Latest / Owned and Operated - A Plumbing, Electrical, and HVAC Business Growth Podcast / How We’d Turn $5M Into $10M in 12 Months

Transcript

How We’d Turn $5M Into $10M in 12 Months · Owned and Operated - A Plumbing, Electrical, and HVAC Business Growth Podcast

0:00
SPEAKER_00: Five million dollar business.
0:01
SPEAKER_00: We have a million bucks and we want to grow it.
0:05
SPEAKER_01: First thing I do is going and finding the next big channel.
0:09
SPEAKER_00: You only need one channel because you will see a high rate of return in the first year of using that channel.
0:16
SPEAKER_01: The next step where you just talked about is hiring sales guys and you put people in charge of growing the business and incentivize them properly.
0:23
SPEAKER_00: But I think you could get to run rate 10 million in 12 months, maybe even sooner.
0:27
SPEAKER_01: One year target.
0:28
SPEAKER_01: I think that that's realistic is a 10 million run rate in one year.
0:30
SPEAKER_00: I actually think the bigger challenge is going to be welcome back to Own and Operated, a top hundred and thirty.
0:46
SPEAKER_00: It changes every day, guys.
0:47
SPEAKER_00: Uh Business and Entrepreneurship Podcast.
0:51
SPEAKER_00: We had some great numbers last week.
0:52
SPEAKER_00: You'd love to see it.
0:53
SPEAKER_00: Uh on the show, we talk home service businesses.
0:56
SPEAKER_00: We talk about our own home service business.
0:57
SPEAKER_00: We talk about acquisitions when I'm allowed, which today I'm not allowed to, and we talk about the industry in general.
1:03
SPEAKER_00: So if you're into home service, you're in the right spot.
1:07
SPEAKER_00: I have on with me my very frequent co-host Jack Carr.
1:12
SPEAKER_00: Yeah, I thought you'd like to change.
1:14
SPEAKER_00: Uh welcome back.
1:16
SPEAKER_01: Welcome back to Owned and Operated.
1:19
SPEAKER_01: Welcome back.
1:20
SPEAKER_01: Smooth jazz.
1:22
SPEAKER_01: Dude, what's going on?
1:23
SPEAKER_00: Um, surviving August.
1:25
SPEAKER_00: Uh August is one of those months where you don't want to look at sales, but you have to look at sales because you run a business.
1:36
SPEAKER_00: Um but that's August.
1:39
SPEAKER_00: That's August.
1:41
SPEAKER_00: So, you know, we're almost there.
1:43
SPEAKER_00: Uh, we're limping towards September.
1:45
SPEAKER_00: I think the the nice thing, and you know, you asked what's going on, and I'm giving you a business update.
1:50
SPEAKER_00: The nice thing is it is cold.
1:52
SPEAKER_00: I don't know what it's like in Tennessee, but like, dude, I'm in freaking sweater weather today.
1:56
SPEAKER_00: It's 60 degrees.
1:58
SPEAKER_00: Um, so I actually wonder if we're gonna have an early heating season.
2:02
SPEAKER_00: Because I I we were about to turn our heat on last night.
2:05
SPEAKER_01: Yeah, we'll see, because it's still 90.
2:07
SPEAKER_01: It'll get 90 today, but we finally dropped the nights have dropped out, though.
2:11
SPEAKER_01: So it was like 75 at night every night, and now it's down into the 60s, which is like it's long enough to let your house cool down, right?
2:18
SPEAKER_01: So yeah, hurt sales.
2:20
SPEAKER_00: Yeah, yeah.
2:21
SPEAKER_00: Yeah.
2:23
SPEAKER_00: Um, all right.
2:24
SPEAKER_00: Today we are going to do a variation of our episode last week.
2:30
SPEAKER_00: Uh, so our prompt that we've been given, we are handed the exact same company.
2:37
SPEAKER_00: We're Nepo babies.
2:39
SPEAKER_00: Five million revenue, fifteen percent EBITDA, which honestly that's a lot as like a percentage of EBITDA for a five million.
2:47
SPEAKER_00: I don't know that I could count on one hand how many five million revenue businesses that I've seen run at 15% net margin.
2:54
SPEAKER_00: It's like three.
2:56
SPEAKER_00: Uh, eight service trucks.
2:58
SPEAKER_00: How does that economic?
2:59
SPEAKER_00: Okay, we got to work on this.
3:00
SPEAKER_01: Yeah, there's a few.
3:02
SPEAKER_00: Yeah, I'm like, damn, okay, this is a healthy business.
3:05
SPEAKER_00: Uh one location, healthy team in operations, no major fires to fix.
3:12
SPEAKER_00: That would be the day.
3:14
SPEAKER_00: And uh we have been given one million of cash specifically earmarked for growth.
3:22
SPEAKER_01: Boom.
3:23
SPEAKER_01: 2020 again.
3:24
SPEAKER_01: It hits.
3:25
SPEAKER_01: You got your what is it, the PPP money.
3:28
SPEAKER_01: You got your free PPP money coming in, a million dollars that you're just gonna dump into growth.
3:33
SPEAKER_00: Um I think I I do want to call out on that really quick.
3:37
SPEAKER_00: Um I don't know, I don't know if I've ever talked about this on the show.
3:43
SPEAKER_00: Have I ever talked about this on the show?
3:44
SPEAKER_01: We've talked about it.
3:45
SPEAKER_01: I don't know if we've talked about it live.
3:47
SPEAKER_01: I think we've mentioned it.
3:49
SPEAKER_00: Yeah.
3:50
SPEAKER_00: PPP was crazy.
3:54
SPEAKER_01: Yeah, I mean it's free money.
3:57
SPEAKER_01: Or at least a 0% loan, but it was still like really cheap capital that flooded into a market.
4:03
SPEAKER_00: That was crazy.
4:04
SPEAKER_00: And I think it for some reason, and I don't totally understand why, I feel like it makes people feel less smart, but for some reason nobody talks about PPP as a major part of their growth story during the COVID years.
4:22
SPEAKER_00: Everyone's like, yeah, consumer demand got pulled up, and the macro was great, and people were in their house more.
4:28
SPEAKER_00: And I'm like, yeah, totally.
4:30
SPEAKER_00: All of that is totally real.
4:32
SPEAKER_00: Also, if you went into PPP with a$20 million business, you got handed like two and a half million fucking dollars.
4:39
SPEAKER_00: Like, let's not ignore that fact, but everybody chooses to ignore that fact.
4:45
SPEAKER_00: It so it is kind of like um it is kind of interesting.
4:50
SPEAKER_01: Yeah, definitely.
4:51
SPEAKER_01: Um, I I think a big portion of today's people who are online talking about this stuff.
4:56
SPEAKER_01: I mean, there's a few people that are like legacy, I'll call legacy like yourself that are pre-2020.
5:02
SPEAKER_01: Wow, but a lot of the influencers now you just call me old.
5:05
SPEAKER_01: I did, I did call you old.
5:07
SPEAKER_01: I'm getting old, we're getting old.
5:09
SPEAKER_01: We've we've been doing this for like three years now.
5:11
SPEAKER_01: It's wild.
5:12
unknown: Dude.
5:13
SPEAKER_01: Old men, old men grumpily chatter chatting about their old businesses.
5:19
SPEAKER_00: Back in my day, we didn't have no AI.
5:21
SPEAKER_00: There was no AI.
5:23
SPEAKER_01: But yeah, there was a bunch of free capital mixed with like the perfect opportunity in the market where everybody was at home and spending on their house and interest rates were essentially zero percent.
5:33
SPEAKER_01: So you had free loan from the government, zero percent interest rates for any kind of financing, and then high demand of home services because people are stuck in their house.
5:44
SPEAKER_01: Like it's an it was an amazing situation for any home service company.
5:48
SPEAKER_00: Yeah.
5:48
SPEAKER_00: Well, I think what what I find really interesting when you compare, and this is back to like don't believe everything you hear on the internet.
5:58
SPEAKER_00: Um, because there's all these people that have these like heroic growth stories, but when you when you like dig a little deeper, you're like, oh, you had a 20 or 30 million dollar business going into COVID, which is a big business, you worked hard, totally all of that stuff, but then you got multiple seven figures dropped in your lap and you grew a lot.
6:22
SPEAKER_00: All good, but when you're comparing it to somebody who after COVID, which this is not my story, so I'm not even like you know, defending myself.
6:30
SPEAKER_00: I just think that people that started off in like 2020 or 2021 when they didn't have access to that whole situation, and they still did incredible, like that is crazy to me, which like half of our friends started like 21, 22, and they didn't even have access to that.
6:48
SPEAKER_00: And some of the most incredible growth stories of the industry have been post-COVID.
6:52
SPEAKER_01: Yeah, definitely.
6:53
SPEAKER_01: I I do think that it's not worth discounting somebody, but if if they're going to deny that, then that's a giant red flag.
6:59
SPEAKER_00: And which is it's not even deny it's no one ever talks about it.
7:02
SPEAKER_01: Yeah.
7:03
SPEAKER_00: And I'm like, that's actually kind of weird that that you don't because you had the PPP, but you also had the the loan product, which gave you one percent interest for 30 years on some percentage of your revenue or something.
7:16
SPEAKER_00: So, like, I have friends that took like five million dollars in one percent loans or two percent or whatever, whatever it was.
7:23
SPEAKER_00: I don't even remember what dude, it's crazy.
7:24
SPEAKER_01: Speaking about acquiring businesses, could you imagine using that money?
7:27
SPEAKER_01: Like, hey, I got five million dollars at one percent.
7:30
SPEAKER_00: It is crazy, it's crazy, and we actually we never had access to that, and I don't remember why, but like we actually could never get that loan, and so I was like always like kind of annoyed at the people that could.
7:41
SPEAKER_00: Um, but yeah, that's crazy, anyways.
7:44
SPEAKER_00: Anyway, five million dollar business, we get handed it, which you know, amazing.
7:50
SPEAKER_00: Um, it's a great business, we have a million bucks, and we want to grow it.
7:58
SPEAKER_00: So we're gonna be talking about what to do next.
8:01
SPEAKER_00: Here's a stat about Yelp that I bet you didn't know.
8:04
SPEAKER_00: When millions of people ask AI like ChatGPT, Perplexity, or any of the others what the best home service provider is, Yelp recommendations show up three times more than Angie, Thumbtack, Home Advisor, Better Business Bureau, and Next Door combined.
8:19
SPEAKER_00: And here's why that matters to you 91 to 97% of those searches do not include the business name.
8:25
SPEAKER_00: The homeowner hasn't picked anybody yet, and they're deciding right now.
8:29
SPEAKER_00: And Yelp is where they're getting their answers.
8:32
SPEAKER_00: These aren't low intent browsers.
8:34
SPEAKER_00: Over half of Yelp's 76 million monthly audience earns six figures and owns their home.
8:39
SPEAKER_00: Jose Varga started a five-star HVAC on his own in Dallas, and he turned on Yelp ads, and they hit 30% year-over-year growth with$650 revenue per call, and he grew his monthly leads by a 444%.
8:54
SPEAKER_00: If you want to own the moment when homeowners are making their choice, then you should be checking out Yelp.
8:59
SPEAKER_00: Start earning your share on Yelp's 350,000 daily home service leads by going to business.yelp slash owned and operated.
9:09
SPEAKER_01: I am gonna throw another wrench in this landscaping.
9:14
SPEAKER_01: That's the category.
9:16
SPEAKER_01: Because I think we stick to HVAC plumbing too much.
9:19
SPEAKER_01: You know too much about plumbing.
9:20
SPEAKER_01: We do.
9:20
SPEAKER_01: So this is landscaping.
9:22
SPEAKER_01: This is landscaping.
9:23
SPEAKER_00: Even better.
9:24
SPEAKER_00: We do roofing.
9:25
SPEAKER_00: You don't need the million dollars at all.
9:27
SPEAKER_00: You just go knock on a couple more doors.
9:28
SPEAKER_00: You get it.
9:29
SPEAKER_01: Um, I like landscaping, and and the goal is to turn five million into ten million as quickly and responsibly as possible.
9:39
SPEAKER_00: Yes, and I am not allowed to do acquisitions.
9:45
SPEAKER_00: Okay.
9:45
SPEAKER_00: All right, dude, you just got a million bucks.
9:47
SPEAKER_00: What are you gonna do?
9:49
SPEAKER_01: So before I spend anything, strategy, right?
9:53
SPEAKER_01: You have to figure out where the allocation is going, how you're gonna spend it, just to make sure that it actually does what you're saying you're gonna do.
10:03
SPEAKER_01: I mean, there's no fires, or there's no there's no big issues.
10:06
SPEAKER_01: I think my first step, again, it's it's a marketing versus um capacity in sales question, right?
10:17
SPEAKER_01: That if I'm gonna grow, it's those two uh items, it's uh marketing and it's salesman.
10:23
SPEAKER_01: So I think the first thing I do is I mean, if I'm at five million, I'm guessing all my stuff is already turned on.
10:32
SPEAKER_01: So it is going and finding the next big channel.
10:35
SPEAKER_01: And I know I I harp, I like if anybody talks to me in person, they've all they've heard my spiel, I tell my spiel without um with as much uh with too much confidence and it pisses people off.
10:48
SPEAKER_01: I think the answer is I think you go marketing.
10:51
SPEAKER_01: I mean, I think you go branding here, is you have a five million dollar company.
10:55
SPEAKER_01: I think you double or triple down on your branding.
10:58
SPEAKER_01: Um, if your goal is to get to 10.
11:00
SPEAKER_01: Uh, and that's where I would start in specific branding.
11:05
SPEAKER_01: I would probably go first radio, heavy, heavy, heavy radio.
11:10
SPEAKER_01: Um and that's where I'd probably allocate my first hundred to two hundred thousand dollars as a test run on the radio and following that up with making sure my KPIs and tracking are really, really good to make sure I know if that works or if anything is getting better.
11:30
SPEAKER_01: Which um I think that's the first place I start, and then hopefully you see a demand spike.
11:36
SPEAKER_01: And and then I think I take the next step after that.
11:39
SPEAKER_01: Where where are you sitting?
11:41
SPEAKER_00: I think my my mind went in a totally different place.
11:43
SPEAKER_00: So this is probably why this is a helpful conversation for people.
11:48
SPEAKER_00: When I think about the limiter on the business, it's not really like leads or um, especially when you're starting at five million dollars.
11:56
SPEAKER_00: Like I think I'll talk about that in a second.
11:58
SPEAKER_00: I'm gonna write that down so I don't forget there's a concept that I think will be helpful for people.
12:04
SPEAKER_00: Uh, but the like the first thing that like hits me is the uh a bigger limiter on the business is gonna be your balance sheet.
12:13
SPEAKER_00: Like your available, your the balance sheet's capacity to grow the business.
12:18
SPEAKER_00: So the first thing I would do if I got a million dollars is I would expand my balance sheet.
12:24
SPEAKER_00: I would go to Ford and GM and open up lines of credit that have them pegged against my million dollars of cash because that might not hold me back in the next six months, but it'll definitely hold me back in the years one, two, three after this.
12:40
SPEAKER_00: So if I can solidify instead of a half a million dollar line for vehicles, what if I could get a two million dollar line?
12:47
SPEAKER_00: Huge win.
12:48
SPEAKER_00: Like that's gonna give me a path to 20.
12:51
SPEAKER_01: But but the the prompt here, I actually don't disagree with you at all.
12:55
SPEAKER_01: It's like, hey, that is definitely something that you would do first, but the prompt here is going from five to 10, not going from five to twenty or thirty or four.
13:02
SPEAKER_00: Well, I I I I think I have more on that.
13:06
SPEAKER_00: So I think the first thing I would do is expand the balance sheet and I would expand like capacity of lending.
13:11
SPEAKER_00: So I would get a line of credit, I would get a vehicle line of credit, and I would open up stronger credit lines with my vendors.
13:18
SPEAKER_00: Because while you have a million dollars of cash sitting, you can go, even if you just show a half a million in cash and sort of earmark that, like this will resolve a lot of pain points over the next whatever.
13:30
SPEAKER_01: So that's my step two with my next 750,000.
13:34
SPEAKER_01: Because you're you're actually you're absolutely right.
13:36
SPEAKER_01: And and if anybody has a bunch of cash on their their balance sheet, or they should be doing this because you want to expand the balance sheet and you want to get all those lines of credit and you want to open everything you can up when the business is good for potentially when it turns bad.
13:50
SPEAKER_01: Because when it's bad, nobody's gonna lend you a given.
13:54
SPEAKER_01: They're not giving you anything, especially in in home services where there's no assets.
13:59
SPEAKER_00: So that's actually you go to all your your uh vendors, you negotiate stronger lines, you negotiate stronger terms.
14:06
SPEAKER_00: You have a defensible balance sheet, so you should increase the capacity because, like in this case, we've been given a million dollars of cash, but you can turn a million dollars of cash into four million dollars of balance sheet.
14:18
SPEAKER_00: So I would that's what I would do.
14:21
SPEAKER_00: That's the first thing I would do.
14:22
SPEAKER_01: And now you've gamed the prompt, and now you're coming into this with four million dollars in credit.
14:27
SPEAKER_00: So the prompt I was given was just don't jump jump straight to acquisitions.
14:32
SPEAKER_00: And now I'm like, fuck that.
14:33
SPEAKER_00: I won't.
14:34
SPEAKER_00: But we're still gonna do something.
14:35
SPEAKER_01: Instead of going straight into financing and leveraging all that money, tripling down.
14:40
SPEAKER_00: Yeah, it's gonna be sweet.
14:41
SPEAKER_00: It's gonna be sweet.
14:42
SPEAKER_00: Um, so yeah, so that'd be the first thing I would do.
14:46
SPEAKER_00: Um, and after that, like after we have a strong balance sheet, uh, I would honestly probably just start to prep orders for trucks.
14:59
SPEAKER_00: I think that lead gen like to buy vehicles.
15:03
SPEAKER_00: I think you could go get, you know, you get a half million dollar line from Ford, uh, which I don't like if you had a million dollars on your balance sheet in cash, like I think you could get a lot more than half a million.
15:15
SPEAKER_01: Um but yeah, zero dollars on my balance sheet.
15:18
SPEAKER_01: I was and they gave you half a million, right?
15:21
SPEAKER_00: Right.
15:22
SPEAKER_00: So I think you uh you'd go like buy five trucks and just like honestly prep them to sit.
15:26
SPEAKER_00: I think you'd have some sitting costs of them just sitting in your lot, but I think the speed that you'd be able to operate at would be better because basically if you're doing a lot forward line of credit though, man, you could go and get that truck.
15:38
SPEAKER_01: Like we can go pick up truck tomorrow from Ford.
15:41
SPEAKER_00: Oh, really?
15:41
SPEAKER_01: Yeah, well, at least locally at I mean, we have a great commercial division here locally in Nashville.
15:46
SPEAKER_01: So we could pick up a Maverick.
15:48
SPEAKER_01: I guess if you're going like a Zuzu box truck or some kind of more unique uh commercial breakout, then yeah, it would take a little bit longer.
15:58
SPEAKER_01: So maybe that that is the play.
15:59
SPEAKER_01: But if you're just going like F-150s, oh next day, like don't buy those ahead of time.
16:05
SPEAKER_01: Like Ford Fortal dump those instantaneously.
16:10
SPEAKER_00: Sweet.
16:10
SPEAKER_00: All right, so we expanded our balance sheet.
16:12
SPEAKER_00: The next thing I would do if we're only going from five to ten, um there's a concept called an elephant curve, which if you just Google elephant curve, it like walks you through this concept.
16:25
SPEAKER_00: Have we talked about this on the show before?
16:28
SPEAKER_00: Okay.
16:28
SPEAKER_00: Well, the the next stage is marketing.
16:30
SPEAKER_00: So that's I think what I'm supposed to be talking about now.
16:33
SPEAKER_00: So the elephant curve, the the idea is when you find a new channel, new marketing channel for your product or service or whatever, it's built for product, but it does work for plumbing HVAC.
16:48
SPEAKER_00: You um you can grow that channel up to a certain point and then it plateaus.
16:54
SPEAKER_00: So just like drawing the picture, it's like the trunk of an elephant is at the ground and it goes up, and then it plateaus on the back of the elephant, and then there's diminishing returns and it falls off the back of the elephant.
17:05
SPEAKER_00: So the idea behind this elephant curve concept is that when you start a new channel to advertise your product or service or whatever, you will tend to have a very high level of success very fast.
17:20
SPEAKER_00: Does this resonates, I would imagine, for most people listening?
17:23
SPEAKER_00: They're like, Yeah, we tried mailers and it totally popped immediately.
17:26
SPEAKER_00: But then three years into mailers, it's not popping the way it used to.
17:28
SPEAKER_00: Well, of course it's not.
17:29
SPEAKER_00: Like you're on the back end of the elephant curve, you're hitting your diminishing returns, like makes total sense.
17:34
SPEAKER_00: You have to find your next channel.
17:36
SPEAKER_01: Does that apply for branding too?
17:38
SPEAKER_01: Because wouldn't branding though cause all of your other elephant curves to to change, I guess, their slope.
17:46
SPEAKER_00: There's honestly, there's like a 50-page blog on this by a guy who uh built um WordPress engine, which like billion-dollar business is an incredible read.
17:58
SPEAKER_00: I heard him do a speech on it once and it was really helpful.
18:01
SPEAKER_00: And what is uh it's kind of a funny idea, and you can break the curve, which we can talk about in a second, but um my point is if you're only going from five to ten, you only need one channel.
18:14
SPEAKER_00: One channel.
18:15
SPEAKER_00: One channel.
18:16
SPEAKER_00: And you have to hit the front of that elephant, and you only need one channel to do it.
18:20
SPEAKER_00: So it can be branding, it can be LSA, you can go fucking balls to the walls on meta.
18:26
SPEAKER_00: It doesn't really matter.
18:27
SPEAKER_00: You only need one channel, and you need to hit that thing with everything you got because you will see a high rate of return in the first year of using that channel, and it'll back off in the trailing years.
18:40
SPEAKER_00: Uh so yeah, elephant curve.
18:42
SPEAKER_00: So, all that to say, what I would do after strengthening my balance sheet is I would pick a channel, and ideally a channel that not many other people are using, and I would go absolutely nuts.
18:52
SPEAKER_00: And I think for like a five million dollar business, absolutely nuts would not even be that much money.
18:58
SPEAKER_00: Like, if we were given a million dollars in this prompt, that might be like 200 grand.
19:03
SPEAKER_01: So, question for you do is is this different or does your idea change specifically on which channel you would pick due to the trade that we're choosing in in landscaping?
19:18
SPEAKER_00: No.
19:19
SPEAKER_00: I think the only thing I that I would change to my answer is like I would add a speed delete or like lead flow technology first, um before like ramping up zero to ten.
19:30
SPEAKER_00: Uh, but no, I don't think so.
19:32
SPEAKER_00: Well, there is now granted, I actually don't totally know how landscaping uh scales.
19:38
SPEAKER_00: I would my understanding of landscaping is that the bet the best side of the business is commercial.
19:46
SPEAKER_01: So that channel would be people.
19:50
SPEAKER_00: I would go hire two salespeople and like maybe base is 50 plus commission.
19:57
SPEAKER_00: Uh so maybe I'd hire like three or four and try to build an army and then just like go nuts, like go selling.
20:03
SPEAKER_01: I actually agree with you.
20:05
SPEAKER_01: And and it depends because if you go commercial, that's definitely an option.
20:07
SPEAKER_01: The other option where which we've seen uh some of our friends or yeah, some of our friends run uh and people who've been to the breaking five is they they're in essentially it's like high-end homes, which we've talked about, is is they manage a bunch of high-end homes and then they do re-landscapes every year.
20:26
SPEAKER_01: And yeah, yeah, yeah.
20:27
SPEAKER_01: And they essentially the concierge service service for your landscaping model.
20:32
SPEAKER_01: Um, and that does really well as well, but that's more of like a B2C versus a B2B, it's almost B2B.
20:38
SPEAKER_00: Like it's like you you're treating um, which you could probably not canvas your way to that, but you're treating um like a house like it's a commercial account.
20:48
SPEAKER_00: And it and it essentially is like they're$20,000 to$30,000 a year residential accounts.
20:53
SPEAKER_01: And that's that's why the first thing I chose was branding.
20:56
SPEAKER_01: Because I think if you really wanted to get high-end accounts in uh that resie market, you would have to have a pretty decent brand to be able to eat a$30,000,$50,000 account.
21:07
unknown: Yeah.
21:07
SPEAKER_01: Or I think it's easier.
21:08
SPEAKER_01: I don't I don't think it's necessary, but it's definitely easier when people are calling you and and the lead gen is coming in.
21:13
SPEAKER_01: I like this this topic in this area for us because it's different.
21:17
SPEAKER_01: There's no there's no urgency, right?
21:21
SPEAKER_01: There there is some level of urgency in some incoming call, but it's not at the same level as you would see in some other trades like roofing or HVIC.
21:30
SPEAKER_01: So yeah, it's route-based.
21:32
SPEAKER_00: You can like stack MRR.
21:34
SPEAKER_00: Um yeah, it is it is different.
21:37
SPEAKER_01: So you'd pick a a singular channel.
21:40
SPEAKER_00: I'd pick a channel.
21:41
SPEAKER_00: And I think the channel, I mean, obviously we're in landscaping in this scenario, but uh I think the channel is gonna be pretty fully dependent on like what are we doing.
21:50
SPEAKER_00: Yeah, um, I think to to your point, you said this earlier, but if we were um if we were running I don't know.
22:00
SPEAKER_00: A different trade.
22:01
SPEAKER_00: Maybe canvassing or like this commercial BDR uh position just doesn't you know make the same impact.
22:08
SPEAKER_00: But inside landscaping, that's a uh viable way to do it.
22:12
SPEAKER_00: Another could just be cold calling.
22:13
SPEAKER_00: You can just cold call.
22:14
SPEAKER_00: Uh I interviewed a guy and he he helped build commercial uh maintenance programs for some big commercial HVAC maintenance thing.
22:26
SPEAKER_00: And I mean he literally just like door knocked and cold called and like he built a million-dollar business.
22:31
SPEAKER_00: And uh that that's sort of like the metric for success for those roles was hey, can you generate a million dollars a year of recurring HVAC maintenance plans?
22:41
SPEAKER_00: Which like that sounds pretty good to me.
22:44
SPEAKER_00: Uh so can you build, you know, you go hire five people, they each build a million, you go from five to ten million.
22:50
SPEAKER_00: And then the other thing is, which I kind of like about this, is that you um one, you could do that in a year.
22:57
SPEAKER_00: And let's let's say it costs half a million dollars.
23:00
SPEAKER_00: You because we expanded balance sheet, we would you'd be able to use all the vendors and all that stuff that we would need to get the equipment.
23:07
SPEAKER_00: Uh, I think hiring would be a big challenge probably in landscaping.
23:12
SPEAKER_00: Um so maybe go after like bigger accounts but less of them.
23:16
SPEAKER_00: So you'd need to outfit less crews.
23:18
SPEAKER_00: Okay, I kind of like this scenario.
23:19
SPEAKER_00: Oh, well, my point is you pay that you pay the payroll costs over the course of a year.
23:24
SPEAKER_00: So you'd sort of like never fully deplete that million or half a million because you'd be paying it, but you'd also start onboarding new accounts and like actively growing the business.
23:34
SPEAKER_00: And then you would bring on debt uh because of the lines of credit with your you know manufacturers for your uh landscaping equipment or vehicles.
23:45
SPEAKER_01: And if yeah, I mean, if you're lucky enough, right?
23:47
SPEAKER_01: This could be as simple as turning on a channel being LSA.
23:51
SPEAKER_01: Right?
23:51
SPEAKER_01: We had that um wasn't David was his name out of uh Carson City, Nevada, Reno, Nevada, that came to the breaking five and he was at five million.
24:00
SPEAKER_01: He's like, I've never run LSA before, and I was just sat there so jealous, like just turn on LSA, man.
24:05
SPEAKER_01: Like that's your one channel.
24:06
SPEAKER_00: We um we turned on LSA out in Fort Wayne, and they spend 20 grand a month at like an eight times ROI.
24:13
SPEAKER_00: Like it's incredible.
24:14
SPEAKER_01: Amazing.
24:15
SPEAKER_01: Like it might be just that simple, like it still does work in some places.
24:19
SPEAKER_01: Um, but I think we're on the same page.
24:21
SPEAKER_01: My assumption is that I'm already running those, so the big the big step change here is going to be to start branding because I'm not running lead ag.
24:30
SPEAKER_01: I'm probably already doing LSA in some level of PPC, start heavy branding and push into the B2C residential space.
24:38
SPEAKER_01: And then I'm the next step where you just talked about is I'm hiring sales guys, sales guys to go run sales calls, to go do project management, to just rack it up as much commission as possible, um, as low base as possible to be able to hold the base close and really focus on getting those salespeople into the market because that's what grows businesses is incentivized people.
25:03
SPEAKER_01: What is it?
25:03
SPEAKER_01: Uh Charlie Munger.
25:04
SPEAKER_01: If I you show me the incentives, I'll show you.
25:06
SPEAKER_01: I'll show you the outcome, yeah.
25:07
SPEAKER_01: Yep.
25:08
SPEAKER_01: And I think that that's the perfect example is you just keep them fed and you put people in charge of growing the business and incentivize them properly.
25:18
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25:22
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25:24
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25:32
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25:35
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25:43
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25:49
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25:54
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26:04
SPEAKER_00: I agree.
26:04
SPEAKER_00: I think um the I think the biggest, specifically for this example that you chose of landscaping, the team is gonna be the bigger dynamic.
26:15
SPEAKER_00: I don't know, I don't know how it works in other parts of the country, but in Ohio, um usually oh, there's a program for it.
26:25
SPEAKER_00: Uh, but it's like an immigrant uh program where like they're primarily staffed from Mexico, and there's like a specific program that I don't remember the name of um to do it.
26:39
SPEAKER_00: But I think you have to get into that program, uh at least around here, to like actually staff up your landscaping company.
26:47
SPEAKER_00: And I think it's because it's like seasonal or something.
26:50
SPEAKER_00: I mean, maybe Tennessee is different because you guys have less of a winter, but like here, really landscaping is like a five-month industry, and then you're doing uh snow.
26:59
SPEAKER_01: Yeah, I mean you ramp recruitment, so hire a salesperson and then ramp recruitment on the other side to fulfill the capacity.
27:07
SPEAKER_01: Um I would probably would you hire your salespeople ahead of any marketing, or would you wait for marketing to kick before you hired commissioned salespeople?
27:17
SPEAKER_00: I would hire salespeople.
27:21
SPEAKER_00: I mean, in this example, we have a very profitable business and a treasure chest of cash.
27:26
SPEAKER_00: So I mean, the trade that I made for 10 straight years was run that thing with no profit and grow it.
27:34
SPEAKER_00: So I would do that every day, all day.
27:37
SPEAKER_01: I mean, I I do think though, on the greater the greater standpoint, is I generally lead towards higher ahead of demand anyway.
27:44
SPEAKER_01: And then let them get their feet wet.
27:46
SPEAKER_01: Let them get their feet wet, and then it's my responsibility as owner to make sure that demand becomes there shortly after.
27:51
SPEAKER_01: I learned from you, so that makes I'm guessing you feel the same.
27:54
SPEAKER_01: But uh just saying.
27:56
SPEAKER_01: Uh and then yeah, the part that I wouldn't hire ahead of demand is probably on the installation side.
28:01
SPEAKER_01: I think that there's more flexibility, but I would start hiring immediately to be able to cover those positions.
28:06
SPEAKER_00: I actually think the bigger challenge is going to be staffing the field.
28:15
SPEAKER_00: I I don't just like I don't understand how landscaping companies get staffed.
28:20
SPEAKER_00: So, you know, if you're a listener and you run a landscaping company, comment it.
28:23
SPEAKER_00: Like, I would love to understand it.
28:25
SPEAKER_00: I I know locally it's that like program that I wish I'd remembered the name of.
28:29
SPEAKER_00: Um, but I'm sure there's more nuance to it than that.
28:34
SPEAKER_00: Uh but yeah, I I don't actually understand how it works.
28:38
SPEAKER_01: My assumption here though is just like again, not urgent need.
28:41
SPEAKER_01: So even if there was a case of like, hey, we're understaffed by two, three, four people, like the projects just take an extra two weeks to get to, which I don't think you lose a ton of.
28:50
SPEAKER_01: I mean, I'm sure you lose customers, don't get me wrong, but just not a ton of customers right out the gate, like in an urgent business.
28:57
SPEAKER_01: Yeah, sweet.
28:58
SPEAKER_01: Uh inf infrastructure.
28:59
SPEAKER_00: So we've got our I solved this like day one.
29:02
SPEAKER_00: And you were like, Yeah, I'm gonna take my time with this.
29:04
SPEAKER_00: And I'm like, nah, I'm good.
29:07
SPEAKER_00: Got crews sitting.
29:08
SPEAKER_01: You just already bought a bunch of trucks and I did a roll, baby.
29:12
SPEAKER_00: Somebody told me I had 15% EBITDA at the beginning of this.
29:15
SPEAKER_00: I'm like, yeah, let's go, let's take that thing down to one.
29:19
SPEAKER_01: Yeah, I mean, I think that that I mean, five to ten doesn't feel like a huge structural change in your infrastructure.
29:27
SPEAKER_01: Trucks, yes, right.
29:29
SPEAKER_01: I mean, if you're running a five million business with eight trucks, all I need to buy is eight more, eight more Mavericks.
29:33
SPEAKER_01: That's like that's nothing.
29:35
SPEAKER_01: That's$200,000.
29:36
SPEAKER_00: Well, I think in landscaping, the equipment's probably gonna be quite a bit.
29:39
SPEAKER_00: I know.
29:40
SPEAKER_00: I don't know how much it takes to outfit a land, but I'm sure assuming truck, trailer, like probably 200 grand between all that.
29:46
SPEAKER_01: I'd think a little bit more because right, box trucks cost a little bit more.
29:49
SPEAKER_01: You you are carrying some heavier equipment.
29:52
SPEAKER_01: Um you're you're it if I probably in either scenario, you're probably having some kind of uh loader, not necessarily a skid steer, but something, you know, there's some there's some slightly heavier equipment, mini excavator, um things of that nature.
30:08
SPEAKER_01: So I would assume that there's a little bit more in equipment.
30:11
SPEAKER_01: Yeah, I still think you're like three, four hundred thousand though to go five million if you and that's like a hard push, right?
30:18
SPEAKER_01: Like you're overbuying equipment, nothing on discount to just really like hey, push to 10.
30:26
SPEAKER_01: Um, I still have half a million left, maybe 400,000 left after a heavy buy of equipment in trucks.
30:33
SPEAKER_01: I don't think I'd switch much.
30:35
SPEAKER_00: I still have like all my cash left.
30:37
SPEAKER_01: I know, but because I you you have you have like 40 million because you're in debt.
30:43
SPEAKER_01: I'm in debt up to my eyeballs, but you know what you know what I'm gonna do with it is I'm gonna take it all and go black on the casino, and now Jack's back in last episode.
30:53
SPEAKER_01: Lost it all again.
30:55
SPEAKER_00: Yeah, yeah.
30:55
SPEAKER_00: 1-800 gambler, yes, 1-800 gambler.
30:59
SPEAKER_00: Okay, um, yeah, honestly, I feel really good on trucks equipment and um because I went through the sort of process of like getting lines in, which I think the general rule of thumb is uh get a line of credit when you don't need one.
31:15
SPEAKER_00: So if you currently are like if your financials are in a very strong position, go get a line of credit.
31:22
SPEAKER_00: Uh which in this case it would be very strong.
31:26
SPEAKER_00: We still have money left.
31:28
SPEAKER_00: I think I'm like somewhere like half a million left.
31:30
SPEAKER_00: Plus, the business is still producing some amount.
31:33
SPEAKER_00: I'm sure I've cut into that quite a bit because uh I hired all these salespeople.
31:37
SPEAKER_00: What do you what do you think you want to do?
31:39
SPEAKER_00: We've got four options add another trade, three options open location number two, acquire a small competitor, double down on the core business.
31:50
SPEAKER_01: So the obvious answer for both of us, and we're not allowed to answer it this way, but this is probably the right answer is if I had$400,000, I'd go and acquire another business.
31:59
SPEAKER_01: Even as like a 10% down, which I would try to keep away from that 10 or 20% down.
32:05
SPEAKER_01: I mean, you're talking about adding two to three million easy to top line revenue tomorrow.
32:10
SPEAKER_01: Like that's an easy choice.
32:12
SPEAKER_01: I think though, if we're not allowed to acquire a small competitor, my second is open a second location.
32:19
SPEAKER_01: Uh uh it might be double down on the core business.
32:23
SPEAKER_00: I think mine would be double down, actually.
32:24
SPEAKER_00: I think it'd be double down.
32:25
SPEAKER_00: Legitimately, I actually think it'd be double down because I think if we've got 15% of you, but uh the cash we deployed the sales team.
32:34
SPEAKER_00: I think we're good.
32:35
SPEAKER_00: Like I don't even know that I would acquire a small competitor yet just because I think it'd be too much of a distraction.
32:40
SPEAKER_00: And I think what I would want to do first is live meter detected.
32:45
SPEAKER_00: Yeah, yeah.
32:46
SPEAKER_00: I would be, I mean, okay.
32:48
SPEAKER_00: Intellectually, what would I do versus what would I actually do?
32:51
SPEAKER_00: Um maybe.
32:53
SPEAKER_00: But uh yeah, I think I would probably want to like rebuild cash position and make sure I'm in a good spot.
33:01
SPEAKER_00: You know, I don't know that we talked about this a lot, but uh before I'm a generally conservative, I run a conservative balance sheet, and I always have.
33:11
SPEAKER_00: So I I don't like personally, I don't like uh debt.
33:16
SPEAKER_00: Um and professionally, like debt can make sense.
33:21
SPEAKER_00: Um, but it it's not really like a YOLO thing.
33:25
SPEAKER_00: So what I would want to make sure I was in the position to do is when I'm ready to acquire again, I would want to make sure I'm in a strong position.
33:34
SPEAKER_00: So just like I'm gonna paint the picture of our business really quick.
33:38
SPEAKER_00: Uh so it's like five million of revenue, but like pacing hard to 10.
33:42
SPEAKER_00: So that part feels really good.
33:44
SPEAKER_00: I've got, let's call it my EBITDA dropped because we hired these salespeople.
33:48
SPEAKER_00: We're still working through it.
33:49
SPEAKER_00: So let's say it's 500,000 of EBITDA, 500,000 in cash because cash hasn't started rolling in yet.
33:56
SPEAKER_00: Um and then I've got 700,000 of debt from just bringing all this shit on.
34:03
SPEAKER_00: So my debt is a little over a a one times, like one and a half times EBITDA, which is still pretty good.
34:11
SPEAKER_00: Uh banks will lend up to like 3.2.
34:14
SPEAKER_00: Um, but one and a half times EBITDA is still like a lot, and it's uh so I would be a little bit cautious of that.
34:21
SPEAKER_00: Um half a million of cash sitting is pretty sweet, but I think I would probably just like let this settle out for a year and then let's build cash back up, pay down some of that debt, and then when I get closer to um you know a one times debt, I would feel better about it.
34:43
SPEAKER_00: Because the problem with acquiring a smaller competitor is I'm probably gonna bring on debt.
34:46
SPEAKER_00: So like I've got a half a million of EBITDA and a half a million of cash, I'm in a one and a half times uh debt ratio.
34:55
SPEAKER_00: So if I go down to like, you know, 200,000 or whatever because I make a down payment, and yeah, maybe I go up to seven or eight hundred thousand of EBITDA, but like if my debt jumps to one or one and a half or two, I don't feel like I'm in in as strong of a balance sheet position as I am today.
35:13
SPEAKER_00: So I I I would take it slow and just double down and like let's pay off some debt, let's grow into the investments that we've made, and then in a year, two years, when I can I feel like I can double down on debt, uh, I would do it.
35:30
SPEAKER_00: But right now, I don't feel like I could double down on debt without having like a risky balance sheet.
35:35
SPEAKER_01: Yeah, I mean I'm in the same position as I just spent a ton on branding, 200k on branding work.
35:40
SPEAKER_01: Uh want to see if that pays off.
35:43
SPEAKER_01: And realistically, right, the business is a great business.
35:46
SPEAKER_01: It's five million at 15%, it drops to 10%.
35:49
SPEAKER_01: I mean, if you're still looking at eight, nine hundred thousand year two, uh, with like 50% growth, right?
35:55
SPEAKER_01: Which should be pretty manageable at 10% to 15% EBITDA and six salespeople on your team.
36:02
SPEAKER_01: Um, like that all seems like a reasonable thing to assume.
36:06
SPEAKER_00: Um and you always told me that you were my lake house friend.
36:09
SPEAKER_00: Yeah.
36:09
SPEAKER_01: So, dude, you're this is a lifestyle business.
36:12
SPEAKER_01: This is a this becomes a lifestyle business.
36:14
SPEAKER_01: I mean, aren't you?
36:16
SPEAKER_01: A million and a half of just like rip 1.5 million from the business every year.
36:20
SPEAKER_01: I'm gonna have that boat in that lake house.
36:22
SPEAKER_00: I mean, let's totally like pretend that maintenance capex doesn't exist.
36:26
SPEAKER_01: Yeah, yeah.
36:29
SPEAKER_01: I think like you sit on a small war chest of a couple hundred thousand, three, four hundred thousand, and you let this ride while making sure that you're you continue to oper be operationally amazing at 15%.
36:42
SPEAKER_01: Yeah and it that's an easy play.
36:45
SPEAKER_01: It's an easy play where in two years, like you've probably outpaced 10 million anyway with three or four sales guys.
36:52
SPEAKER_01: Yeah, like you're gonna be running the desert on fire.
36:55
SPEAKER_00: Yeah, paid on debt.
36:56
SPEAKER_00: Yeah, I think you know, honestly, the most fun.
36:59
SPEAKER_00: So when we bought now, this is like a balance sheet, um like basically the business is the balance sheet, which is something I feel like I knew, but definitely like became more obvious the bigger the business got.
37:11
SPEAKER_00: Um but the most fun I've I ever had running the business was when we had the lightest debt load as a percentage of EBITDA.
37:21
SPEAKER_00: So earlier, you know, we grew into our debt.
37:24
SPEAKER_00: We acquired a bunch of businesses, we had like probably a pretty aggressive debt load for a couple years as we were like growing into it and figuring it out.
37:33
SPEAKER_00: Um but like we hit a one times late last year or mid-last year, and it was fucking awesome.
37:40
SPEAKER_00: Like, I mean, we still had a lot of debt, but like the business was big, so it really didn't actually matter.
37:46
SPEAKER_00: It was just kind of funny.
37:48
SPEAKER_00: Um, but yeah, it was fun and you felt like you could make the right decision for the business and not because of payments or whatever, uh, which was really cool.
37:56
SPEAKER_00: So I think that is what I would do.
37:59
SPEAKER_00: One of the hardest transitions for any home service business owner is moving from running jobs to running a business.
38:06
SPEAKER_00: At some point, the whiteboard or the spreadsheet or that group text that you guys are doing just stops working and things start falling through the cracks.
38:13
SPEAKER_00: The office is gonna lose visibility into the field, and you become the bottleneck for basically everything.
38:18
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38:20
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38:30
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38:38
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38:42
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38:47
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38:55
SPEAKER_01: I I think that the the big question that we ended last episode was is how fast?
38:59
SPEAKER_01: So how fast, what's your projections?
39:01
SPEAKER_01: How fast does this all run?
39:02
SPEAKER_00: I mean, I think a year.
39:04
SPEAKER_00: To get to a run rate of 10, I yeah, I think you could do it in a year.
39:07
SPEAKER_00: Now, whether or not you achieve that 10, I think that would be harder.
39:11
SPEAKER_00: Um, maybe that takes two years, but I think you could get to run rate 10 million in 12 months, maybe even maybe even sooner.
39:18
SPEAKER_01: 90 day target.
39:19
SPEAKER_01: I mean, I'm going run rate maybe like 6.5, 7.
39:25
SPEAKER_01: Like they're still new, maybe 6.5 is conservative.
39:28
SPEAKER_01: They're still trying to get their feet under them.
39:30
SPEAKER_01: The new sales guys have only been there for 30 days, so they have to be killers right out the gate, and or they're just learning the role still.
39:36
SPEAKER_00: Yeah.
39:36
SPEAKER_01: Um, one year target, I think that that's realistic is a 10 million run rate in one year.
39:40
SPEAKER_01: Is you just again you hired a bunch of salespeople and a bunch of people to install or do capacity, like you dumped a bunch into branding.
39:49
SPEAKER_01: Realistically, that that's a that's a very conservative goal.
39:53
SPEAKER_00: Yeah.
39:54
SPEAKER_00: Yeah, I think the next big step, uh 10 million for landscaping, I think is pretty big for that industry.
39:58
SPEAKER_00: So then after that, you'd have to figure out new location or acquisitions.
40:03
SPEAKER_00: I think you want to get to uh somewhere between four and five Vita.
40:08
SPEAKER_00: So then you could go just take on better debt and just keep going, or you could sell it or do something.
40:16
SPEAKER_01: The way I've seen it before is they they do small acquisitions and they acquire into sub um sub businesses.
40:27
SPEAKER_01: So essentially, right, sprinkler repair and maintenance and like the digging of uh lines is it actually usually a different business than landscape design and installation.
40:38
SPEAKER_00: That makes sense.
40:39
SPEAKER_01: Um right, commercial accounts is obviously different, like we talked about a B2C.
40:43
SPEAKER_01: So like there is ability to move um horizontally here that all kind of work together.
40:50
SPEAKER_00: Yeah.
40:51
unknown: Yeah.
40:52
SPEAKER_01: So I think we did episode.
40:53
SPEAKER_01: I I have an episode on Jack Positions with Ian from uh Terra Nova, and that's what he did.
40:57
SPEAKER_01: He he had bought a high-end landscaping company, and then they bought the sprinkler company that they were subbing to, and then they bought another like mid-tier landscape company, and like he busted through 10 million in like three years.
41:14
SPEAKER_00: So that's pretty cool.
41:15
SPEAKER_00: I mean, I feel like trees is an interesting one too.
41:18
SPEAKER_00: Like, you could do a lot with trees.
41:20
SPEAKER_01: Yeah, I mean, there's plenty of proof out there.
41:22
SPEAKER_01: Davy Tree Company is giant.
41:25
SPEAKER_01: Yeah, so crazy.
41:27
SPEAKER_00: Awesome.
41:27
SPEAKER_00: Well, if you know anything else about landscaping that we didn't cover, toss in the comments.
41:31
SPEAKER_01: Five star review.
41:32
SPEAKER_00: Five star review, we need it, we're desperate.