#133 - Managing HVAC Growth and Infrastructure in the Summer Heat

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 going to 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. Service Scalers is running a promo right now where if you sign up for a year of service, you get a free website. Which is awesome. We just did this in one of our businesses and it really helped a lot. It was a brand new look, plus we got great SEO with it and PPC to help. So make sure you check out servicescalers.com, promo code OWNED.

Welcome back to Owned and Operated. I miss saying that so much. How's it going, man?

Man, it's good. It's good. Yeah, like I said before we started, I feel like we're farts passing in the breeze right now. We're just like, you know, I see you once a week. I'm not getting enough Jack time. So this is good.

This is summer though. This, this is HVAC in full swing.

This is HVAC in the summer.

Yeah. Is it miserable up there right now?

Oh yeah. No, this is dis— it's disgusting.

Disgusting.

It's disgusting. We're selling so much of your ACs. I think we're, you know, it, it's great. And obviously the heat is what really helps. And then you build infrastructure, you sell more memberships, and then you do it all over again. Yeah.

I mean, It's been 95 and humid and unbearable, and yeah, I don't want to be outside. But guess what? I'm in love. I'm so happy. I'm, you know, I'm a kid in a candy shop in summer.

Well, this is a strong summer too.

Yeah.

Um, because I actually don't feel like we've had a strong summer in a couple years. And I think it depends on where you are in the country. Like, some people I read on some Facebook groups, some people are having a pretty weak summer. But like, yeah, our center, our, you know, like you and I are in the sort of same section of the US and strong summer here.

I just got back from Las Vegas last week too. Yeah. And 117. So I mean, like, they're doing, they're doing all right.

Yeah. They're doing good. Yeah.

You're out in Vegas, Phoenix, Reno, like 110 plus is—

yeah.

I couldn't imagine working out there in that.

Yeah. I, I can't either. I, we had, we had Matt Ballard on the show last week in that new Legend series that we're doing that I think, I don't know actually when that starts airing, but it will be fun. And he talked about his guys working in like 140, 150-degree attics, and I'm like, that's crazy.

Yeah, if you've ever been— I've been in a 140 attic with zero ventilation and spray foamed. It is miserable. Like 120, 115 is still like super hot, but like 140 attic, like you can't touch the machine, like you can't touch the equipment without it like burning you. It's the craziest thing.

Yeah, we I interviewed someone a couple weeks ago and they, they were previously working for a competitor and this was like 7 years ago and they had someone die up in the attic.

Mm-hmm.

I, I, you know, I don't know what it was. Maybe heat stroke, maybe, I have no idea.

Yeah. Sweet, man. Well, how, how are you guys doing? Good.

Like good.

Like across the board though? Like not only HVAC?

Pretty much. Yeah, pretty much. We've, yeah, all the trades set a record June. So we had a record May that was like our first time crossing $2 million. which we've been chasing down $2 million months since, uh, like October and just like really flirting with it. And we finally broke it. And then, and we like, we, we tipped the line in May for $2 million. And in June we did like $2.35 million. It was ridiculous. And July will probably, will probably do the same. Uh, it, it might be like $2.5 million.

That's so cool. I'm so excited for the day like that we do $100,000 a day. Like that's my, you know how you build these goals into your head that in the future, like, Yeah. I can't wait till we hit $1 million in revenue or $5 million in revenue.

Yeah.

Like my first $100,000 day, I'm gonna be so freaking pumped.

Oh yeah. They're, they're still cool. Like $100 grand is now a normal day for us.

I hate you. Don't, don't, don't say it like it's no big deal.

Like, oh, it's, it is, it is a big deal. Like it's still like a 6th digit.

Yeah.

Like, so every day it's just like, dude, this is awesome.

Yeah.

But like now that number for us is like, we broke, we broke the $200,000 a day. We broke, popped our cherry on that, which is like such a ridiculous number for us. Hey, but we did like our, our previous high was like $180,000, maybe $160,000.

Mm-hmm.

And just all the stars aligning for something like that to happen. And same with $215,000.

Yeah.

But we ended up doing $215,000, uh, in a day.

Most people listening, like most contractors in the United States, a $200,000 day, that's their month.

Yeah.

Like that's their average April.

Well, I mean, this'll make even, this'll, this'll be even more nuts. In the week that we did that, we sold 750,000.

Yep.

In, in 6 days. Like it was ridiculous.

That's cool. That's super cool.

I love that. It, it, no, it is. It, but like my, it, it is still cool. It's not, it hasn't, uh, it is still cool. I think what's been fun, and I did a tweet on this a couple, like, uh, maybe a month ago, 2 months ago, but it, it took us 65 years To hit $1 million a month.

Crazy.

Like literally 65 years. It took us, I think, 18 months to go from $1 million to $2 million a month. Like a million's really hard to break because it's infrastructure and, and not, and the, you know, I've said this before here, but the lift from going from $1 million to $2 million a month is so outrageous. And it makes sense, like you're, you're, you're doubling, you're going from $12 million to $24 million, but like, Like the lift from $2 to $3 million is probably hardly going to be a lift, but the lift going from $1 to $2 is insane.

That makes sense. I mean, you have to like get your processes in place by the time you're at $12 million. You've already bashed through the screw it up stage at $10 million, right? You have to— you've added the people, you've added the infrastructure, you've added the training programs, you've added the sales training. And so it all makes sense that it kind of J-curves towards the end and then you hit other milestones.

Is you add like now another million a month is 10 hires. But I mean, we're not gonna be able to get all that done.

Yeah.

In, in, 'cause that's, it really ends up being 20 total hires 'cause you have to back that in with install too. But yeah, I mean, it's basically 10 to 20 hires and that feels pretty darn achievable. Um, even this calendar year, like we think we're gonna hit our next, like the $3 million a month mark. By next May.

And once again, it's the nuance to it. Like, yeah, the number doesn't sound crazy. It's not hard for you because you guys have been there and done that, but it requires the infrastructure of, hey, we have HR teams to actually go through and hire people. It's not the GM going out there. Yeah, it's, hey, we have the benefits to attract people and we know how to get the right people in the right places.

Yeah.

Because I mean, we're trying to do like 3 hires. 3 hires is such a pain. Like, so when you say 10, I laugh because it's like, damn, 10. I can't even, I can't fathom.

I mean, 10 is, 10 is still like a lot. Like, I'm not even saying that lightly. Like, yeah, 10's a lot. Like, 10 would, would be a lot for us. Like, that, that will happen in the next year. 10 service sales hires. Uh, but like, that's not gonna be next month.

So the crazy part that we've ran into too with this is as we like get more People on board, and we've hired three more people. Like the landlord called me the other day and chewed my ass. Jack, I would never have rented to you. Da da da da da. The lease, sorry, lease to you because we held an all team meeting. Like we held a company wide meeting. Yeah. And I mean, we definitely were assholes. Like we took up every parking spot in the entire complex, and like we have eighteen nineteen people now, and we're hiring three more. So twenty twenty one twenty. Like, I can't believe how big of an issue trash becomes and then parking.

Oh yeah.

And like office space. Like, I couldn't imagine we were— when we started this, I was out of a storage unit and now like kind of that, that same J-curve is a year and a half later.

Yeah.

Not even. We are running out of parking. But like, what was the moment for you where like you, you kind of fell into your first building, right? When you bought the business, it was already there.

Yep. Already there.

What was the big kind of reasoning in the lift to get to where you are now?

I was, this was on the brain earlier today and I'm, I'm gonna give like a sob story.

Diatribe, go.

So today I did my final walkthrough of the building that Wilson spent its first 65 years in, which is insane, right? Mm-hmm. So my grandfather bought this building back in the like, '50s, and we've been there ever since. And we like, we kept, it was a huge building, 26,000 square foot. We kept remodeling and expanding and people had double offices and parking was a problem for like the last 4 years. Like we ran outta room years ago. So having multiple locations was partially because we bought the businesses, but also like we couldn't, we could never have combined if we wanted to because we didn't have the physical space set up for it. So we obviously moved. I've talked about that a lot on the show. But we've, we moved and we shut down all those external locations and we combined them all into, into one, which was a ridiculous lift. And so what we were looking for in the building was we wanted somewhere that we felt like we could spend the next 10 years, which was probably a mistake.

Oh, 'cause you've already grown it already. Yeah.

Yeah.

There you go.

We, we still have room. We do. But I can, it's coming faster than I would've thought. So we're not, we're definitely not busting at the seams like we were at the last building.

Yeah.

But I think within a year or 2, we will, like, we filled a lot of offices faster than I thought we would. The call center filled in quicker than I thought. All like, we use all the rooms regularly and parking, which we thought we were gonna solve by moving here, is still a ridiculous issue. We thought we had enough and we just, We just plainly don't. So that's kind of like, that's super frustrating. Like we should have moved somewhere with 200 or 300 parking spaces, like a shutdown Toys R Us or something like that is probably what we should have done. And instead we took an office building.

That's so crazy that you're already, I mean, you can see it on the horizon, which is the crazy part. Like it doesn't hurt just yet, but yeah, you can see it's going to hurt.

'Cause you're right.

Yeah. There's not, I mean, you guys, last time I walked through, you guys didn't have, you had like 1 or 2 open offices. The bullpen was pretty full. And then—

Yeah. And we're, we're not using space efficiently. Like, we're not, like, where I'm recording is an office that like in the next year will have to become someone's office. So I'll have to move this room. Yeah. Or like we have an office that we use for uniforms and we have an office that we, we have, we have like 5 empty offices. But you know, as we're as we're thinking about this, we're thinking a lot about you know. Okay, what does this look like? We're thinking about more locations again in different markets now. But so like the building, I think the building is going to continue to work for us. It's just like how it how it works might might shift. But we still have room to add another probably fifteen heads in call center. So that's good, which is only double. our current call center. So that's not like a crazy number, uh, 15, which like we'll probably hit that in the next 2, 3 years.

Yeah.

And when we first moved in, we were like, oh man, I, this feels really big. Um, we filled it. Like we've, yeah, we've like, we have room, but we don't have a lot of room. The, the where we could do the warehouse was really important because we knew we were gonna do VMI and we had to be able to block off and gate and camera And then put 'em behind, like, we have key cards access for everywhere and we had to put, we had to be able to lock all that down 'cause it's someone else's inventory. So that was really important for us. And then we had to have enough garage doors for staging, which like I could have done. We only did 4. I like, I wish we had 10.

Yeah. It's bustling in there in the mornings. Everybody's just flowing in trying to get that stuff out there.

It's crazy. Yeah.

Get it all stacked back.

So yeah, it's like we did some stuff right. We did some stuff wrong. We would, I don't know that we would be able to run double all inside one building, mainly just from a, like, where do people park? Like we're already, you know, it's already a problem.

When you get to the next step, right? 'Cause there's potentially, right, as you reach a certain point, you expand offices back out, you just have to go multi-location. I can't imagine you continue one location to get past certain milestones like Tommy Melos type of stuff. You just can't do one single market to $100 million, or you can, but you know what I mean? It just gets very difficult versus opening up a second market and a third market doing $6 to $9 million each. Yeah. So my question here is, do you view the office space changing right as one of them becomes your main hub and then you utilize—

Goodness.

I would, I would think that your call center comes out of one location.

Yeah.

You could actually offset that call center to somewhere else, right? You get a full office building with no warehouse and no, like, do you think about those kind of things or is it you really want to consolidate as much as possible?

Yeah. Like this will be an interesting podcast to listen back to in like 6 months, but we're in the early stages of thinking next market again. All that said, like we can go bigger inside Northeast Ohio. We don't think we're anywhere near our peak inside this market.

I'd agree.

But you can go pretty big. Like Hoffman ran, I think, 70 or 80 out of their primary location. Peterman runs 50 or so out of their primary location. Eco down in Columbus runs 50 or so out of their primary location. So you can go big with one location. You can go pretty big. And I think we could get to 70, 80, but I also think we're within the next 2 years, Dropping new locations again, and the way it looks is going to look like Tommy Mellow, Gettle, Chad Peterman. Yeah, we centralize call center. We centralize. We centralize most of it, really, and we are dropping in branch managers, and we're building from there.

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We'll keep, we'll keep call center centralized just like everyone else has done. I think that just makes the most sense. So like, you know, the other people that we talk to, they put in a dispatcher and a branch manager and those are the 2 people inside that new market and then they build from there. And then yeah, warehouse. Like again, we're really early. We are very early stages. I have enough of it mapped out that I'm like, yeah, I think, I think we could do this. We, we ran multi-location for years, so I feel like we have really good understanding of what it looks like. And what we're really trying to be conscious of is not rushing into it again when we still have like issues, like scaling issues.

Yeah.

Here at home base that we just haven't fully solved yet. Because the, the way that multi-location works, Is like, how good is your training department? Because when I go hire 10 people in wherever, they're gonna get flown in and they're gonna get taught the Wilson way and they're gonna go through a, a bootcamp. And that has to be robust and good so that when they go back to whatever market they came from, they're able to perform at the standard that we want and, you know, give great customer service, drive the numbers that we're looking for. And that's all training. And I think that we're farther than we were, but I don't think we're far enough to, like, put our best foot forward on that.

That's a really interesting idea, though. I think that moving back out, it was— it's kind of neat that you're consolidating and then branching out again. So—

Well, we used it to get to scale so that when we go do the next thing, we have the infrastructure to do it. So like, I have 25 people in the call center. We have a great call center team. We have a great dispatch team. We have a full accounting team. We have a full HR and recruitment team. We have a like fully built marketing team, so we can just go do it. But the the pieces that are still left to like feel really great about our current position: training development. We want to make sure HR is on point, and we want to make sure accounting is clean and strong, ready to like separate those financials out. And there's a Like we have to be able to build capability for future leaders. And those are the big gaps. Like I could go launch a new branch tomorrow and I feel like it would be a terrible experience. Like I think we would, it would just suck my time and energy and we're just not there yet. But I also, I think it's within the next like 9 months.

Circling back to locations and when you picked and why you picked, So we are going through that too. Like I was saying, parking's becoming a hassle. I mean, our warehouse is full. I'm looking, right? My wonderful thing looks like your office, but it's actually in the storage room for everyone who can see the video. And I get to stare at our walls and walls and walls of HVAC supplies 'cause we don't have VMI. So it's like wraps and insulation and—

Yeah.

6-inch whatever. Like, so I guess, We've, we've kind of come to the conclusion, right, that it's $1 million per 1,000 square feet.

Yeah.

And then you have to look ahead to the future. But from your, your perspective, what is like the maximum you would spend when you're kind of that sub-$5 million for our listeners and myself?

Yeah.

That, that you would look at spending because you— because we couldn't— I mean, I'm sure you couldn't either, but you can't go out and like, I can't— we think we're going to be $4 million this year if we say we can't go out and buy 8,000 square feet just 'cause the price is gonna be so expensive per square foot. So what, where, where's your constraints on like capital?

Man, see, I, I feel like that's exactly what you should do.

Oh, that hurts so bad though.

Yeah. I mean, it's just—

'Cause like our biggest issue isn't, like, don't get me wrong, this is annoying, right? It's not, it's not hurting growth at this very second. Versus where I think in your situation it would.

I think that like moving is such a drag operationally. Like it is such a drag. And I want to move the least amount of times possible. And like any savings on rent, you like multiply that by like 30 and that's how much you lose moving.

I mean, the difference though, like, right? So this is a legitimate thing we're worried about right now. So we can move down the street. we could get this building that's 6,000 square feet. It wouldn't be the full doubling, but it would give us a couple years of wiggle room.

Right. I, I figure like that, like a year, actual number, what's your current rent? And then like, what's the rent you're trying to get?

That's what I was, that's what I was gonna go into. Yeah. So the current rent on what we're paying right now for 3,000 square feet is $2,500 a month.

Yeah. Like we're not talking about a lot of money.

Easy. Not a lot of money. It doesn't, I write that check and I feel zero pain. Jack, if I go and buy 7,000 square feet or 8,000 square feet, we're talking like $18K.

Why would it, why would it multiply by 6 or 7?

So $2 per square foot. So $16K, excuse me.

You're paying $2,500 a month for $3K, but if you went to $6K, it would cost $15,000.

I get a killer deal here. The market is $2 per square foot and here it's like sub-$1.

Sure. You could find that again.

I'm looking, I'm always looking. Yeah, that's, that's like the key. If I can find that, we would move. If I can get 6,000 square feet for $6,000 a month, like that jump is that much of a lift.

I still think you're aiming too small. Like my quick take here is if I were in your shoes, I would be very hesitant to sign a lease under 10,000 square feet.

I know. I mean, we see it like I feel it right now, the annoyance. And I know that, hey, in 1 year we'll fill out, 2 years we'll fill up. But it's also a giant recruitment issue. So we have a, we have a problem here with recruitment that when people show up, they, they kind of leave sometimes. I think they show up and they see our small—

Yeah, we've had that.

Yeah, we've had that small, I don't wanna say small office, but we literally talk about this at the workshop.

What's the phrase?

Recruitment problem. Yeah.

Yeah. It's a recruitment and marketing, not a cost problem. Yeah.

Yeah. Unless it's cost prohibitive. So I mean, I'd be good if like, if I could get $1 per square foot.

Yeah.

So if I pay $10,000 for $10,000, I could do that. Like we could swing that.

Yeah. I mean, our rent, our building occupancy cost is $200 grand a year, but that's a building like, yeah, we're not Class A, but it's a good building. Works fine for us. But I think I would imagine that you would be able to find something and just take your time looking for it because I would much rather take my time and find like a property that's located well, that we're gonna be near our customers, that like looks good on paper and in person. So it's good recruitment tool. I'd rather spend, like, we spent a couple years looking and it was COVID market, so that's a little bit different. But like contractor buildings are really hard to find in, at least where I am.

Yeah.

Like above 15,000 square feet, which is what we were looking for. But now, I mean, ours is like, yeah, 28, I think. I could not imagine 10,000 less square feet. Like we would have moved again already in the first year.

And as you continue to J, it becomes an— I mean, and so that's the thing is like we've seen, I've seen myself move twice already. And so I'm 100% on board. It's just the pain in the initial—

Worse and worse the bigger you get too.

Yeah, I could imagine.

Oh, definitely. So much worse. I mean, moving the inventory, moving bills, moving the team.

Did you find that, that like, I mean, given you were already above the size, but I could imagine too that from like a VMI standpoint, like vendors are much more willing to work with you when you had the space to put them.

Yeah.

Like there's a cost cap to it, right? They, they want you to make a certain amount before they bring in VMI to make it worth their time. Yeah.

Yeah, for sure.

But I definitely would think that like, hey, the easier you make this on us, the more willing we're going to work with you.

Like a professional looking building helps every single part. of what you're doing. It helps your marketing, it helps your recruiting, it helps your vendor efforts. Like you just, you do, it's, it's, it's sort of like how you dress gets, is how you're treated. Like the building that you're in is, is how you're treated.

Yeah.

And if you put forward a, like a professional presentation, then you're gonna be treated like a professional. So like our vendors with VMI, they're awesome partners and like they're regularly bringing in other parties to site visit what they're doing in our VMI. Because we put forth a good foot forward. They see what we're doing. I also think it becomes more important, like the bigger you get, the vendor relationships you have start getting really complicated. We're like, we'll have open balances with vendors of hundreds of thousands of dollars because that's the, you know, that's the amount that they've given us for credit. And they like, they want to see a well-run business. And part of a well-run business is the facility. Like, are you a well-run business? So I, I think the— I think it ripples out pretty far. Now granted, that's for our size of a company, but I think that, that having never been in a nice building before this one and then moving in here, it has— it like, it has been a huge difference across almost every part of what we do.

That's cool. I mean, it feels good knowing that because as we move forward, like, it, it definitely helps make, make the justification easier.

Yeah.

But it makes sense. I mean, look good, feel good, do good. I've always, I live by that.

Well, you can also sublet if you get it too big. But like Rich is a great example. He got 40,000 square feet. He sublet a bunch of it.

Yeah.

That was awesome. But now he's got an amazing facility and he's gonna be able to grow into that facility.

Not to mention the marketing of just having that freaking fairway right there, the freeway going and you see the sign. Oh, that, that sign was beautiful.

Yeah, I think the bigger you get, optimizing around location becomes a good thing. So like when we're starting to think about auxiliary markets, like it'll probably be minimum 10,000 square feet, even when I start with like 2 people and maybe even bigger. I don't even know because we want to make sure VMI has room. We want to make sure we've got good room for training, good conference rooms, adequate office space, good parking, clean bathrooms, good kitchen. You know, we want people to feel comfortable with where they work and we want to put forth a good presentation. But yeah, that's my philosophy on real estate. I really need to do like another like updated tour of like, hey, here's what it looks like a couple months later. Because I think the last one was like we were still under construction.

We need to do, I need to do one too so that people can see what I'm talking about.

I would love to see it. I haven't seen it.

Once we get the garbage problem situated, we, I gotta get the, we are, like I said, we're having a garbage issue currently just because We don't have like any place to put a 40-yard dumpster. Oh, so we have to be— yeah. So we just brought in a vendor to do trash for us. And so we're like 2 weeks behind. So once we get rid of those 2 weeks of the trash and everything looks nice again, then I'm going to do it. But so that I can pretend, pretend to you all that it looks beautiful.

So we did, like I said earlier, we did this walkthrough of this building that we spent like 65 years in and obviously a lot of memories. Like I grew, literally grew up in that building basically.

Mm-hmm.

And one of the things that was fascinating was like, it's a, it is a, because it's totally empty, like broom swept empty.

Yeah.

And you start walking through this empty 26,000 square feet and it's really badly laid out. That's why we had to move, like 2 stories, one garage door. Like it, it's not, it's not really like good. And You start walking through all of the decisions that we rationalized to stay in that building that over, over like the past like 5, 6 years.

Yeah.

Like we built, we built on entire sections. We remodeled huge sections of the building. We, we did like an insane amount of work to go from being able to run, like, that's where my dad, that's where my grandfather had 3 plumbers a CSR and himself, like 5 people. And that was 50 years ago. So like, I was running 70 people outta that building.

Mm-hmm.

And we had to, like, you, we just walked through all the justifications and like, I was there with my wife and my wife's like, when we were engaged, she was working for the, for the business, not how we met, but she was working for the business. And we had this little section that doesn't exist anymore and that's where her office used to be. And we have like this picture from 10 years ago of where her office used to be and it doesn't exist anymore. And like, we walk through this and I'm just like, I can't believe that a year ago we were using this building because it's so clearly too small and the wrong fit. And we had to make so many justifications and like, I just should have moved a decade ago.

Yeah, it's funny how, how we all do that. And I think I'm just thinking back on like 3 or 4 times that I've done stupid stuff like that.

Yeah.

And you finally pull the trigger, you do it, and it's just, it's better. It's so much better.

The business is literally up 65%. Like, it's like a tangible difference and like growth is real. And the quality of hire, I think that's probably been one of the biggest movers in our business over the past year is quality of hire. And I'm convinced a large reason that we're having higher quality hires is because of the facility. Like they're coming to interview. They see where we are. We, and we were in an area where like people didn't want to go. And now we're in an area where like the type of staff that we're trying to hire live. So like our, our whole team has leveled up because of the property that we're in.

It's a good reminder. Recruiting location is a recruiting effort and a marketing effort. Yeah. It is not A capital issue.

Yeah.

Yeah. Unless within capital restraint, of course. But yeah.

I mean, like, don't go freaking nuts.

That's awesome, man. I mean, I did see downtown in Akron, they, what, they have like a 200,000 square foot high-rise you could go into next.

Yeah, that would be, that would be good. I still need to see if it's available.

Only like 40 stories. I don't know how you—

Yeah. Yeah.

I don't know how you're going to put any garage doors in there, but you should be good to go.

Should be good.

If you like what you heard today, head on over to ownedandoperated.com. out the new website. Leave us a 5-star review wherever you're listening to this. Let, uh, John and my moms know that we, we're making it. We're doing all right. We're doing all right. Um, and then event, John, we got an event coming up.

Yeah, we've got our next workshop, the Breaking $5 Million Workshop. Check it out. It's early September and that's ownedandoperated.com. We had a great time last time and it's gonna be fun again. And it's at our facility here in Stowe, Ohio.

So speaking of location, come out, see John's location, see how a Proper location is set up. And, uh, awesome guys. Thanks for listening.

Thanks for listening. 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.