The Home Service Expert Podcast - Secrets of the $500M Goliath of the Home Service Industry

Episode Date: December 8, 2023

Frank DiMarco is the Chief Executive Officer of Service Champions Group. Prior to taking over the company, he was Service Champions’ Chief Operating Officer from 2018 and brings over 30 years of operational experience in the home services industry, including serving as Vice President of Operations with Horizons Services and Regional Manager with Goodman. Over the years, he has brought foresight, integrity, and tenacity in delivering customers the absolute best home service experience. In this episode, we talked about growth strategies, operations, business acquisition...

But to your question on integration, we are very slow and steady. We have a checklist and we're careful about it because you can't give too many things to the companies or the GMs. It's not because they're not intelligent, they can't run it. It's because they're trying to run their business while they're doing all these other things and managing the heads of the people that are asking, why are we doing this? If it impacts them on which we just try to avoid. And then over time, we'll say, do you think that's the best model? If you do, great.

Does that work in your market? If you don't, what would you like to improve? And that's when you see the business is really... It takes a year, 18 months, some sooner, some longer. But to your point, none of it's easy. I mean, none of it's easy. This game, probably same for you, Tommy, it is a 90% headspace game. It's 10% processes and procedures. But if their heads are in the wrong spot, the greatest salesmen, the best GMs, the best technicians, when their head gets screwed up, it gets real expensive for us. And our job is really just to kind of make sure that they're in a good place. 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 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. Very excited to have Frank on the podcast. Frank DiMarco is an expert in home service operations management. He's based in Newport Beach. He's the CEO of Service Champions Plumbing and Heating. He was the COO from May 2028, four years, from 2018 to 2022. And then you worked with David Geiger at Horizon from 2008 to 2014.

Prior to becoming CEO, Frank led the service champions group as chief operating officer from 2018 and brings over 30 years of operational excellence in the home services industry, including serving as vice president of operations with Horizon Services and regional manager with Goodman. He has a BS in Business Administration from John Carroll University. Over the years, he has brought foresight, integrity, and tenacity in delivering customers the absolute best home service experience. Frank, glad to have you. Who wrote that, Tommy? It must have been somebody out of our marketing department.

I'm pretty humble. That's a big phrase for me. You're always dressed to the T. You could always catch me in my black A1 shirt. Listen to your stuff, Tommy. You don't have a lot of decisions you make. You wear the same shirts, right, in your morning. It's efficient.

Now, look, I don't do that. I grew up wearing shirts and ties of my father doing this and jackets. So I think your approach is smarter, but nonetheless, yeah, I'm always in a, in a jacket every day. I love what you guys are doing. You know, I got, I had a guy come in for lunch and he goes, Hey man, he's got a corporate job. He's making three 50 a year. He goes, I'm thinking about doing HVAC. I said, yeah. I just talked to another guy raising a fund for 150 million. I'm like, HVAC is it. I'm like, everybody's getting into HVAC. Grant Cardone's getting into HVAC. You got to know when the real estate guys started looking into HVAC. It's crazy to me, but I also know behind the scenes what's going on, that it's not been a great year for budgets, especially in California. I don't know. I don't have any

insight to where you guys are at. I never asked you about that before we started, but it's pretty interesting to see what's going on out there. I'd love to hear first and foremost, tell us where you kind of grew up in the home service industry, what it was like working at Horizon, why you decided to make the move, what's going on with the PE group, what your goals are. Then we'll start talking about where we're at today in this environment. Yeah. Yeah. Look, I'm a third generation doing heating and air conditioning and plumbing. I grew up in suburban Cleveland, Ohio, and my grandfather did this industry and my dad, so my mother's father actually, and then my dad went to work for him. And my brother and I, I joke, I'm 49. And my brother and I joke, we've been

doing this for like, since we were like seven, he's three years old and me, I joke, I'm 49. And my brother and I joke, we've been doing this since we were seven. He's three years old and me, he was 10. My father would drive us into the office and make us stack sheet metal parts and put the elbows together and sweep up. And that's where we started. It sounds silly. But my father believed I did not have any cushy jobs, my brother and I. I mean, we had to do every one of the jobs that the business you could do.

He said, in order to learn this, you have to do it. And nobody really cared at all that our last name was on the business. So I did everything from working in the warehouse to service, to literally running service calls, to installing, to on-call at night. We did residential and commercial. And at the time, it was terrible. My father just didn't want to hear it. You worked hard. That's what you did. My father grew a business to what he was capable of doing and what was his comfort level. Always made a lot of money. My father believed he had to make money 12 months out of the year. Didn't care about the weather. Didn't care about anything. And he was always

very profitable. The businesses were smaller than what I deal with today by... But at that time, you're talking back in the late 90s, there weren't $100 million residential businesses hanging around. Yeah, the Isaac Brothers in New York, and you had some other bigger guys, but they were 20 million at the time. You thought that was huge. But we sold the business to... At that time, ultimately, Lenox, but it turned out to be Service Experts. It was third quarter 99. My father built a really good business and sold to them. And, you know, Leland Smith, who founded Service Champions, says it this way. He said, Frank, all the owners quit. They just didn't tell anybody. You know, the deals went bad or they took stock and the stock

didn't pan out. So, you know, without getting into too much detail about how I got to different places, I ultimately put my hand up and said, Hey, I know how to run these. My father said, Hey, you should go out and see what else is out there. I don't want to see you leave Cleveland, but there's a lot. This is why we sold the business. And so I had a number of different moves in the country running things for service experts. And ultimately, at the end of the day, just thought service experts had changed their mind a bunch of times on whether they want to be residential or commercial.

And I actually had a commercial background as well as residential. And I got a phone call one day from a company called Blue Dot Services. I think somebody said, knows who you are. Well, they knew my father. The reason they knew my father was because one of his original business partners, a guy named Alan Mintz, brought these deals through Blue Dot. And it's a long, much longer story than this podcast can handle. But ultimately, he saw my name and said, we know Frank DeMarco. And he said, no, this guy's way younger. They took a job with Blue Dot Services. And little did I know that the bulk of those guys are good friends today. They're running some of the largest companies in the country. The RVPs at the time were Ken Haynes, Paul Kelly, Chris Leboeuf.

They were the foundations of the largest consolidators that there are today in PE-backed firms. I mean, Paul running the largest, as far as I know, largest residential business in the U.S. with Parker and Sons. Ken had Cool Ray. Chris Leboef was my boss. He had Dan Howard Plumbing. That was the start of Turnpoint. So here were all these guys that you got to know. And then I went off and had two bouts with service experts running their businesses.

And that was after the Blue Dot kind of bought a business in a fire sale from them, sold it a year later, and wasn't sure if I even wanted to stay in HVAC and plumbing. I just, nobody seemed to be doing it well. I went to work for Goodman for one year, and I realized that just wasn't my thing. I'm used to getting up at 4.30 or 5 every morning, and I'm doing 110 miles an hour with 4,000 moving parts. I just like it that way. That's

contracting to me, and I love the people side of the business. Manufacturing was a little more... It's not exactly like this, but it's a little more 8 to 5. Weekends are calm. I'm not saying it's not difficult. I'm just saying it's a different business. And I ran into Mark Aiken, who I knew, got to know him and Dave just briefly in my stint with Blue Dot. And they wanted to buy Goodman Equipment. So Mark Aiken has me come out and I go to lunch with him. And we have a three-hour lunch. It feels like an interview. And it was. He calls me a week later. And this is around Thanksgiving of 2008. And he says, look, I don't really want to buy the equipment. But you have a really cool background. We're trying to get something up

and going in Pennsylvania. And we've struggled with it. We've had like four GMs. And you seem to fit the bill. And that was really it. He said, I want you to come work for me. And at the time I said, I don't really have any interest, Mark. You have a really small operation in Pennsylvania. He says, well, I'll let you get in the Delaware piece. And that was the start really. That was really what defined kind of what I did. I had run big stuff, upstate New York,

company called Roland G. Down. That was 25 million. I'd run bigger stuff, but Horizon was already 28 million when I got there in 2008. Little did I know, in 2014 when I left there, it was $102 or $104 million, something like that. Didn't buy anything. All organic growth. And so those runs are really tough. But you got to have a combination. You got to have owners that are risk takers that believe in what they're doing.

And Dave Geiger is still a good friend of mine and a mentor. And the story there was, look, Dave knew I wanted to be an owner. And there were some things that weren't under Mark or Dave's control that were going on with the business, but they're personalized. And I wanted to be an owner.

I knew what was coming. We would see it again. It's not like I was that smart, but you could tell some way these were gonna, they were just getting bigger. You could just hear, and we were in a peer group with Leland Smith and Kevin Comerford and Ken Haynes for a bit,

Dewey Jenkins. These were the big companies now in the country. And they all shared ideas and shared financials. And so I left because I really wanted to buy something, looked at a couple of different businesses, ultimately moved to Denver. It was not a good outcome. I tried to buy a business.

It didn't go well. I just didn't know what I didn't know. Dave was going to try to help me buy that business, Dave Geiger. And the story is it didn't end well. It actually ended... I'll be honest. Everybody knows me. I'm open with my story. It ended so poorly. I lost all my money. I lost all the money I'd worked my whole life for and didn't have a deal and had three kids and wasn't sure I was going to pay the rent and had debt because I was trying to put money into this company. And I won't spend any detail on this. And I have some really good relationships, but I think that's all you have in this world is your handshake and what you do and what do people think of you. And you got to work hard. You got to work your ass off every day. You got to go get it. The world doesn't owe you anything. And I woke up February 1st of 2016. I thought I was going in to sign a

letter of intent. I walked out of the building and that was that. I remember Dave Geiger calling me after I had gotten to California. I was consulting with another business, ultimately joined with Leland. I knew Leland through that peer group. I had met him 10 years earlier. And God love Leland Smith. I asked him to borrow $5 million. I had no money. I asked him to borrow $5 million to buy a company. Dave couldn't give me the money because he had a non-compete. He had already sold the Sun Capital. And instead of Leland Smith saying, you're out of your mind or why are you calling me? He was like, what are you trying to do? And I said, look, I think I see what's coming. You see what happened with Dave. I think we can grow this and sell it. Ultimately, he didn't give me the money for the business. It wasn't because of that. He said, look, I think I see what's coming. You see what happened with Dave. I think we can grow this and sell it. Ultimately, he didn't give me the money for the business.

It wasn't because of that. He said, I want you to join my company. And ultimately, we're going to open a branch in Los Angeles under Service Champions. And he had a good general manager and operations manager. But Leland always believed his business could do more. And it was about $40 million when I joined. And long story short, I was there for two weeks. He calls me for dinner.

And he says, listen, you're really good at this. You've run bigger stuff. I need you to run this company. I know what I agreed to, but I need you to run this company. I took over four months later. That was the end of 18. I started in May, right around my birthday. Took over in October as the GM. And by May of 2019, one year after I started with them, we sold the business to Center Oak Capital out of

Dallas. And the goal was a three to five-year hold. Get the business up to 50, 60 million in EBITDA and sell it. And Leland tells a story, but it was a hot time to be involved in that. And again, I give Leland all the credit for the foresight. We built a $250 million business by buying stuff. We didn't add one body to do it. And I had the luxury. I did all the deals with Leland all the credit for the foresight. We built a $250 million business by buying stuff. We didn't add one body to do it. And I had the luxury. I did all the deals with Leland and got to integrate those companies. And then along came Odyssey Investment 18 months later,

December 31st, we closed with them in 2020. And without getting too into the weeds on where we're at today, it's a massive business. One, I'm learning how to run and creating a good corporation with back office help and support, but letting entrepreneurs run businesses. But our goal is to be a billion.

We're closer to the billion than we are the 500 million. I'll just say that. And anybody who wants to be a platform, here's what I'd tell me. You know this, Tommy. Anybody who says they want to be a platform, I tell them, call me. i'll tell you how easy it is

it is anything tommy but easy it is you know i'm a big movie guy and sports guy but like it all looks good when it's just like yeah we'll just go out and buy some companies i know some guys and we can buy them in today's environment ken haynes used to give this gave this statistic i think you were there tommy at the RhinoX probably three years ago now. Ken Haynes said when we started this, there was like four or five PE groups total. And now there's over 100 in the HVAC and plumbing space. Good news is it's a hot area to be in. You know, bad news is some of these are, you know, we can't have any of them fail.

And there's some deals that were written while rates were at zero and rates are up and those loans got big. And I hope I'm wrong, but you gotta really know what you're doing to run these. You gotta have, the PE firms will teach a lot in a hurry on how they look at these deals. And we're lucky, I love Odyssey. They're really great partners.

These guys, they're teaching us to run the business. They let us run it, but they give us our advice. We're open-minded as to how to create a bigger business. But you fast forward into a year like you were talking about bringing us to present. We've been good and we think we've been a little bit lucky, but we don't have the luxury in most of our businesses of weather. Not all of our markets, but many of them because we're based in California, Nevada, Phoenix. Now we have Seattle, Denver, Texas, Austin, Texas, Cincinnati. But our business, we didn't brag about it, but we're up pretty good for the year. And I think if can you know talking to my peers that do this are

like listen you must be doing something right because we're all getting our asses kicked it's not because they're not good operators it's just it's a tough environment to operate in we have the club base we have has largely saved us you know 115 000 paying monthly customers across the brands but that's helped us but it has been an incredibly challenging year. I mean, there hasn't been really but a 30-day break to catch your breath. And that was probably from mid-July to mid-August. That was it. And so I know it. Everybody's trying to figure it out. We're all looking at EBITDA and there's bills to pay. And so we have felt fortunate. We think we have, like everybody does, there's some great operators in this business. All the platforms

have them. But we also didn't buy anything. We were very picky as to what we invested in. And so the 18 brands that we have today, we have high-end people running those companies. We have four regional vice presidents, really division presidents going into next year that run those. I manage those guys, but I've known them for a long time. And to me, they're the best of the best. We have a thin infrastructure, but they're very well-versed. But yeah, look, it's been a tough year. We've fared well and we're humble about how it's gone for us, but it has not been a break. September was, I think, was the first real, real challenging, tough comp for us

because last September, for most of us, at least in the West, it was blistering and we didn't have much of a summer. And then we saw this drop off with you've got rates going through the ceiling, two wars going on, people are unsure what's happening, finance deals getting declined more. So we are focused on blocking and tackling, watching our expenses. Look, we want to grow the business, but if we're struggling to do that, we're going to be very careful with how we spend our money and watch our nickels and dimes. So that kind of is the story bringing us the present, but it's been a fun run for me. And I think the one thing, it's funny you talk about history, and I'm pretty open with it. I'll never

forget Dave Geiger called me and he said, I bet you want to call where the deal went bad and call around and call those people. And I said, no, I'm going to send them a thank you note because I'm worth 20 times what I would have been had I stayed doing what they're doing. That's how you got to look at life. You can't sit around and say, what happened? You got to get up, you got to go after it. And you can't tell you, nobody wants to hear your tale of why your life shit. They don't want to hear it. I think people like a success story. They like a failure story. It seems like better. But I get up every day.

Everybody knows me, knows I have a list. And everybody says, what's on the list? And I said, it's not people I'm angry with. But I'll tell you what, I get up every day and I jump out of bed. I love what I do. I love the people I work with. But if you're on my list, you can't get off my list. It's motivation for me to do more.

You told me I couldn't make it. I couldn't do it, et cetera. And good luck with that philosophy with me. I know I'm a smart guy, but I'm not the smartest guy in the room. But I'll tell you what, you're not going to outwork me. You just, you won't outwork me. And it's, well, my father, you know, I go back to how I started. You just, I pride myself in that work ethic and we're going to figure it out. We're going to treat people well. We're going to treat people well. We're going to do what we say. We're going to try to help people where we can.

I think if you do all those things every day in business, however your personal life, you'll get to where you want to get to. But you can't see the path. So that's kind of the summary. No, it's great. I love the story. I mean, I was going to ask you, Dave Geiger, Leland Smith, two completely different people. Yes. What would you say? Obviously, there's great qualities. I really want to look at the different management style and just kind of understand the different leadership. It's a good question. Two legendary guys in the industry. I mean, there's definitely a few of

them and you can go back to... But with Dave, when I was with him, it was Mark Akin, Dave Geiger, and two polar opposite personalities. But the debate and the passion drove the business. There was just two different ways to look at it. But I learned... Dave would always have this very calm nature about him even when you know it was really tough we had a i'll never forget we had a great year in 2010 there was a federal tax credit a bunch of jobs getting pulled into 2010 we go into 2011 we invest in this big building in the main branch now i'm in in pennsylvania and it like it the economy seems just like shut off like the phones aren't even ringing. This business now is, I don't know, we were probably 60 million at the time or something.

And people were like, man, it's mild. What are you going to do? And I won't forget, Dave gets up in an all-company meeting. And fortuitous or not, he just gets up in front of everybody. He says, I know it's tough. And he says, but the weather's going to come and we're going to be ready. And we just got to be careful till then. Dave just always had an incredible sense of calm about him. And he would always say, Frank, what's fair? I'd be frustrated with a guy coming in looking for

something or money or time off. And he'd say, Frank, I hear you. But what do you think is fair? And ask the person. Not everybody's going to answer you the way you think, but he always had this just great way to look at stuff. And it's ironic because I'll get to Leland in a second and how they're different, but Dave used to use this phrase and he'd say, Frank, this business is so simple. It's just not easy. It's a very simple business. It's just not easy to do every day. And he was just an incredible, calm, great leader, quiet. And what I love, I'll tell you probably more of the similarities, but Dave never believed, even though he was running one of the largest businesses at the time in the country, and really no acquisitions, no anything. He just always knew he could learn something, no matter if you were a

$2 million guy or a 20 or 80. He would always be like, boy, we could do it better, Frank. We could do more. And that's what I loved about him. He was a driver, but it wasn't like we suck. It was like you could always take something out of meeting somebody and listening to what their business is doing. And I love that about him. I'll give you the contrast to Leland. Leland, Dave was in the details, but L as hard as this fucking guy worked. Like, work, spend seven days a week and then maybe you'll get to where he was. But that's what he was. But he was so into the details, Leland, and the systems he had. He knew everything about everything in his business from who put the scrap in the wrong spot on Saturday to why somebody didn't spend enough time on a call to turn a lead. I mean, he was all over it all the time.

Not that Dave wasn't. Dave was just... By the way, Leland's business when I joined was 40. When I left Dave, it was 100. They're different levels of the business. So I would say that the difference was Leland wanted to be in the weeds, but then also realized he had to let some of that go, the detail and had to let somebody run the business. He just hadn't run into the right person. And I respected the hell out of who, I thought the business needed more Leland Smith. The guy who was before me, I think didn't want Leland as involved. But if you ever have met Leland, and you've met him, Tommy, and so many people have, he has this Kentucky kind of aw shucks about him, like, yeah, I'm just trying to make my way

in the world. But he was the most profitable business and the best model I had ever seen. And when I got to him, he said, Frank, you're looking at the business wrong. You're used to being in the East and you're waiting on weather. He said, you're in Southern California now. We don't have the weather. I have to wow people with a tune-up in customer service. You used to want to do a tune-up in 45 minutes. I'd fire somebody for doing it if they didn't spend an hour and a half to two hours. And so the model was just different. But Leland also had that sense of calm about him.

But you knew if Dave was frustrated, but you really knew if Leland, he'd be on you with emails on Sunday night, Saturday afternoon. But the man would do, both of them would do anything for you. I probably took more about how they operated personally than I did or as much as more about how they operated personally than I did

or as much as I did how they operated their businesses. But Leland always thought, just like Dave, Leland literally thought his business was broken every day. It's terrible. We suck. Now, he didn't tell his management team that. But as I got to know him, he'd be like, we're terrible at it. So I would say the contrast for definitely Leland was more in the weeds. And again, I want to be careful with that. It's not to say Dave didn't know what was going on in his company, but Leland wanted to know everything. The business was, again, smaller, but he was making as much money, I think, at the time at 40 as we were at 100. So the similarities, though, are way more. So would say, it's a simple business, not easy.

Leland says, Frank, it's easy. It's just easier not to do what we do. And that's why people aren't as good as us. But the similarity was, I'm open. How can I learn? I don't know enough about this business. We can learn from everybody. You got to share information.

And those were all good. Again, as much on the personal side of life as it was the business side. So I think I answered it, but there are more similarities than there are differences. But both just dynamic guys, but very quiet and very humble. They didn't want you to know.

You would never know if you met these guys what they're worth or what they've done. They're like, they'll sit next to you and have a drink and talk about life and that's what i love about them is they so many people today are so busy running around telling you who they are and what they do and my thing is i'm like these two mentors i had i'm like that i we got so much work to do like let's quit talking about how good we are let's talk about all the stuff we got to do so that was kind of my takeaway but two i was extremely fortunate to work for two of the best in the industry. I mean, they're just, and they're fantastic people. So I've been lucky to have that experience. And look,

it's helped me get to where I'm at today and all those learnings. And now we're having to put them to even more use with things as complex and different with these numbers we're dealing with in private equity. And we're learning from them, too. Yeah, it's remarkable. It's interesting just thinking about HVAC in the early 90s with Frank Blau and George Brazil and what those guys laid the foundation for. Yeah. I wouldn't be anywhere if I didn't make a trip to Keegan and Ken Goodrich and Ken Haynes. And I came out and visited you guys. And I'll tell you what, I took a lot out of that trip. I sat down with your marketing and I learned how much you guys mail to your current customer list. It was incredible.

I was like, what's your LSA, PPC, SEO? We didn't talk anything about that. They're like, oh, this person's on this type of mail. This person's on another type of mail. Then I went and saw the training and I spent quite a bit of time with your rehash team and your training team. Then you guys gave me an opportunity to sit down with you guys. But I left

there and that was the start of my 151 point tune-up that lasts a lot longer than a 15 minute. Thank you, ma'am. Let's tell you some shit. And then Leland said, hey, and it's the second time he told me to read the book. And I buy this book for everybody.

It's double your profits in six months or less by Bob. It's making the cuts necessary. And I think now more than ever, that book is necessary. Bob Pfeiffer, double your profits in six months or less, and just be conscious of the money. Because sometimes when you're growing a big business, you tend to say, we're just reinvesting in the company. But in fact, you're wasting a lot of money. You know, you, you guys, every time I've seen you, you're in a meeting working on a deal. It seems like, you know, I've grown mostly greenfield.

And I'll tell you what, a lot of HVAC guys are like, man, if I did garage doors, I'm like, no, no, no, no, no. I had an HVAC guy call me this morning. He said, I bought a company for 1.1 million. Would you buy it? And I'll give you six year terms. He goes, worst decision I ever made. He goes, I don't want to ever do garage tours again. And I'm not saying the great news is it's

still fairly low multiples. You know, we are one of the only aggregators, but I thought integrations were going to be so much easier. I thought deals were going to be like plentiful and they are, but I mean, you're trying to go back 30 years in hvac right trying to explain what ebitda is what an ad back is you know even or not or not compete is like kind of doesn't make sense to people and like and do they roll or not and then if they do roll you got to tell them the valuation of the company which is bad news because then they're like, how's it worth that much? Maybe I'm worth more. It's one of those things. It's not easy. And a lot of guys I meet, Frank, they say, I'm just going to do what you did. And I'm like, man, I was writing myself checks to make payroll 10 years ago. Like success is a lot of calculated

risks. Some of them all don't work out, but you got to be at the right place at the right time. You got to stay humble. You got to be around the right people. And I just, I really appreciated you guys opening the doors. And I took a lot, a lot away from that. And the service agreement game is strong. We're at 35,000 service agreements since I came and visited. Wow. I was at 200 before that. You've done a hell of a job that's for sure now it's all about the ltv right the lifetime value of those clients and building that because i don't have enough data to see and we're just getting to the point where we're getting really good at tracking equipment stuff that you guys have probably been doing for the last decade so one thing i see about leland is he's very very strict he doesn't give any of the top sales guys.

I mean, he does, but it's like, no, you're going to do it my way. And you can leave. And this is how we're going to do it. He doesn't bend for his top performers. And I think that's something that everybody should take is you just don't make exceptions. In HVAC, it's a dime. Somebody offers you an extra 10 grand, you're gone. And that's pretty you you see that my top guys won't

leave me for 10 grand because they know that it's all it's all lies most of the time people will give them i had a good guy leave he's back already that he got promised equity and a company and all this stuff and he was my best guy for turnovers right and we do that virtually and he's back and i love him and i wanted him back we went i went to his house for dinner and he says hey man i got lied to and i'm a big enough man to say it and i miss my family over there so but you know how you guys bought 18 companies tell me a little bit about integrations in your process. Cause I, I want to make sure the audience and the followers that they get a lot out of this and they understand that it's not just like you go buy companies. Yeah. There's a lot of shit you guys got to do. 18 companies is a lot. Yeah. Well, you know, first I would say the,

probably the more important statistic to know is we, we actually bought 21 businesses, but we knew that we were going to tuck a few of those in. So that's rare. That's not our thing. But we had a couple good opportunities to do it. But what I would say is the real statistic is we looked at 400. We talked to, visited, not just called, like talked to 400 to buy 21. So today, the way I look at it is we have such a... And don't get me wrong, I want to make this statement,

but we always have work to do in our companies. But I was really picky about the businesses because they have to fit together. And we have a lot of camaraderie. We built the business on the idea that they could share ideas. Not necessarily that they're the same, but our GMs all have a very good relationship. They're on a weekly call, our cadence is, how can we help if somebody's in your area or you want to go see an operation somewhere else? The best teams, at least for me and at least my experience is, they had to fit well in the system.

And they had to have the same DNA. They had to have an open mentality to... Not because we needed to change them, but were they interested in better pricing for equipment? Most would say, well, that's an easy one, Frank. Do they like a club program? Do they see the value in it? And so that's just the first place I'd start is that's how picky we are. We have a pristine portfolio of businesses. That's my personal opinion is we have great companies. Don't get me wrong. I have some peers that have great companies too.

I'm not saying we're the only one that way, but we're picky. And when you're operating at a good level, there's no reason to make a mistake or buy anything because you run into tough times. It's just harder to manage. We also have an appetite to buy stuff that's a little bit bigger. My belief is, you know, you said you were talking about the deal you're looking at now. Like for me to buy a smaller company, it's almost as much work as it is to buy a big one just to get the deal done.

And now that's not a problem. It's just if it's in a new market and it's not big enough and that management team isn't mature enough, we're going to have to spend a lot of time there. That's a time drag. It's a return on time is more we look at the business. Yeah, we look on return on investment.

We aren't as big on IRR. We understand it. But the time suck, you got to be real careful of. But the integration for us, our first thing is, we want to learn everything about them before we ask them to know anything about us. And you can only do so much through due diligence. But our first thing is just let the business settle back down. We're going to change the easy stuff, right? And integration with banking, et cetera, that has to happen when there's a change of ownership. For us, whether they're on service Titan or not, we'd like to take a look at it,

but we leave it kind of sit for 60 to 90 days, almost to the point where people are like, are you guys going to come back? There's a regional vice president, there's a president that sits over and wants to go in and meet everybody. But one thing we find is you have to let it just get settled back down because people just don't know. They've heard their buddy or somebody else tell a story on how it went bad, or they changed the pay plans, they fired people, they brought in people who weren't from the industry. And our thing is like, look, we're going to be able to talk to you about whatever you want to talk to, but let the business just kind of run like it did to show people we're not coming in to flip it upside down. That's not our model.

Usually what happened though is through due diligence, we're going to say, hey, look, we think that there's some great possible pickups for you when you looked at equipment pricing or purchasing power from supplies, et cetera, all the distributors. And those are very easy to do. Most people see the math and go, yeah, how quick can I do it? It's a no-brainer. We have great agreements with major manufacturers. So those are really easy. Then what we start to do is really just say, how can we help? If you're not in plumbing, do you want to get into it?

Ultimately, we'd like to get you into it. But do you want to look at your margins? Is it service? But we don't pick at them. We just start to ask questions. Do you want to visit? Get on calls? Do you want to understand about our training? We're proud of our training program. Leland started this thing, God, I keep saying it's probably 18 years now based on when he started it. Building our own technicians, plumbing, plumbers, plumbing safety

inspection. So our integration is very slow, calculated. We have a checklist. There's clearly, we've already done everything once the deal is done, but there's banking, IT, legal, insurance. We've got to get through that and we've got to get through it smoothly. And so we're a very much crawl, walk, run scenario. If somebody puts their hand up and says, I'd like to do more things, hey, great. Our division president will get in and take a look at it or help you with it. We view what we call our home office where I sit. And Odyssey uses this phrase, our private equity partner.

We are a servant-based culture. This is not a top-down organization where it's just do what we tell you. We are successful as we are because of the entrepreneurial spirit I believe in. I've watched enough consolidation, enough people do it wrong over my career. And there were some train wrecks for sure in the late 90s. Look, we have some great people running these businesses, great owners that moved on. Some, only a few still with us, but that was by design. And then management teams within that people elevate or we go get a general manager, but the team gravitates and says, we can do more.

And our businesses have done very, very well. But we are very subtle when we come in. We do not want to rock the boat too much. Look, we bought a great brand. We bought a business that was performing. Why would we go and screw it up? And look, there's a bunch of different philosophies. We're going to pay.

Certainly, we're probably known for paying fair to the upper end of the premium when we really want to get something. But they have to have the same mentality and DNA in their staff, which is we're open. We'd love to do more with this business. It's $20 million. We think it can be $50. And we have that expertise. We don't have all the answers, but we see around the corners or we see the potholes in the road just a little bit better because we've taken a lot of businesses from 15 to 40 and 20 to 60 and 40 to 100. And you name the numbers, we're not perfect.

We are not. We still make mistakes. But that integration is slow, steady, calculated. The GM runs the location. The vision president runs the GM. If it doesn't get past those two, forget it. It's not going in. We're going to talk to them about ideas,

but we will not force someone to do something. There are some necessary things when you transact that just have to be done, but that doesn't impact the field. You know, it doesn't, it may impact just how back office is done. You know, I'd like to thank the, this isn't a, certainly where I'm on, but it's not about me. I actually, I don't like my title because I grew up doing this. I want somebody, if I visit a center to be able to go in the back and grab a cup of coffee and see the guy on the dock and say, like, how's it going? And he may tell me it's going great. And he doesn't know who I am. He may say, like, the deliveries are always late every morning. Now, the GM probably knows. I'm using an example for effect. But we've got to be open to communication at all levels in this business.

I think it's what's a driver for us because everyone's got a great idea. But to your question on integration, we are very slow and steady. We have a checklist and we're careful about it because you can't give too many things to the companies or the GMs. It's not because they're not intelligent. They can't run it. It's because they're trying to run their business while they're doing all these other things and managing the heads of the people that are asking, why are we doing this?

If it impacts, and which we just try to avoid. And then over time, we'll say, do you think that's the best model? If you do, great. Does that work in your market? If you don't, what would you like to improve? And that's when you see the business is really... It takes a year, 18 months, some sooner, some longer. But to your point, none of it's easy. I mean, none of it's easy. This game, probably same for you, Tommy. It is a 90% headspace game.

It's 10% processes and procedures. But if their heads are in the wrong spot, the greatest salesman, the best GMs, the best technicians, when their head gets screwed up, it gets real expensive for us. And our job is really just to kind of make sure that they're in a good place. And we got to coach them and hold them accountable. And we're unapologetic for expectations is the phrase I use. That sounds like a really tough statement when I say it, but it's not meant to be. It's just, I'm not going to apologize for where I want to get to. What I'll tell you is, I will break my back to help you get to where you want to get to, but I'm not going to change my expectation. Right. And so integration is tough though. It's challenging because it's delicate. And yet at the same time, there's opportunity and we spend a lot of money investing in these businesses. And so you want to try to get the move sooner than later on

where you think you can pick up more return or grow or make more profit, etc. But it's, you know, I didn't probably articulate every step of that all that well, but we are careful with it. I'll tell you that. So I had Ken Haynes on the podcast probably a year ago and shares the same mindset of buy good businesses, let them operate. My biggest issue was when I was on this podcast and just looking at it from my lens, kind of the economies of scale is what I get. I don't buy businesses just because of the arbitrage. I buy them because there's room to grow and get higher percentages. And when I'm buying small companies, I look at, I don't really care what your EBIT is. I don't really care what anything is.

I look at four KPIs. If you're not spending a lot on marketing and your phone's ringing off the hook, I'm buying a great lead source. And most of the time, the guys are all going to come along with us because we're just going to train them a little more. We've got to make some price book adjustments. We've got to sell service agreements. We've got to do more service to sales. But first thing I'm doing is rebuilding all the marketing campaigns because there's none that exists. They got stickers. It's a completely different industry. So they got 30 years worth of stickers where they're getting a ton of calls or past clients. And, you know, I heard through the grapevine that you guys kind of went on a little hiatus of not buying until you got a little bit more uniformity throughout all the companies,

because maybe letting them operate two alone, but to kind of go into that and explain what exactly, if you don't mind. No, no, it's a good question. So end of 2021, it was our first full year with Odyssey. We'd invested in basically seven that year. I knew I was taking over as CEO really earlier than I actually did it. But Leland, it was an open conversation. We knew it. And what happens when the business gets really big, and I'm sure you've experienced this somewhere, is sometimes the business just outgrows people. It doesn't mean they can't stay on the team. It's just they can't

handle that position because it's just much larger to deal with. And so we had to go get a new CFO just that understood a business of this size. And so one of the things I asked before I took over and they knew the transition was coming, I said, guys, I needed some time to get my arms around these companies. In year one, when we transacted with Odyssey, there was our current CFO, myself, Katie Stern, who's our chief marketing officer, and Leland. That was it. We didn't add anybody. We added nine companies in the first year and then another seven. And I didn't have time. I'm trying to add RVPs and create a structure. But these guys don't even come on until mid-2021. And it was busy.

I mean, we went from $250 to nearly $400 million. And I was like, at the rate we're buying stuff, we kind of knew where we were heading. But I said, we've got to build some infrastructure. And Odyssey was fantastic. They're like, okay. Which they knew when they bought the business. And so I said, look, we got to be real. We got to slow down a bit. Not because I didn't... Everybody gets into this, let's just buy, buy, buy. And I was like, the field is feeling the fact that we don't have infrastructure. They can feel it. We don't have the support they need. You can just hear it in the calls. And then I bring these four RVPs on and we're sorting out who's running what business as we're adding companies. So yeah, we said, let's just catch our breath. And we basically

ran from the late fall. We did two deals in Arizona, great businesses with Howard and Scottsdale Air, kind of a package type deal, but they were separate businesses. And we took a break basically almost through almost most of the third quarter of 22. We had to get our arms around things. Now, fortunately, the businesses did well and we didn't have any problems, but we needed to really, we had, I had to revamp a C-suite. I needed kind of director level. And we were very conscious of what our home office or our corporate overhead is as a percent of how we run things. We get operating leverage because then when you build it, then you're just adding companies. You don't need to add the people. You know all this. But so we were, I was the one who just, you know, God love Leland. We joke. I just had dinner with him the other night, but he was just like,

just buy stuff. I was like, yeah, but I got to run it. Like I hear, like I, we have to have people to go help and support and transition them into new equipment products and things that they want that we told them we could give them. And I think it was one of the best moves we had. It took us out of the game for a bit. We were still looking, but we just, we said, we've got to do this part. And I believe that was the catalyst that put us in the position we are in 2023, where it was a tough year, but we had really built in. We were very focused on what we needed to do, but it took a whole nearly nine months of not buying anything to get focused and get structured and get a new CFO who was getting us more detailed information and better breakdowns on stuff and building a finance and FP&A division.

And it was just all that we had to do. And at the time, it was frustrating because you hear all these deals getting done and you're thinking we're losing ground. But now when I look back, our ability to buy is... We're lucky with our partner. We have money to go spend. We want to buy the right things. But if we hadn't slowed down, I'm not saying the outcome would have been bad. It just, it was, you could feel it kind of starting to get this big momentum. So for us, it will fall off. And so we didn't yank the parking brake per se, but we got hard on the brakes.

And we were like, I said, flat out, we got to get our arms around. So it was, again, little did I know, it was fortuitous just because now we got very stable. And then as people really, you felt them starting to struggle in 23, we felt like, oh, we're going to go buy stuff, which we did. We had some great deals this year with C-Town up in Seattle and Fetchatech in Vegas and really loved the businesses. And we had the money to go get and pay what was necessary to get great businesses. But we also had time to build infrastructure. So yeah, that's what happened with us. And it was, at the time, challenging because you wanted to buy. But at the same time, now I look back and I'm happy we did it the way we did it. And we feel like we had put the time and effort in with that infrastructure.

Now it's allowed us to have a, I would say, a solid 2023. Challenging, but solid 2023. And, you know, we see a headwind. I think there's going to be a headwind on that topic with in 2024. I think you're seeing little cracks in it right now, consumers. I don't know if it's a full-blown recession or what it is, but there's enough going on in the world where people are like, you know, either as hot as or as cold as it gets. And we don't, weather's still a factor. It's not the only one, but it's a factor.

That post-COVID glow is gone, or that COVID glow from people staying at home and spending money. And so the demand, the demand, we've got a really rapid business. And I don't think these times we went through everything with everybody was growing 20 and 30%. Hey, don't get me wrong. I think certain businesses can do that. We want to grow our businesses, but let's be focused on our costs. Let's be focused on our pricing. Let's not just grow our way past the problem because it'll, you'll get over your skis in a hurry doing that. I think a lot of people right now, they just assumed everything's going to be great like it was during COVID. Their budgets, they overshot. They said, if it keeps going like it's going, and it's talking to a buddy of mine that's got some inside information on thousands of companies,

and he said, there's no way the growth could continue at this rate or home service will be bigger than the GDP in the next seven years. Exactly. It's just not plausible. You know, when you were talking about the FP&A and getting the right CFO and the right team, this, and you probably think I'm crazy

to have it printed out, but I do a printed copy. This is just one month, one month, taking a deep dive into different projects and KPIs and financials. And they handed us 40 or 50 pages and we've since then built it to 200. And I don't know how big this thing's going to get.

But what I love about our partners is Quartec looks at these and they say, OK, the top two guys in the fund, they said, we took a deep dive into this. We figured out a way to make 10 more million dollars. And very easy things, accounts receivable. We got five full-time people. Have our installers collect. No bullshit, no excuses, or you don't get paid. We've got 2% going to bad debt. We want to get that to half a percent. We're doing 300 dry calls a week for warranties.

We were able to fix that down to 250 done virtually. These little things, if you're not looking at your burden costs and you don't have the right things and the right data, and it's such an unfair advantage because people don't understand what they... You don't know what you're looking at until you've got the data to make the decisions. It's KPI driven. We use this phrase, and Odyssey uses this, the data is what we use to forecast and look at the business.

But you can't take away the fact that we're from the industry and there's some things that aren't on the page and the trends, but the numbers don't lie. And if you ignore them and keep saying, yeah, we've done this, like it'll bite you because it's not the same. But we have tools now and data that look, there's pick your number, but there's 20 dials to turn on every company. There's more than that. But just use the example. It's which ones of the 20 do you touch and when do you touch them and how much do you turn them? And without data, that's been our biggest thing. Our CFO's 20 years, Johnson & Johnson, seven private equity firms. He's kick-ass and he's always,

always into trends and numbers, but he's relatable to what we do. Great personality. And he's taught me stuff. As long as I've been in this business, he's taught me stuff and said, Frank, have you thought about it this way or do you look at it that way?

But I agree with you. I mean, I'm sitting talking to you. I've got the division president next door because we're walking through every company pre-full budget template, even though they have the templates, as to what's it look like to you next year. I think we have to take a different look at what our expectations are on growth. We can still have great EBITDA and grow EBITDA at a better percentage than top-line growth. But we got to be really sharp at running these. And so we're constantly digging into that. And we got to run the businesses

every day. But I'm with you. That's where I spend my time besides M&A is really the focus on the trend and what we need to do. And then what do we think the next 6, 12, and 18 and 24 months holds? I don't run the business at all day to day. I'm in a couple of meetings a week. I'm not even looking at next year. I'm looking at five years, 10 years. I'm looking at creating the largest, most trusted garage door company in North America and beyond.

And I don't have a two-year plan. I have a 10-year plan. I mean, it's 10 years is a long time out, but just some of the innovations we're working on are just crazy. It's survival of the fittest. And I'm looking at things that we can control within our four walls. I was negotiating with my manufacturers eight months ago. I was working on a new line for storage racks that took 18 months. And I know none of these things come easy. That's why nobody else wants to do them. if it was easy everybody would be doing it so i go after the hard things like service calls to door sales service agreements getting customers financed for garage doors it's just people are like you're

you're high that's not gonna happen and i'm like okay well i'm glad everybody's got that attitude i don't have a list i should probably put a list of all the people. Yeah, I love my list. Frank, I love this podcast, man. I really, I enjoy hearing your story and what you guys are doing. Sounds like everybody says Leland's a service agreement guy. Service Champions is the service agreement company.

And some people just don't feel the same way about that. I just think any type of seasonal, I believe in it for garage doors, and it's not really a seasonal business. It is in the winter. You're not replacing as many garage doors in Michigan and Wisconsin. But, you know, we got to run 18,000 jobs a month to be where we're at. Like, I don't think you guys are running 18,000 jobs, and you guys are probably doing a little under four times what we're doing.

And so I kind of understand what you guys got to deal with. under four times what we're doing. And so I kind of understand what you guys got to deal with. I just want to get my ticket up now. Like there's only three ways to make money, Frank. And I think, you know, these three ways you charge more to your current customers, you keep them coming back more often with service agreements, or you get new customers. And that's why every day I'm in my CMO's office working with him because that's my forte. It's like, we're going to drive leads and we're going to raise the average ticket and we're going to continue to do service agreements. And we just hired a full-time person for email and SMS. That's all she's going to be doing. It's like, I got 800,000 people in

my database, not even including the acquisitions. You look at a guy like Ken Goodrich, he's all about reactivating that list, using your list, buying that customer base. And when I turn these knobs, I'm very pleased with where we're at, but man, there's so much work. I don't want to pat on the back. I want to say, great job, guys. Now we got to, it's so hard to celebrate.

It's so hard to celebrate. So Frank, I got to figure out how to buy this company and I got to, I got to come to Jesus meeting here. The one I was talking about before, but if you had a couple of books that stood out to you and your experience of being an amazing leader, you are in charge of, you know, seven, $800 million a year. What are those books that really made you think differently you know i'd say one is um for me it's more about kind of i'd say the first one for me is like there's a simon sinek book on just what's your why yep to me if you don't know why the hell you

get up every day and do what you do and everyone's got their own thing. And it's not my list. It's my three girls. It's wanting to create... It's funny you said the largest and you are doing it. Look, we're one of the bigger companies. For me, I just want to be the very best home services business in the United States. I don't need to be the biggest, but I certainly want to be the best. And we'll get there. But I think have a reason you're coming in every day is one. I would say, what's your why? Everybody's got to have one. To me, outliers is two. Indeed, say why. You read into what's in there and how people get to where they're at and what it takes to get there. It's just an interesting book to me when you think about that. Good to

great. One of my favorites, just it's what it takes to go from one to the next. And ultimately, then you just... For me, the other one I use is... We give this one out. It's just the 100-day plan. When we take over a business, what's the first 100 days? And we look at it that way. And I'm sure there's some others, but those are the ones that kind of stick out to me in terms of leadership, what motivates and brings you in every day. We can figure out the business. But if you don't really have a passion for what we're doing, then we're in a people business. We happen to do heating, air conditioning, plumbing, and electrical, but we're in a people business. We happen to do heating, air conditioning, plumbing, and electrical, but like we're in a people business. And so those are more interesting to me.

I interviewed my top tech. He's at 37% service to sales in garage doors. That's unheard of. And he wasn't still outdoors till 90 days ago. And he was still double everybody else. And he said, I just more passionate. Like I care. Like I tell everybody, I make a lot of money.

I show them my garage and my car. I talk about pinnacle. I'm almost done. And the pinnacle trip is where all of our top guys go each year. Like he's not ashamed of the price. There is a lot of guys sell out of their own pocket. He goes, I don't do that. I mean, he's a unicorn and I just want to bring everybody the passion. And that's what I think I get ahead is I'm super passionate about this business. Frank, if someone wants to reach out to you, maybe they want to sell you their business. What's the best way to do that? Yeah. So funny you said we had a kind of a we had a change in the name.

So it's Champions Group now. So it's Champions Group Holdings. We want to keep the heritage of the business while not calling it Service Champions. Service Champions is a brand we own, one that Leland started. You can go. I'll certainly give my email out. It's the best place. And we have a head of M&A who does it. But fdemarco at championsgh.com.

That's Champions Group Holdings, but it's just GH. You can go, you can find us on our partner page, but that's the best one. Just email me directly. I'll get you to the person in touch. But I also want to meet people that do it. I'm in the process in M&A. I want people to know my story. I want to know their story. Certainly reach out. But if you go to championsgh.com, you'll see our partner page. You'll talk about the companies we own, our leadership team. But please email me directly.

I'm with you, Tommy. I'm in the business to the degree that I want to see what's going on, but I got four division presidents that worry about the day-to-day. I want to do M&A and look at the strategy for the business, but I'm happy to take a direct email. Jameson McLaughlin, he's our VP of M&A, but I'll get him the info. I just say vet the people. It's the same message you hear from all the, I think the good operators, not that there's not good ones, but there's other more seasoned ones. It's just, there's one out there. Just make sure you know what you want

for your company and your people. And you'll find the right personality and deal match that you want. But we're happy to always give our opinion, take a look at a business, even if it has nothing to do with us or you just want to hear about what the options are, certainly use my email.

Well, Frank, I am going to come out again, see what you guys are up to. Probably won't be until first quarter, but I appreciate you taking the time. And I know based on all the comments and the 75 people watching live and, you know, I will say this month we're over 100,000 downloads, which is great for the month. And now we're number 25 in all of business in Apple. Okay. Yeah. You know, I'll get to top 10. I've got my own KPIs for the podcast.

But, Frank, I really appreciate it, man. And listen, I want to do another one. I've cut short today, but you're fantastic. Tommy, thanks for having me, man. Congrats on all you've done. You've certainly been your own trendsetter learning from all these people and what you've done. But it's great to talk with you.

Love what you're doing. And thanks for having me on. Yeah, we'll be in touch, brother. I appreciate it. You have a fantastic day. You too. Take care. Thanks.

See you, buddy. Talk to you. 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.