#110- Avoid These Mistakes and Save Money with Your Home Service Business

I'm John Wilson. Welcome to Owned and Operated. Twice a week we talk about home service businesses, and if you're a home service entrepreneur, then this is gonna be the show for you. We talk about our own business in residential plumbing, HVAC, and electric, and we also talk about business models that we just find interesting. Let's get into it. Hey, this episode is sponsored by Service Scalers. So Service Scalers is actually a brand that I've used personally with our companies for a little bit over a year now. They've helped us manage our digital advertising. Frankly, they did a lot better than our last agency. Leads went through the roof and cost per click went way down. Check out Service Scalers if you're a plumbing, HVAC, or electrical home service company. That's what they knock out of the park and they did a great job for me. Welcome back to Owned and Operated. Today on Owned and Operated, Jack and I share our 3 biggest mistakes each. Mine are super embarrassing, and I feel that I'm being held at gunpoint telling them, so I'm sure that you will enjoy them. Thanks for tuning in. Welcome back to Owned and Operated.

What's going on?

Dude, I'm ready to humiliate myself.

Yeah. So I'm really excited about this episode. This one stems because I have made a lot of mistakes specifically around acquisitions, but also in the business. We've been around a lot shorter timeframe than you. So today's question is top 3 mistakes you've made in your business. What do you think? Do you only have 3?

Yeah. Yeah. I only have—

Only have 3.

Only have 3.

If you want to think about it, I can start because I know what mine are.

I've got mine reared up. So—

No, we're going with you then first.

All right. Okay. So top 3 mistakes. First one was a cost-saving-first philosophy. And the way that manifested was in 2020, we moved our entire call center to the Philippines.

No, no.

I actually think that we have an episode on this, like one of our first episodes. And I don't remember if we took it down or not, but we talked about that, about like, yeah, we just did this. And it was one of the worst mistakes we ever made. We never developed the skill to run a real call center. And like, basically the net result Was we tried to, which is also the second biggest mistake, but like we put cost savings first. And because of that, we did reputational harm. Like customers had a tough time dealing with our call center. Customer service went down. We got a lot of complaints and we probably lost millions of dollars over the course of a few years in revenue in order to save $50 grand or $100 grand.

How long did you run it for overseas?

It took us a few years to unwind it is the problem. Yeah. It took us a couple of years to unwind it.

Because you have to rehire everyone back too.

You had to rehire everyone. You had to restart the process over. You had to bring on a call center manager. Like it took a lot of time to undo. It was very easy and quick to do. You just fire a bunch of people and hire remote people. Like that's the quickest thing in the world. You can do that in literally a day. It's not hard. It's much more challenging to re-in-house it. When you're not used to having that capability in-house. Easily top 3 mistake. Next one was multi-location too soon. So that was just a huge error. A lot of that was, you know, I'm just an uneducated man, Jack. And when we were a small company, smaller company, we still are a small business, but when we were a small company, I thought that we were like hitting the cap on our available market. And we were like $2.5, $3 million, which like, obviously, like I think is nonsensical now. And, um, in the same rough market, we're gonna do like $100 million in the next, over the next, like however many, however much time. So, um, like ridiculous thought. And, um, I was trying to figure out like how to continue growing and how to keep doing the thing, 'cause I was obsessed with crossing $5 million and I just couldn't see a path to doing that. When really all I had to do was like figure out how to drive more leads. So the way I thought to solve it was multi-location. So we ran multi-location for like 3 years, huge mistake. And like to the tune of tens of millions of dollars of like revenue loss.

When you say run multiple locations, what do you mean? Like you started up a second facility to try and grab market share there?

Started up a second facility, kept second facilities when we bought businesses instead of like immediately rolling it in. Tried to figure out multi-location unnecessarily. So we did that for 3 years from 2020 to 2023. And like, we added complexity, we added drive time, we lost focus. Like it was just a huge waste of time. And I talk about this a lot on the show, or at least in real life, of like many of the things that I say, hey, we're doing this. Hey, we just started this. Hey, we're trying this. It's only happened in the last 6 months. And the reason it's been 6 months is because 6 months ago is when we all moved into one building. So my business is exploding because we started running one location. And all I can think about is, oh my God.

That's also all I think about.

What would've happened if I did that 3 years ago?

Yeah.

And like, we would literally be tens of millions of dollars ahead. Which is like, that's a tough nut to swallow. 'Cause the difference between this year and last year in revenue is gonna be above $10 million gain. Yeah. This year. And that's just one year. Like, would we be at 35 or 40 this year? Like, drives me nuts. So multi-location. And I see, I talk to a lot of people that all wanna do it and it's just like, it's a huge mistake. It's going to hold you back and it's completely unnecessary. Like, Just have your guys drive. So that was mistake number 2. And then the other big one, and this is back to cheap of like, I was trying to save money. I continually put the wrong person in charge of accounting. That was a huge mistake that I also see other people make.

Mm-hmm.

And like, you could come up with any number of reasons, but like, that has cost me dearly over the years. And the number is hard to come up with. But I'm sure that is also in the millions.

Um, you've also heard the horror stories of other people who have done something similar.

Yeah.

And then it goes 10 times worse, embezzlement and/or just running a company into the ground and like not even trying. So those are good.

Yeah. Um, each of those mistakes costing in the millions. Um, and the humbling thing about each of those mistakes, especially costing the amount of money that they did, is they were decisions that I made at your size.

I have learned from you not to make those mistakes. So like we have multiple locations and we're like, as fast as I can, I am looking at, like, I looked at real estate today to lease because we're at 3,000 square feet as our main, like 2,500, 3,000 is our main. And I'm going, we are already too small. We have 3 desks per office.

Yep.

We could just, you know, run call center and have a different location. No, one location, one location, and be able to eat growth for a little while.

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Question for you. So do you still use overseas talent though for call center, just different positions, overtime, after hours?

Yeah, we still have overseas talent.

But you don't use a call center. You've just like made them like individual hires, your call center, correct? Yeah. 'Cause I don't want to discourage people.

They're part of the team. No, no. Use overseas talent. Like 100%. We have like 10 folks overseas and we're getting ready to bring on, I think, 20 more.

Mm-hmm.

This year in call center roles. Um, what I think was the issue was making that one, we weren't discerning enough about it and we were looking at it as a cost savings and we just like, we stopped looking at like enhancing the call center. So it was more than that. It was like negligence on our part of like out of sight, out of mind with call center. And we basically saw call center as something that we could offload, which now Like the way I think about different parts of our business is like, if something is a real needle mover, like one of the most critical parts of your business, you in-house the hell out of that. So like marketing is like the thing that gets us to $100 million. I, I need every single capability in-house. Like I can't bring on agencies and be like, grow us. That doesn't make any sense. Call center's the same thing.

Yeah, that makes sense. And then the second one was location. Third one was accounting. Those are really good.

Yeah. I lost millions doing each one, each and every one of those. I really wish that I didn't have more multimillion-dollar mistakes, but like, I know that I do. It's—

It happens. It just happens, whatever. It doesn't just happen. It just only happens to a select few people who are grinding and achieving big. So congrats to you. Our big 3, first big mistake. Was in acquisitions. It was improper due diligence as a cost savings feature. So rather than bringing in people for full due diligence and pushing on lawyers, it's a little bit of, you don't know what you don't know, but we didn't have the correct verbiage. And the reason that I had to be an HVAC tech from day one was because of errors in due diligence. In the sense of there was no non-compete clause to the extent that it needed to be, and non-solicitation clause. And so it allowed for loopholes in the system. And that's where I'll leave that one. The second one is also with the due diligence, and it's making sure that you are getting a better understanding of the individual's customer list. I didn't understand the importance of the customer list. I thought it was more of a lead generation business. Like this brings in leads, but the customer list actually is almost more valuable, even if they're not members, because you can go back and outbound them. They've used your service before. The customer list is more important than I think most people realize. And so I spent— didn't spend enough time on the customer list. And what we found was in the CRM system, The way that they entered it in showed a higher number, but certain entries had multiple entries. So we overpaid for a customer list that had, you know, Jack Carr and then Jack Carr HVAC, Jack Carr HVAC 2, and it was all the same person. That also screwed us up on transition into ServiceTitan too. Very difficult to weed all that out. Their data team did a pretty good job though. Biggest mistake number 3. That's a hard one. I mean, we haven't been around to make like million-dollar mistakes, so you set the bar really high.

Dude, Jack, I hate to tell you, but you're actively making them right now.

I know. That's the worst part is I'm gonna look back going, there it is.

Yep. There it is. Yeah. It's like people started telling me that I needed the role that I needed in accounting at like $7 million, and I didn't wanna fork over the money. And huge mistake.

Yeah, I think our 3rd largest mistake is probably around hiring out of just wanting to hire people versus really focusing and looking at us and saying, hey, why aren't we able to hire the people we want? I mean, it's 2022, but that shouldn't have been an excuse. Like that was our excuse saying, hey, and we probably missed a full year of revenue generation at where we should be because we weren't able to fully hire techs because we were looking at ourselves or we were looking outward saying, 2022, the market's crazy. We're not going to pay that. We should have just paid it. One, we should have had the correct pay structure in place to be able to pay for people. And then 2, said, well, what aren't we offering as a reason? You know, this is the market, whether we like it or not, we're not going to get top-tier techs trying to skimp. And that's it. So due diligence on hiring, make sure that you pay your lawyers and a due diligence person. Correctly so that you can actually get good due diligence. 2, make sure customer lists on acquisitions are as robust as they say they are, or you are going to overpay. And then 3, making sure that, or that I messed up on looking and saying the world is the problem for why I can't hire and the market's the problem versus I and the company am the problem. Something internally is at fault. Sweet.

Yeah, these were good. And I think this combined with our last episode of really just like most of the mistakes I've made, and it sounds like you too, have been from the perspective of cost savings. And I will submit that most of the mistakes that I know other people make are also from cost savings. The biggest reason people don't choose ServiceTitan is cost savings. Like there is no other option. But it's a cost savings. So they, you know, find another option.

That's interesting. I think I might need to like go back into like a meditative state and go, what am I doing cost savings on? Because instantly, as you say that, I'm going, I'm not wrapping any of my vans right now. How much am I losing in marketing potential by not wrapping my vans versus like, just spend it, do it.

Obviously not irresponsibly, but like, maybe there's like a matrix of like, urgent and important, um, that type of matrix to the business of like, is this going to move the needle?

Mm-hmm.

Because there are some things that there's no business, like you have no business overspending on.

Yeah.

Um, so like my philosophy on like warehouse is one of my examples there. Like if I ran the best plumbing HVAC warehouse in the world, it would not grow my business a percentage point. And that would be if I was world-class, like fucking Jeff Bezos, $100 million mistake right there. Yeah, that would be a $100 million mistake trying to figure that out.

I meant the other way. I said you're making it right now.

Oh yeah. I mean, maybe.

We'll see in 6 months when you come back on and say, this was a mistake. No, I'm just kidding. I think you've actually thought through that one very well.

Yeah. I think like how urgent and important is it to the business? Because what I don't want people to think between this episode and the last one is like, oh, I just need to overpay for everything.

just go out and spend a ton of money.

Yeah. That's not what I'm saying at all.

Yeah.

It's just like, what are the things that are gonna move the business the most? Or what are the things that are gonna hold the business back the most? Like having an accounting department that works is gonna hold the business back.

I think you said it best last episode. It was like, is this holding the business back in a capacity standpoint? Or is it, am I not spending something that's gonna generate revenue, huge amounts of revenue? And so that's how we need to think about it. And so that's why I'm going back in my mind going, what are we cost savings on? And like you said, ServiceTitan's a great one. That's a perfect example. It is brutally painful to pay that ServiceTitan bill every month.

Yeah.

But when I can see which of my techs is better at selling water heaters, yep. And then put that good tech on the water heater job and have everything I need in a singular platform, it's worth it. I mean, we had this conversation at the workshop quite a few times too. It was like, yeah, we know it's expensive, but capabilities in the long term. Yes. It doesn't help you out at $2 million, but it helps you out at $5 million. It helps you out at $10 million and then it helps you out at $20 million.

It helps you get there. And like, we have to do the same thing of like, buildings was another one. Like building, people look at it as a cost saving, but like it's not. And that's the wrong way to look at it. Like that'll be a mistake that somebody will list on a podcast at some point. I think there's a lot like what's gonna move the needle. Does this drive revenue or does this reduce constraint? And like ServiceTitan, uh, reduces constraint. Yeah. So like huge, worth the dollars.

Sweet.

Good app.

Cool.

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And we're selling tickets for that currently, correct, John?

Yeah. ownandoperated.com.

Yeah. So take a look at that. Get your, reserve your spot. We only have 30 spots.

I don't even remember how many Yeah, I think about a third is already, already booked up. Yep.

So huge win.

Cool. All right. Thanks everyone. Thanks for tuning in to Owned and Operated, the podcast for home service entrepreneurs. If you enjoyed today's episode, please hit the like button and subscribe to the podcast. If you have any questions or topics you'd like us to cover, feel free to reach out. You can find me on Twitter at @WilsonCompanies. I'll see you next time.