that are just incredible. So I think that for us, inside staff will change, will be using AI a lot more. As far as the fields, like you said, robots aren't going to change our garage doors and and I don't see robots going out and doing service on air conditioners. But I really feel like the manpower of these businesses will be sliced up a little bit. And even selling over the phone, you know,

this is happening, you know, and it's happening in many people's locations, right? It's the, you know, and it's something that I'm testing here. I know that, you know, there are a lot of people that have great success with it. And, you know, I'm an old school guy, and I'm probably late to the party. But I'm listening and really open to it. So just looking for ways to have a healthy bottom

line and still be able to provide great customer service. Speaking of bottom line, what is a healthy bottom line? What would you consider this as healthy? I think that most people have no idea what a healthy bottom line looks like in heating and air conditioning. And by most standards, if you're double digit, you are an achiever, right? Because most companies that are out there scraping and scratching aren't hitting double digits, right? And if you're lying within 10 and 15, you are certainly doing great with your business.

If you're somewhere between 15 and 20, you're top of the class. And if you're north of 20, you are one of the best in the nation. And there's a handful of companies that live in that 20 plus range. And there's a lot to learn from those folks. And, but to me, if I'm living,

if I'm always living north of 15, even in the down months, then I'm doing it right. And, you know, ideally, we're, we're north of 20. And you're scraping and scratching trying to make decisions here in Los Angeles, guess what, the next five months, the urgency is gone, right? We don't have cold weather, we don't have warm weather, we just have that beautiful 75 degree weather that everybody moves here to enjoy. And so we have to be different, we have to be better. You know, we don't have them, we're not coming in here every morning to 25 or 30 furnace breakdowns, no heat calls. We don't have that in Los Angeles. So my guys have to go out

there and they have to just do a bang up customer service job and create their own urgency. And if we do that well, then we're able to, you know, keep our our bottom line where it needs to be. So this is the time of the year that you have to look at your business and just make sure that everything is well set up for the time of the year that you have to look at your business and just make sure that everything is well set up for the time of the year when we have to work harder. Yeah, I know a lot of companies that are seasonal, they just expect to lose money five, six months out of the year because they've got a lot of installers that they need during the busy season. And it's tougher because I'm not used to having a massive shoulder season. And it's tougher because I'm not used to having a massive shoulder season.

So I'm kind of fortunate but also my tickets are not even close to 8-Track Plumbing or Electrical. I've got to run 22,000 jobs a month, soon to be 30,000 jobs a month. People are always like – they're like, man, if I was in garage drawers, every 8-Track Plumbing electrician that I know that looked at garage drawers, got into garage doors, every 8-track plumbing electrician that I know that looked at garage doors, got into garage doors said, F this and they got out of it just as quick as they got in it. And every garage door guy I know that got into 8-track in particular got out of garage doors right away.

And I'm not kidding. It's not one, two or ten. There's a lot of them. And I'm not saying it's easier either. I'm saying, look, in a lot of ways, it's harder because you got to get a specialist and it's harder to train those positions. But the ticket, people always say, if you could go back in time and said, look, the competition in window washing, HVAC plumbing, electrical, garage stores, locksmiths, you name it. It's all competitive. What's the biggest ticket?

What's the largest ticket I could get? You do more of that, you need less leads, you need less bookings, you could run a much bigger company with way less people. As long as you pay attention to gross profit. But if you could go back in time, would you still have landed is – and by the way, HX Plum Electrical is almost a 200 trillion or $200 billion market cap where the garage is hovering around 14. So there's just more opportunity just based on pure revenue. But what would you – if you could go back when you started, would it still be a bit

in the path you chose? David Morgan It would still be air conditioning. And here's why I stand in front of my technicians and I tell them how lucky we are to be in this industry. Because if you're installing granite countertops, it's completely aesthetic, right. And if you're, if you're a landscaper putting in a rock slide in a pool, it's these are things that impact people less than what we do because installing heating and air conditioning, it's comfort. We can affect their pocketbook. We can cut their

energy bills in half. It's air quality, the cleanliness of the air that they breathe. It's the comfort of the home. It's your monthly expenditures. I mean, we can affect so much within the building envelope. And then when you add other streams of additional supplementary revenue, attic insulation, make the home quieter. There's so much within the building envelope that we can do if we use air conditioning as our lead in. So I'd probably stay with air conditioning. air conditioning as our lead in. So I'd probably stay with air conditioning.

Do you have a basis of how much you like to spend a year as a percentage of revenue on marketing? So it's different for all of our businesses. We're fortunate at Brody, we spend 4% here. And, you know, there are some companies that are spending 8, 10, 15, you know, up to 20%. And I think that, you know, for us here at Brody, we had a name when we arrived here that we knew people on the west side of LA knew. We just had to sort of shine it up and make them remember us. And we made them remember us through our reviews, because tonight when you order a pizza, you're not ordering a three-star pizza, you're ordering a five-star pizza. We just decided we wanted to have the most reviews, and we've got 4,000

five-star reviews. When people Google and they want someone to come service their air conditioner, they're going to always choose the company with the most five-star reviews. So we decided we wanted to be that company. We are that company now. And as a result, my phone will ring just by virtue of the number of reviews that we have in our, in our, you know, our review score. That helped to reduce my marketing expense significantly here.

You know, we have a layered approach, right? I spend a bunch on digital and, and you know, there's a little bit of direct mail mixed in there and a couple of other things. We have some billboards. But I think that, you know, to keep it at 4%, we do some tests, right? It might reach as much as five or 6%, but we're fortunate here. In the other locations that we have, you know, one of our businesses, it's a little younger, six or seven years old,

and we have to spend more there. You know, there's not as much brand recognition, so everywhere's a little different, but I think if you're spending, you know, six, seven, eight percent, that's a good place to be living. Hey guys, before we get back to the episode, let me tell you about a guy I know named Mike Giddich. Mike went from doing odd jobs that nobody wanted to take to hitting $1 million in revenue in his business. Sounds like a success story, right? Wrong. Mike told me

his business was falling apart. His phone rang 100 times a day with problems from employees and customers. And he was pissed at himself because even at $1 million, the business wasn't where it should be. Sound familiar? Here's what changed everything for him. Mike went to the Freedom event. And he realized there's way more to running a business than just grinding. Fast forward to today, he's doubled his revenue multiple times and now 30 million feels totally within his reach. So what did he do differently? He learned from owners who had already solved the exact problems he was facing. That's what Freedom 2025 is all about. Getting in the same room with people who've been exactly where you're

trying to go. You've got less than two months to lock in your spot. So go to freedomevent.com and grab your ticket before it's too late. That's freedomevent.com. Now back to the episode. What are your thoughts? And this is kind of a tough question because I think they both work. This is kind of a tough question because I think they both work. Greenfield or acquisitions? If you had to choose – and I know not every acquisition is built equally. So I know that that's a tough question. But a greenfield is hard. I feel like when you figure out greenfield, it just creates so much value.

But there's an ROI of that too. That like you got to come out of pocket and run a Greenfield versus you get lent the money because of the EBITDA that already exists. You could get a multiple of that on a line of credit. So what are your thoughts on acquisition versus Greenfield? Haven't done Greenfield and I look around at some of the people, Chad Peterman, like these guys, younger guys, much smarter than us, older guys that have been doing this for a long time. And he's doing a bunch of stuff right. And I know that he's had a lot of success with that.

And for me, it's been acquisitions. And I'm comfortable with the acquisitions simply because I'm confident in our ability to turn a business around, right? To me, it seems like there's more low-hanging fruit to buy an older business that needs someone to change the processes and the procedures. You find out which of the people are the ones that are going to be critical mass that you want to keep, and then you train the others.

And if they don't work out, then you just recruit more in. But to me, as somebody who spent years turning around businesses, it's a much easier path. The Greenfield approach, it's just probably not part of our plans. But some people have great success with it, but I'm just an old turnaround guy. So I think I'll probably stick with the acquisitions. I do agree with you.

I think that if I were a buyer, a massive P company, I would say I can predict Greenfield much more than I could predict the right acquisitions coming along. So, so it's to each their own. I think that's accurate. I think that in Los Angeles, what you've seen from private equity over the last five years is that, you know, there's a few groups that have come in and, and just, you know, bought a lot of businesses that under normal circumstances, we wouldn't have considered. And we looked at many of them and we just decided they weren't something we wanted to do.

And the other groups scooped them up, right? They have a different idea of what they want to do with these businesses. And, but the green-filling isn't really in Los Angeles, not happening. It is not anything that is happening in this market. None of the groups that have come in, this is a very unique market. It's not anything like many of the other major cities, but nobody's green-filling. The groups have come in and they've, I would say that of the top 20, 30% of the reputable businesses in Los Angeles, they're gone, right?

They've all been purchased. And, you know, the people that have come in are doing things quite differently. And the landscape is changing. You know, the top two players in this marketplace, they don't look at all like they used to in the last, you know, since they've been purchased, they've radically changed. But yeah, the green fielding isn't really happening here in Los Angeles, but the acquisitions, it's just, you hear about a new one every day. As a purchaser of a lot of companies. And don't take this the wrong way.

But the last place I'd buy is California. Right along there with Washington, Chicago, New York. But California by far. Because I just had an event in California. It cost me 40% more than anywhere in the country. Literally, we've done the math. And I know for certain, and I'm not afraid of getting sued by the way, as long as we're

doing stuff HR above board. But I know there's more litigators in Southern California than the rest of the country combined and they're calling our guys up saying, did they text you at home and are you getting paid for those text messages? It's like they're going and finding a way to sue. And the different taxes, like this new tax for the wealthy, I heard it's 2.5% to accommodate for the homeless, which I'm all about. We just raised money for water and food for the homeless, the justice center here in Phoenix.

I get it. I'm just saying if I was a smart business guy, I'm not going to be like, man, I can't wait to organically open up in Southern California. You know what I mean? Like, there's so many more places and people say, well, what about Phoenix? What about Vegas? And I'm like, well, you don't, of course there's the weather. And I could literally put duct tape on the side of my truck and keep a couple guys busy in those markets. But now the cost per lead is going up. It's going up dramatically because now you're competing.

People are willing to pay $400 a lead because they got a high booking rate, a high conversion rate and a great average ticket. So that's driving up. I know a lot of people are like, man, maybe I'll go back to TV, radio and billboards just because I think a lot of people set up their Google campaign for broad match and they don't even realize it but they're paying a fortune. And then there's click fraud and everything else. But that's – I understand it's a different type of market and if you could make it in

California, I truly believe you could make it anywhere. You could have a great business pretty much anywhere if you could make it there because you got more traffic, you got pockets you got the it's crazy Then you got no cloud seating which is making clouds and like now the seasonality is hard to predict What are your thoughts on all that I think that You're right on so much so much of this, you know if you If you terminate someone tomorrow in this business, they're gonna drive drive out of here and on their way home, they're going to see 10 billboards from the lawyers. And it's a full scale attack.

It's an all out effort. And it's really, it's, it's so insulting as somebody who runs a business the right way. But their job is to talk to anybody and everybody who has been terminated from a business and to start to go after their wage and hour policies, to start to go after, like you said, text message. It's just, I'm in the middle of it a little bit, you know, and yeah, I think everybody that I talked to that is in other places, including the attorneys that are part of these cases,

they say that whatever we do here in Los Angeles, it's 10 times more than whatever it would be settled for in other states, right? It's just the game and it truly is a game and it affects all of us. The cost of doing business here, workers compensation and insurance is just so many companies have left here because it's just so expensive to operate a business here. So you have to be a great operator in order to have really a successful business here, right? And there are a handful of really successful air conditioning companies in Southern California.

And usually there's a great operator behind the desk. So yeah, a lot of stuff to navigate here that makes it different than other places in the country for sure. So it's about that time of year where if you're a great operator and you're a great business founder, you're getting pretty deep in the weeds on budgeting. I just got off a podcast with Jan O'Peterman, Aaron Gaynor, Travis Ringy was on there. And we were talking about some core fundamentals of a budget, KPI-driven budget. We don't accept cash anymore as a company for the last few years.

We look at the working days in a month, although we do work Saturdays and Sundays. We look at each month, 23, 22, 21 working days. We look at a lot of different factors. We're not a seasonal, but we look at – I have a different budget than everybody else. Mine is impossible to hit. It's just what I think we could do. But it's never like how I build my bonus structures or anything like I want to be able to tell every person around us that we hit budget and make sure it's attainable.

I put a higher standard on myself than anybody and I think that's the way I was raised. And it's okay if we fall short of the Tommy budget as long as we hit our BHAG. Because we got the BHAG, and then we got the Tommy budget, but we got, this is no matter what, we have to do this. We have this, and then we have this. And this is the first year we said if we hit the BHAG budget, you'll get a double bonus.

So if you make 200 grand, you'll get a $400,000 bonus for the year. But what are some of the tips and advice you would give in building a budget to make sure that it's attainable the following year? I think that for us here, we've been on a rocket ship really the last three years. This was a small business that we bought and we grew it quickly. You have to know your business and be in it, I think, in order to build a good budget.

There are some guys that have exited and, you know, they may be building the budget based upon the numbers that they have pulling them out of service Titan or out of their sage or whatever. But I think that if you're in the business, it's a different experience. I'm in my businesses, right? I travel each week, and I'm at I'm at Brody today. And I'll be here a couple days this week and I'll be at a couple of the other ones later in the week, but I'm in it. I have a good feel for the business being here and touching it every day.

So I think that the budget that I'm going to build isn't going to be just me sitting behind the desk at home looking at service tightening. It's more than just the numbers. It's the people, it's your manpower account. It's, there's just, there are other things that I look at. So I think that if you're in the business, number one, that will help you to build the proper budget. I think you can look at things historically, but sometimes that's gonna lie to you a little bit

just because of a year like this, market sentiment is a little bit different. Los Angeles is a little bit different this year, right? In 2024, we weren't able to stay on this trajectory. We did this a little bit, but it's everybody here. I talked to the vendors and Lennox says that there's 15% less equipment that's been ordered and it's everywhere. So I think that the talking to your vendors, being in your business, talking to your friends in the same marketplace, I think these are the things that are going to help you to build a successful budget because otherwise you're going to put something together that it's unattainable or it's beefed up and you're going to be disappointed

at the end of the year. So I think boots on the ground, you're going to have a better opportunity to do so, to build a successful budget and to talk to your people as well. On Friday, we up in our training room, I had all of our managers at a table for two hours. We bought a lunch and we just talked about the problems that we have in the business, the solutions that we're coming up with. And if you're doing that, you really have your finger on the pulse. And I think this is the kind of stuff that we talked about Leland earlier. I learned this from him.

He wasn't out on the weekends, you know, on an airplane. And no, he was in the business. And that's what made him so great, you know? So when you get to a certain point as an operator, you can choose to live your life one of two ways. And but I think if you're still in your business, you probably have a better shot of putting together a realistic budget. You know, one of the things that Leland discusses is the way he pushed his vendors probably beyond where they were comfortable. I've seen them on several stages. I've talked to him in person where he said, I feel confident that nobody in the country had a better arrangement worked out with the vendors.

And it's something that I've learned from him, actually, that I push pretty hard. But instead of going, what can you do for me, I say, what can we do for you first? Where do you need us to grow to? How do we get a better product mix? How do we make sure you're making the most money possible? This isn't a one size, one side wins.

Do you think that you're purchasing power in comparison to – and I can say wrench group service champions, I can say any hour, I can say there's the apex. Do you think that you are able to negotiate as well as some of those guys are? And how much does that play a role? Should people be negotiating more with their vendors? They should. And I think that so many people talk about not accepting pricing, right? Not accepting price increases. And I think that's a great way accepting pricing, right? Not accepting price increases.

And I think that's a great way to live, right? You have to look at each year separately. And as you go into every year, you know that in the first month of the year, you're gonna get an email from your vendors that say, that says, hey, we're gonna be, you know, four to 6% this year. And it's up to you whether you want to participate in that or not.

Right. I did learn a lot from Leland's and we always had a backup vendor. And sometimes, and I remember one time that he just turned one of our main vendors off completely shut down. You're done. We're going with these guys who was our backup and man, like he got exactly what he wanted when he did that. Right. He was, he was so good at that kind of thing.

Um, so yes, have backup vendors. Put people in place so that you can put the screws to one, um, you know, and get, get what you want from the other. That was a great lesson to learn. I think that, but this is the time of the year that we all know what's coming at the first part of the year, but we have to start talking to our vendors now and making plans. Otherwise, it gets real expensive. It's amazing. You look at Costco, for example, they were always Amex.

And Amex came in and said, we got to do this. And they said, no, you're not. We're too big for you to do that too. And now it's Visa. And I think the fact is you got to be willing to walk away. I've turned off things. And the crazy thing is I don't bluff. I'm not bluffing.

Like I've turned off 800 zones of Val Pak for three months. I'm like, we're out. I don't need you guys. And very rarely when you get to a certain size, I mean, look, we've got options out there and people don't understand this art of negotiation, but it's never to put them out of business. I want them to innovate. I want them to invest in technology.

I want to invest in better machines to bring their prices down. And the idea of what I did, which was way different than Paul Kelly, I said I want to own one industry and get into 100 markets to get the buying power to where, I mean, they cannot live without me. And then I'm getting into the home of more affordable. The next step is what other lines do I bring on? Where Paul's like, I own the customer, I'm going to bring them 20 lines and I'm going to own Phoenix to 300 million. And by the customer, I'm going to bring them 20 lines and I'm going to own Phoenix to 300 million.

And by the way, I like his approach. It's much easier to grow where you grew up, where you go to church, where you know a lot of people, where all of your contacts are. I tell people all the time, wait a minute, you want to expand? You must have a ton of market share. You must be killing it. You must be over 20% of EBITDA. You must have standard operating procedures checklist.

You must have everything worked out. or they say I want a franchise. And I'm like, wait a minute, you suck. Your business is still in single digits. Yeah, but I got something really special. Well, why don't you get an investor? Well, nobody wants to invest in me, but if I did a franchise, they'd invest in me. And I don't think there's one way that's wrong. But I saw an industry and I said, man, if I take a tracks approach to it and learn service agreements, and learn how to offer promotions, which is financing, and we get really good. I'm still not to the point where I'm like, man, this is so great, because the average chick is just not going to be the same. And the demand isn't as high. Quite frankly, it's still high.

Like if you can't get out of your garage, you're calling somebody. But I'm a little bit envious still of HVAC. But I got to tell you, I've always said I've learned so much from these guys. So many people have mentored me until they're out a little bit deeper out of the game. I just wouldn't insult them by by doing something in a market they're in. I understand that, but you know, we all look at you, you're doing something that, you know, you're living in our world, right? You're the people that you've mentioned, the people that I've mentioned, these are the most successful people in the western United States in what I do. Right.

And everybody, whenever I, we gather at these conferences, whenever I'm in a room with, you know, some of these guys, your name comes up constantly. Right. Because you've done something that none of us are familiar with. It is a lower average ticket. Like we're looking like, how do we do that? Right. None of us are familiar with, it is a lower average ticket. We're looking like, how do we do that? Because what you've done is just quite different. So if you got involved,

I think that you'd probably teach us all something that we haven't seen before, and we would probably all stand to benefit from it. No one's gonna lose from that, right? To have the really sharp people in contracting in the air conditioning industry, we all stand to benefit. I'll tell you my latest kick, and I know we gotta get going here,

but garage doors kind of fall not into only home service. I'm a home service industry right garage doors. It breaks we go fix it. 60% of our revenue is made up from repair. I can tell you that the new circle I've aligned with is home improvement and I'm amazed by Anderson Renewal and the bath remodelers and the kitchen remodelers and the windows and the way they build demand where it doesn't exist. And of course your multiple is not going to be the same because they go out and they build demand where it doesn't exist. But now everybody in this circle, this new circle, there's over a billion to a billion and a half of revenue. And they do it

through 300 home shows a year. They do it from door to door. They do it by crazy things. And as I learn, I'm like, whoa, outbound calls, the things they're doing. I'm like, we have a potential to 3X and not even expand. No Greenfield, no – just you're organic taking these home improvement. And no one's ever married the two. I don't know anybody that says I turned my home service industry into this home improvement and no one's ever married the two. I don't know anybody that says, I turn my home service industry into this home improvement. I think Roger's is one of those unique things that kind of follows right between the line.

It is home improvement, yet it's home service. I always want to go to the next mountain and go to the base camp and say, hey guys, I'm new here. What's the best way to hike this mountain the fastest? And for some reason, I don't know why. I think it's because I go in and I'm not like, that's what I'm going to do. You guys better look out. I just go in and I say, Hey, I'm still learning.

Look can I buy dinner for you and your whole company? I'd love to come in and just be a fly on a wall. If there's anything I can learn come on the podcast You have a book I could read and I just genuinely I take notes they see and I always pay it forward. I say look I Give it up to L. Levi. I give it up to Ken Hayes I give it up to everybody that I've ever worked with that I've learned something too. I Never say look what we did. Look what I did I'm like if I didn't learn this if I wasn't in that room that day, and so I think

it's a lot more – people approach me in a different way when I come in very humbly. And I'm like, look, I still – I'm just getting started here. I got so much to learn from you. How did you do it? Like this is crazy. I'm so impressed. Sometimes they're smaller, but I don't even – and I start talking so much about revenue.

I used to walk in and be like how much revenue you do and now I'm like, okay, what's your profit? You know? But that's what excites me is going into a new category that still is I think Just huge because if you could do build the man wherever you want and still be all those demand calls coming in It's the best of both worlds. The windows here in Southern California, there's air conditioning trucks on the road, but like the other, the bath fitter, the rebath or Anderson windows, they're everywhere. We pull up into a neighborhood to do work and they've got two trucks in the neighborhood already, right? Property values are

expensive here. A lot of these people bought these houses for $200,000 and they're worth three and a half, four million now. And they're taking care of the house. The house has taken care of them for 30 years. Time for them to take care of the property. Anderson, they have the market here, but yeah, the way that they market, it's quietly, right? But they're just creating the demand, like you said, it doesn't exist, but they're creating it. A lot to be learned from folks like that, for sure. Well, listen, let's start wrapping up here. I know you got to probably get going.

What's the best advice you ever got from Jim Abrams? I think maybe to test things. His was a business that was built upon direct mail, right? It was all these letters and many contractors across the country have sent those same letters for 30, 40 years on a very regular basis. And so he was very involved to see what our success rate was with those letters. And he, I think I learned, you know, he was always saying, test a letter, send a very small amount out. And I had never heard that before. People were just, here's $10,000 and here's $20,000. I'm going to send 50,000 pieces. He would say, pick this zip code here, pick this zip code here, send out a thousand letters,

see what the return is. If there's a return, then flood the market. So I think testing the mail was was something that that wasn't in the books. It was just something that he would tell us he would have these WebExes where all the all the general managers from around the country were on and we would just pick up our little things. I remember a one holiday, it was July 4th or Memorial Day, and he called our location in Los Angeles. And he said, hey, it's Mr. Abrams. Just wanted to say happy Memorial Day

to anybody who was in the office and check and see who was working today, right? Like he had all these locations and he's sitting at home dialing the numbers to all of his locations to see how many were open, how they had them staffed. Like this is why this guy had that kind of success, right? Because just like Leland on a Saturday and a Sunday, and Mr. Abrams on a holiday calling his locations,

this is what it takes, right? These are the boots on the ground. So these are the great lessons. Trevor Burrus Is there any books that you've read that are like a must that you think just kind of fast forward your success? David Morgan I think that Ron Smith's HVAC Spells Wealth is a great book and I always – the guy did the Successful successful contractor by Mr. Abrams, which isn't available. It was only, it was available way back in the day and it was only available to people

that worked for his business. But it is every bit the equal of HVAC Spells Wealth. But since you can only get HVAC spells wealth, that's the one. And Ron Smith was a visionary. Everything that he talks about in that book, doesn't matter if it's service agreements or your customer service approach

or your profit and loss statement. Everything about what he talks about is gospel. And there's a handful of guys that, you know, that really shaped the way that a lot of us contractors went. And HVAC spells wealth is the one that I would recommend to anybody who's in our industry. Anybody in the home service industry, I had him, by the way, the listeners out there, I did have Ron Smith a few years ago on the podcast. I actually ordered the CDs to Ron Smith, HVX Bells Wealth.

I still have those on my bookshelf and I got the book. And what I could tell you guys is one day I was with Keegan at his house with Flurries and I said, isn't Jim Abrams just the godfather of everything? He goes, no. Ron Smith is the godfather. Much older, much different time, but he started pioneering the way of how he would get people together and they'd learn from each other.

This is something that I noticed the garage door industry didn't have but HVAC had. That's what drew me to HVAC and plumbing and HVAC or electrical so much. It sounds like they share numbers. They want to see each other win. They encourage each other to do better. The whole industry wins. And that's something that 30 years after Frank Plow started doing this with George Brazil and some of the guys and Jim Abrams before that. But like it's starting to catch on for some people, but very few. And the people that embrace these best practices and they get around the right people and they do shop tours and they're podcasting and they're reading books and they'll go out there today and buy H. Rex Bell's wealth and they'll study it.

They're the ones going to grow the fastest. They're the ones that are going to appreciate it the most and they're the ones that are going to give back to the people that helped them come up. So how do people get a Holy Lawrence if they want to reach out to a shop tour or just, you know, bend your ear? LinkedIn, but before that, let me just say this. Thank you for what you do because what you just described, you know, it used to be best practices group, used to be Nextar, it used to be Clockwork Home Services and the success group, all of that kind of stuff.

And then all of a sudden, there were a bunch of podcasts. And that's, I think, when we really started to see contractors want to help each other. And it changed like all of that really changed things. And there were more conferences and there was just there's there's more and more and more there's so much more available now than when I started in the industry. So anyway, thanks for what you do because you know, on the back episodes of your podcast, I've been able to go back and just like it's freebies, right?

It's great advice. You're having conversations with the leaders in the industry. So thanks because all of us, you know, we pick up this stuff and you know, you're out there doing the hard work. So thanks for what you do. I can be reached on LinkedIn. Lawrence Castillo, C-A-S-T-I-L-L-O. And finally, the way I close it out, is there something we missed something heavy on your mind something you feel like the listeners got to hear right now? I'm just going to turn it over to you. You know, these podcasts are always for the contractors to listen to. And I, you know,

in the spirit of giving, I've always I, I had great mentors. And that's why I do these podcasts is because anything that I have that might be of value, I'd like to share it and, you know, do the same thing that that that you're doing. And the people that host these podcasts, they're just trying to get the information out there so that other people have access to it. I'm always happy to help, right? You know, if I hadn't had the exposure to the stuff that Mr. Abrams or Leland Smith had taught me, then the businesses that I ran would have just continued to be small businesses, you know, without much change. And because I had exposure, I was able to impact those businesses. So I think that, you know, without much change. And because I had exposure, I was able to impact those businesses. So I think that, you know,

for the people that are out there to be able to listen to the things that we say today or listen to the things that you interview people about, it really, it helps. So I'm always happy to help. I think that, you know, for the little contractor out there who's doing a million bucks or 2 million bucks and

who's going to lay out a bunch of money to wrap his trucks and going to join every best practices group and drain his bank account because he wants to do what everybody else is doing on the podcast, they always have to remember that the people that are on these podcasts, these are people that have 10 and 20 and $50 million shops that can afford to do these things. And that sometimes when you're a small contractor, you've just got to work hard, right? You've just got to work hard and put your nose down

and your trucks may not look great and you may not be able to afford the fanciest computer program. And you may not be able to afford the fanciest computer program, and you may not be able to fly to all the conferences, but if you work hard and recruit some people in and have some processes and procedure, at the end of a couple of years, you're going to have a little bit extra in the bank where you can start to think about doing the stuff that you hear about on the podcast. So I think

that for the small contractors, it's great exposure, but no one should be running out to buy a fleet of vans and, you know, spend hundreds of $1,000 on wraps or, you know, to buy 50 billboards, right, these guys, they have to, they have to put in the time. And, you those lessons and then you can, then you can, down the road, you can go ahead and start to partake in all the other stuff and spend a little money on the business once you've worked in the business. I love that lesson because, and I just want to elaborate a tiny bit, is I went through

all the hard mistakes. I went to the first prong of the ladder and made so many mistakes. That ladder, that prong, I was not ready to go to the next step. And if I did, if somebody would have loaned me money, I would have lost it. I was not ready. I didn't have the maturity in business. So I had to go through the cuts and the bruises and the scars. And then I was ready for the next step. And then the next step. So

everybody says, yeah, if I knew then what I knew now, the fact is it's through experience and failure and falling forward. And so happy all these mistakes. I am a series of mistakes. And that's what I try to highlight in the podcast, not all the glory days. I'm an overnight success of two decades. But Lawrence, I really appreciate you doing this. I know you're a busy guy. You got a shop tour today. You're running a lot of businesses.

I look forward to seeing you. I'd love to have you out anytime you want to come out to Arizona. You come stay with me. I'll feed you. We've got some great restaurants out here. Next time I'm in SoCal, you'll be the first one to look up. For sure. For sure.

We'd love to come out and see it. I've heard so much about it. And yeah, when you come to Los Angeles, let me know and we'll show you a good time out here. Brilliant. Well, thanks for doing this. Hopefully the listeners, you got a good experience here. One of the things that Lauren said is he focused on reviews.

So selfishly, if you like this podcast, you love Lawrence, you think highly of me, leave a review, share the podcast, let other people know that you're listening to it. I don't make any money off of this. I just I'm hoping to deliver more and more value getting guys like Lawrence on here. So I hope you're having a great day. And thank you, Lawrence, once again. Make it a great week. 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 help 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.