#112- Breaking Down One of the Largest Home Service Companies in America

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.

This episode is sponsored by Service Scalers. They're a brand I've used personally, and after almost giving up on PPC altogether, I gave it one last shot with them. They were able to not only reduce my cost per click, but also drive consistent and high-quality leads. If you are a home service company, they specialize in PPC and digital media just for you. I would highly recommend giving them a call today.

Thanks for tuning into Owned and Operated. Today, Jack and I talk about the largest home service business that I've ever seen, and they got that way by doing just one thing. Check it out. Welcome back to Owned and Operated.

Owned and Operated with your hosts, Jack Carr and John Wilson.

Nice.

What's going on, man?

Dude, living it up. Schedule picks back up in April, usually mid-April. And, um, that really happened in the past 2 weeks. Um, so that's been honestly kind of like, um, it's been good. It's been good and bad. Um, so we're in our busy hiring time of year. I don't know if we talked about that, but we're probably adding 25 heads between now and the end of May.

Mm-hmm.

And, um, so we're like ramping up for that, but obviously it's really hard to do that. When the, you know, schedule doesn't cooperate and leads don't cooperate. But we've been pushing really hard and we're really trying to just get ready for our peak season, which is June, July. So it's been good. And then today was also eclipse day, which was—

Eclipse day.

Dope. Like, were you directly underneath it?

We weren't directly, but almost.

Yeah.

Like I think it went over Memphis or something.

We had full totality and it was honestly wild. Like it was crazy.

Just stare straight at it.

It was crazy.

Yeah. We were in a fleet meeting.

I was in the middle of an interview. We had to like step out. I was like, hey, did you bring glasses? Yeah. Right.

That's cool though. I mean, it's interesting because we are in the same boat and it's the first time, like we've been in hiring mode all year long just to try and catch up.

Yeah.

But this was the first time that I sat down with my service manager in the HVAC department. I said, you are not gonna hit goal this year unless we get more heads.

Mm-hmm.

Like we are turning down business right now because we do not have enough service techs.

Yeah.

Absolutely wild.

Well, it happens fast. I mean, for us it happened within a week or two. Like we have 9 guys in plumbing service and they went from like not booking to now we're at 4-day call board, like really quick. Not really weather, like some of it weather, but a lot of other factors at play. But it was good cuz we Generally saw that coming and we have 2 new plumbers onboarding in the next like 2 weeks.

Yeah, we've been interviewing hard for it. So, yeah, it is what it is, but it's just, it's definitely wild and we're catching up.

Dude, you know what was actually really wild is I interviewed someone today and they're at a company and this company's kind of a funny company because they're like not great locally. And what I found, and they've stayed almost the exact same size. My entire career. Mm-hmm. Which I don't know how that's possible. Like, I honestly think it takes work to stay exactly the same size, like same staff. And what I found out today is same revenue, which is like, how? And turns out they're still charging $100 an hour time and material in 2024. And that was about the craziest thing that I've ever heard. I haven't heard anybody and I guess they just raised their rates.

Yeah. I mean, I think that unless that you're just a single guy in a truck, I don't know how you stay the same.

Like, yeah, they have 20 guys.

Oh no. So they're actually a decent size too.

I know. Yeah. And somehow they're covering truck payments. I genuinely don't know how. They were selling water heaters for $950 installed. And they probably pay $800 for the water heater.

Yeah, that's nuts.

It's very confusing.

Your labor costs have to be so low.

Their guys are super low paid. Yep. So that's why we were talking to him. He's like, I think I can make more money. I was like, you can't, you definitely can't.

Yeah. So, I mean, we're going through, it sounds like everything you're going through. We've almost surpassed like our February's numbers in April already, our month revenue goal. Is already like sold ticket is already higher than that for April. So really happy HVAC's picking up like a freaking train and then plumbing's just being plumbing. And so really happy trying to switch the model over. We really have no capacity on our plumbing side. So everybody's doing everything. I see why it doesn't work. It is a nightmare to schedule. And we're going through goals right now. Like, what are you expected to do? How do you know if you're winning? What's your KPIs? What do your guys need to be making? So just all the basics with the new company and the new manager and lining them out. So it's a learning curve, but I think we're over the big hump. We just need to get a few more people in the door and keep on keeping on. This is gonna be a good year though. Like looking at projections feels good.

That's awesome, dude. All right. Today was my topic and we're doing a business deep dive. Something that I'm fascinated by, like really fascinated by, and I think I've brought this fascination to the show a little bit, is sometimes I sit, I stay at home just like staring off into the ceiling and wondering what could my business be like if all I did was one thing and that was it. 'Cause I like something that I've said a lot, which I think surprises people.

Yeah.

It shouldn't, but it does, is like, The less you do, the bigger you get consistently. So, you know, one of our projects right now is we have 78 job types and we're trying to take those 78 job types and like the distributions, you know, whatever percentage-wise, we're trying to take those 78 job types and break it down into 6 core services and do those 6 core services really well. And those 6 core services be 60% of our revenue or greater.

Sorry to interrupt. Is that over all your businesses or just like the big 3?

That's like 6 services across the whole place. So water heater replacement, water quality, HVAC replacement, sewer replacement, indoor air quality, and generators. So those are our 6 core services that we're trying to push. Sometimes I sit there and I think to myself, what could it be like if all you ever had to do was one thing instead of 78 things? Because I think that's a big part of like, You just build this really distracted thing where you're running after all these different things and you never get very far on any of them. And my best example of this is a company called LeafFilter, which everyone's probably familiar with LeafFilter or some version of it. LeafFilter is the largest gutter guard in America. I think they invented it. They're based 5 minutes down the road from me. Like that's their headquarters. That's where they were founded. And it's a fascinating business to me because they only have a couple service lines. They have more now, but like they were built on the back of LeafFilter, the gutter guard. And I don't know exactly how big they got on just that one line. Like their business now does $400 million of EBITDA and maybe $1.6 billion of sales. Across essentially 3 products, which is like wild to me. So they have water quality, gutter guards, and like safety, which is guard handrails on bathrooms. Basically.

It's a strange vertical.

Tied into the filter.

Sorry. So they have leaf guards on their gutters.

Yeah.

Water quality for your house. And then bathroom, hand safety. I'm wrapping my head around those verticals. I don't understand.

I think the safety one's the newest one and it's mainly just like at this point they have the distribution.

Yeah, I guess.

So what Leaf did is they took one singular product and they blew it up. I don't think they got to quite a billion on just the gutter guards, but they got damn close. And like to me, and we're gonna talk a little bit about how they do it, but like I think the power of having one thing Is incredible. And I think that we have all these different things. Like before we were talking, you were talking about like a price book update on all these different things. And I'm like, all I can think about is how do you get to one thing? Or how do you get to like 3 total things?

Yeah. Well, have you heard of Water Heater Pros? I'm jealous of the business.

I hate them.

Yeah. They're right down the street from us. They have their little Honda, or not Honda, the Ford Transit Connects, the mini ones. And they run around in those things and all they do is undercut everybody on replacing water heaters. That's all they do. But because they do such high volume replacing water heaters and you type in water heater replacement, they're doing one thing. They bid on one thing. They don't do any other plumbing. I don't even think that they have, they might have their little limited license for plumbing, but—

What, like that's a dream scenario. Like, so we've hired people from a company around here. They don't do a good job of it. They're not well advertised. They're not anything. I think they have like a couple partnerships, but they basically, they just do water heaters. It's only like 10 guys. So it's like not that impressive. What I'm fascinated by, like, that's not a good example of it because they stayed small. Like a good example is getting to a billion dollars of sales. Like that's insane. And like $400 million of EBITDA with like 2 or 3 products. So like, yeah, the Water Heater Pros, that's an example. There's a Mr. Water Heater in Pittsburgh. But this idea that the entire business can be summed up in one thing is like intoxicating because then you can be the best at that one thing. You can drive the most leads, you can do all this stuff. And I think most people don't do it because they don't have the distribution. They can't figure out how to just drive enough leads in that one thing. And I would say that like of what Leaf did well, one, they kept their focus. They kept their eye on the ball and did one thing. Till they were nearly a billion dollars. And 2, like they really, they hit leads, they hit lead flow. Like Leaf is one of those companies that they're at everything. So you always see them absolutely everywhere. Like they're at Lowe's, they're at Home Depot, they're at the events, they're like door knocking. They're doing absolutely everything. They're in every mailer, they're in every magazine, they're in everything, but it pumps that one product.

Is there an installation aspect to it or are they just a product that's being delivered?

There's an installation.

Yeah.

It is literally a home service company and it got to over a billion privately owned by the founder. Guy's name is Matt Collig and he owned it and he just sold majority a few years ago and they were north of a billion dollars. And like, that is the largest privately owned home service company in North America. And they were doing like gutter guards. Like, it's just absolutely insane to me.

So like, not to undercut his achievement, 'cause that is incredible. It doesn't matter in what you did getting to a billion dollars in valuation, especially with a physical install aspect, is absolutely insane. Do you think though that some of that was driven by being the first to market on a new product? So more so from like an invention distribution trademarking side of owning— there wasn't gutter guards 20 years ago, or at least they Didn't look like they did now.

They may have very well invented it. I really think it's distribution. So like what I think Leaf has done well, but what they've really done well is their distribution is insane. And they started a partnership with Lowe's and the commitment was like, we'll be in every single Lowe's in America. Like I will put a Leaf staff member in every Lowe's in America to push our product. And then Lowe's gets a commission per product sold. So like, that's insane.

It's a good partnership.

I don't even know how many thousands of Lowe's that is, but it's a lot. And then if you do that with Home Depot or Costco or BJ's or like every, any other thing. So I think that's what they've done really well is they've built this network of nationwide distribution. And then now what they do is they have this network, the machine is built and they're just dropping other products into it. So like they built the network and then they dropped in water filtration. And then they dropped in safety and then they dropped in, they have like a floor coating thing now. But like, you know, now they're just like trying shit out. Like, hey, we're in every single market ever. Let's just drop this little product in here. So now they're messing around with it, but like business is huge.

Yeah. They didn't wait till $3 million to start their second vertical.

So yeah, that's back to the argument of like pure focus.

Yeah.

Like they weren't even pure focused on one trade. They were pure focused on one Mm-hmm. I don't know, man. Yeah, I can't stop thinking about it.

Yeah, no, I'm with you on that one. And if not in the sense of like, you obviously potentially, right, you own a business that's multi-vertical. Like there's no getting around that. You're not shutting down 6 different verticals tomorrow because of this idea. At least I don't hope so. But at the same time, like how do you take lessons from that and extrapolate that out to do something bigger? And it sounds like that's what kind of the angle that you're starting to take into that. Is there any big findings that you've come to revelations with yet. 'Cause like my head, I'm just, I'll start first. Like the first thing that comes to mind is like water heater pros. Why, like why couldn't you do that for HVAC?

Yeah.

And just be like HVAC replacement guys.

Mm-hmm.

And then that's all you do is just go around and do the best, highest margin thing in HVAC that you love so much and you don't have to do the service, you don't do the maintenance plans.

Yeah.

You don't do memberships, you just change 'em out when the time comes and Get huge purchasing power and undercut everyone else.

Yeah. I mean, I think what I took away from it is focus and distribution, like, which I knew that was a thing, but I was still thinking too broad. I've talked about it in the past of like, you know, I chose to be locally focused instead of nationwide. And like the option is like a Zoom Drain, like all they do is drain cleaning. And I'm like, man, that's beautiful. But like, you can go even deeper than that. You can get even more niched than drain cleaning. You could do just jetting, you could do just lining, you could do just drain punching if you want, drain clearing. And like at each thing there's like its own thing. But what I think you need is like a minimum. I think you need like an average ticket that makes sense so that way you can really push on it. But like, what if you could drive Enough lead flow to support a full sales team selling one singular product. And that's it.

Yeah. I mean, I see the draw. I do like, as we're getting into, sorry, I was laughing during your talk because, you know, it just flashes in my mind is all roads lead back to franchise. All roads lead back to franchise saying, you know, at the same time, I see the point. I see the drive. I mean, definitely focus on a singular item. All your ads are about a singular thing. You have a very limited like keyword base. So everything is, it's easier. It's just easier cuz you're focusing on one thing. But at the same time, the cross-sell that we are getting from like HVAC to plumbing is insane. And I couldn't imagine looking back like not, Yeah. partaking on that. But maybe that's peanuts compared to the distribution and what you get by going single vertical.

I don't know. I mean, like the big thing is I'm still flushing through my thoughts on this.

It's an interesting dichotomy.

Yeah. Like I've always known that less is more, but seeing it as such a clear, blatant example of less is more, like reconvicted me of less is more and then shook me up. And how do we become like, I don't need to do everything. But how can I do one thing to the tune of 9 figures? Or how can we just do 5 things? So that is the push. 'Cause I think like simple is scalable and one thing is simple. If you like what we talk about on our social media, on Twitter, on this podcast, then you should be signed up for our newsletter. Go to ownedandoperated.com where every Friday we break down our business. We break down insights, things we're learning, things we're working on. And it's good stuff. Check it out. Ownedandoperated.com.

Is there a national brand for like water heater only changeouts, or is that because you're getting into plumbing?

No.

It's kind of difficult as you go franchise state to state.

Well, I think like competition's complicated. So this same idea is done in other things of like how I'm thinking about this. So as I'm thinking about this idea and like, how can I implement this into my business? I'm not thinking about plumbing, HVAC, electric at all. Like I'm looking at other industries like dog containment. This is dog containment. So how do dog containment companies get leads? I'm sure we can think of a bunch of different ways, but like they roughly run the same model as Leaf. There's a parent company that manufactures something. They created a channel for distribution or like 100 channels for distribution. They drove crazy leads. They only did one single thing and then they launched it all over the country. And I think it's really complicated to do that with like a water heater because one, you're not manufacturing it, so you don't have pricing power.

But you could.

You could. And 2, everyone is competing with you.

That's why I questioned about the Leaf Card, like the first to market inventor.

Maybe, but like the products they're doing now, they're not the first to market. They used to have really big distribution.

Yeah. Poor distribution areas.

They're doing like garage floor epoxy coatings. That's not new at all.

Well, what John Mazur started, the Mance, or how do you say his last name?

Mazur.

He started the garage cabinet company, right?

Yeah.

They remodel your garage with cabinets. Super niche. That's all they're doing. It's an interesting idea. If you pick something extremely niche, one item, and you just run it through with great distribution nationwide. Could you, like, Got Junk's another actually great one. There were junk removal companies prior, but then that's a home service. I mean, it can be a commercial service too, but blowing that up to a billion-dollar valuation extremely quickly just by distribution. And there's no new idea there. It's just hauling junk.

That's the problem that I've been working on for maybe 5 months. Like I remember first drawing on the board back in October as my marketing manager and I were sitting there, like we drew the 6 core services.

Shout out Jesse.

Shout out Jesse. And we were like trying to figure out how to drive that further.

Yeah.

So for the past 6 months of my life, this has been like the thing. And I feel like we're closer than ever, which is pretty exciting.

That's cool, man. That's interesting. This is personal, but do you feel like that's what's going to get you above the $100 million mark? Like, is that the key or the lever?

I don't know if it's the key. I think it's the key to getting there faster, but like, we can just continue doing what we're doing and we'll get there. The problem is everything's so messy because we do so many different things and like, it is just messy. Like, what if you could build a process and just drive that process to a billion dollars? Because like the process of installing gutter guards doesn't change. And then it's like building an organization, whereas there's so many different job types, marketing channels, there's all these different things. And I think it's sort of like, I remember thinking this as we've shut down a lot of verticals before. I don't even know how many, but like the most recent is electrical new construction. I've never had an issue turning off revenue if I think it simplifies the business and we have always grown as a result. Of turning off revenue. So I just think this is like the next version of that, of what is the next 10 things we say no to so that we can continue pumping even further on the few things. Because I think ultimately, if I look at this, like if I'm a million-dollar company, every million-dollar plumbing, plumbing company does everything. Like they're doing some new construction, they're doing some restaurants, they're doing some whatever. And like you can summarize the problem as they don't have distribution. Like, that's it. That's why they're doing everything. They're taking whatever comes their way. And I think that we haven't quite grown out of that yet. Now, obviously we're narrower, we're 95% residential, which makes us feel like, yeah, we're doing good. We're better than those guys. But like, we still have 78 job types. It's like, are we really that much better? Like, maybe we don't have 200 job types, but like 78 is still a lot. So like, what's the next version of that? We're like, how do we get down to 20?

And do you envision that inside your business? Like saying, 'cause this is a super, I mean, we are on the other side of this, right? So we are expanding out our job types to try and cover more.

Yeah.

I mean, we don't necessarily have a huge issue with distribution, but at the same time, when you're trying to grow so rapidly, you kind of just take everything.

Yeah.

Within your scope. And our scope is like, hey, we'll do remodels. We won't do new construction. The remodels have to come in at X margin, but we'll still do 'em. So do you view that as like, hey, we're gonna, our next step is we're gonna cut gas pipe. We're just not gonna do gas pipe work anymore. Or we're just gonna cut this type of job type, whatever's the least valuable.

I think you say no more.

I don't know.

Like, I don't know that I wanna put like my full unfettered thought. It's not even that, like we're not doing it yet. So like, I don't wanna send somebody down the wrong road here.

I'm just trying to understand in the same way that you're trying to understand yourself. 'Cause at some point in my mind, like, Residential plumbing is just like, it's residential plumbing. You have to do everything in there or you lose the customer. However, that being said, I thought that's the same way for on-call weekend work. And you said, hey, we grew to $30 million without that.

Now we're adding it back in, but now it's like a very robust weekend, 7 days a week schedule. So it's a different program.

Not the same as a, like the $2 million, hey, you have 3 guys and they're all switching off a weekend. And you do that because you think you're gonna lose customers if you don't.

Yeah.

So, um, my point of that was trying to figure out, like, if it was me, like, what would I shut off from just residential HVAC or residential plumbing? Like, dude, what kind of work do you just not do anymore? 'Cause it's so low value.

Well, like, how do you replace it? Um, that's the question is, I know we talk a lot about marketing, but like, um, the reason that they were able to do this is 'cause they designed a marketing system. to pump that one thing. So how do you design a marketing system to pump that one thing? Because you can't turn something off if you don't have something else to replace it.

Yeah, fair enough. That's an interesting idea. I'm not going to sleep tonight. Thanks, John.

It's an interesting problem. So like over the years we've shut down so many different services like bath remodels and plumbing, new construction, like commercial boilers, like all these things that were meaningful percentages of our revenue. And I think that a lot of people get afraid to shut them off because they don't know what's going to happen. But every time we have simplified, it has helped our business. I think we're at the next stage of simplification where we have to go even further. And like, that might be divesting like a trade. I don't think so, but like, it could be broad. But yeah, it's an interesting problem that I think I'm like kind of close to a solution on, but I'm afraid to give it out because I don't want somebody to go in the wrong direction.

Yeah, fair enough. Just don't get rid of septic pumping.

No, I don't think we actually get rid of anything. It's more like, what is the one thing that we can do instead of 6? And this was a joke I even told Jesse 6 months ago when we first started talking about this. I was like, 6 still feels like a lot. How do we get to 1? And how do we get to one single thing being 50% of our business? So that's the problem I'm trying to like solve right now. And I actually don't think I'm that far off.

Sweet. Well, I'm excited to hear it when you, uh, are ready. Yeah.

I'll tell you in a year if it worked.

That's cool though. Different problems. That LeafGuard was a neat business to bring in. I've never thought of them as a home service company, so that's kind of cool. I forget about some kind of these super niche.

Super niche, huge. Which like, dude, if all you could do is one thing, You would never need an academy to train people in a bunch of trades. You'd be able to simplify install. You'd be able to simplify sales. You'd be able to simplify lead flow.

You'd simplify hiring, simplified everything.

Everything. It's almost like, no wonder you got to a billion because you only had to do one thing. Like it almost makes sense that you got huge because you only did one thing. It'd be like, if you didn't get huge, it's like, what were you doing?

I'm with you on that one. I'm thinking about The water, like, I know my mind is just stuck on these water heater guys, but just completely jealous.

Yeah, I've thought about that too.

Dispatch out a house, they all have trucks, so there's a fleet management aspect, there's a manager's aspect, but it really stops there.

Mm-hmm. But then you just have to figure out how do I do 10,000 water heaters a year? Because it's a solvable problem and that's not me being facetious.

Yeah.

That's the problem to figure out.

It's also a great franchise opportunity too, because as you grow it to different locations and get different licensing and just all you do is that, you get prices, purchasing power that absolutely dominates everyone else. And then if you could white label any of that, which I wouldn't be surprised, I don't feel like water heaters are overly complicated.

No. I mean, I'm sure you'd be able to, you start moving 10,000 a year, I'm sure you'd be able to do whatever you want. But like we move 1,200 water heaters a year now. So like I could see a future where we do 10,000. I remember doing like 50 a year. So like 10 times isn't that crazy now. That was like a couple hundred times.

Hoffman. Hoffman probably sells that.

I'll ask. All right. Thanks for tuning in. This was a fun one. This was interesting. Massive home service.

Guys. Well, yeah, thanks for listening.

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