#135 - Pipelines, Heavy Equipment, and Marketing your Excavation 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.

Recently, we've been buying off supplyhouse.com, and we've been able to get plumbing, HVAC, and electrical stuff off there. And my biggest concern was timeliness, like, hey, if I need this thing pretty quick, can I get it? And you for sure can. So that was awesome. So deliveries are fast, they ship coast to coast, and you can call them and you can get expert support with real people, which is awesome. So check out supplyhouse.com.

Welcome back to Owned and Operated. What's going on, John?

Living it up. I'm overlooking a body of water, so I feel good.

Beautiful, beautiful. Living the dream. Sounds like— that sounds like a great time.

Yeah.

Dude, I never viewed Michigan as a A great vacation spot until I met you. I need to get up there and take a look at it. I bet it's absolutely gorgeous around the Great Lakes.

Yeah, I mean, it is like the air literally smells like pine. Yeah, I don't know. It's good. The only downside is the water's cold.

I mean, I love a good cold plunge.

Yeah, what's what's the realistic? It's a solid. It depends. So we stayed at three different spots this summer, and I mean, it is beautiful. Like it looks like it's a white sand beach in some of these places. It's like it's insane. It's just that that's cool. But yeah, the houses, I have no idea. Like. I really don't know. I haven't—

Yeah, no worries. Yeah, I was just curious. So like, I mean, my wife grew up at, in Lake Tahoe, same thing, like gorgeous pines, lake. Yeah. But if you wanna buy a house, you gotta have, you know, $6 million. So, yeah.

Yeah.

You know, it's one of those things. So, you know, I'm always looking and, and I love Tennessee. Tennessee's a beautiful state. I'm not talking bad about Tennessee, but I'm not gonna go swimming in any of the lakes around here. Just saying they're a little bit mucky, a little bit dirty for, for my, uh, I guess spoiled Tahoe taste.

Yeah.

I mean, I mean, I'd be down to fly out to Michigan. It's not far from us, so.

Yeah. I mean, even just up to Detroit, like, so the, a month ago we were in Michigan and we, we were staying, I think it was like Port Salina or something, and it was 30 minutes outside of Detroit, maybe an hour outside of Detroit.

Mm-hmm.

But it was phenomenal. Like the house was 50 feet off this white sand beach. The beach was 50 feet wide. Like the kids just stayed on it all day. It was amazing.

That's cool. That's cool.

Yeah, that was great.

So, um, what's going on in your world? I heard you have a new toy at work. That's very exciting. I'm, I'm a nerd, so this is right up my alley.

Yeah.

And I love this. What'd you buy?

We bought a sewer lining machine. So sewer lining, if you don't know, like there's a couple different ways to fix a sewer. You can excavate it and you can dig it up and you can replace the pipe. And the alternative— So yeah, so you can do this lining. And the beauty of lining is like, so excavating is always good. Right? So, you know, in HVAC, the, the, the top of the value ladder is replacing the equipment.

Yep.

So, you know, you do a tune-up for $98 and you hope to get equipment replacements out of those tune-ups. It's how the business works. Makes sense. Drains is basically the same thing where there's this funnel of, okay, you come in with a drain cleaning. Now people do it in different ways. It can be Like we don't do the $98 thing, but some people do. We're we're still like full premium on cleanings. So it just means we do less, right? But we just don't have capacity. But so you can do these drain cleanings. Then when you do them, you can basically upsell same as you know HVAC. So in HVAC, you come in, you do a tune up, you try to upsell into air quality, and maybe flip it to a comfort advisor. Drain cleaning is the same exact thing. You come in, you do a cleaning, you try to upsell it to a jet or a patch repair or like a whole house jet or something like that. And then you also try to flip it to a sewer salesperson. So that's the model. It's HVAC, both drains. So excavation is like sort of the big thing. So average ticket depends on where you are. I was talking to someone in Texas the other day and their average ticket is like $40,000. Oh, but it's because they have to tunnel under the house in order to replace the sewer, which I had never heard of that. Apparently that's just Texas.

Is it because they're on slab or something like that?

So, yep.

The way that they're slabbed and their building is done, they have to actually tunnel under and like bore under the home.

Yeah. It's insane. So like while I was on the phone with him last week, they sold an $80,000 replacement to bore under a home.

Yeah.

I like it.

That's cool.

That's insane.

Right?

That's insane.

But very large lift to actually sell that, right? Because, you know, your average person won't even, um, the average homeowner won't even qualify for $80,000 worth of Yeah. Funding to get there without doing like a full HELOC or refi on their home. So it, it's not, yeah, not easy to sell, I'm sure. So yeah, there's alternatives.

Yeah. So, so anyway, so we've been excavating for probably 4 years, 5 years. Drains, drains has been like a slow burn for us where we started, we started really doing drains in earnest in like 2018, 2019. Uh, just as we did more plumbing, we just got more drains with it.

Yeah.

And yeah, so, you know, more drain cleanings. We bought jetters in 2018, I think, and that was a really big investment. And just, we've continued to do that over the years. You know, we went from leasing the equipment for the excavation to buying it. Um, it's really felt like a slow burn, and it's, it's a good, uh, part of our business. But it's still only about 4 million. So as like a part of the whole, like, yes, that's a lot of money. But as a part of the whole, it's still a small department for us. It's not like the big banana. So, but every now and then there's a step change and this is sort of the new one. So the step change for us now is we're going to go from excavating most of our drains, all of our drains really, to we've now added this pipelining equipment. And what pipelining does is in certain scenarios, you don't have to excavate. Now, sometimes you do, like if it's a break or if the pipe is collapsed or, you know, there's different reasons that you would still have to excavate in some capacity.

Yeah.

But if it's roots, root intrusion, or a few other scenarios, you can do something called lining. And the benefit to lining is that you don't have to excavate, which that sounds obvious, but like, that's the benefit to literally everybody. That's the benefit to the customer and that's the benefit to us. Like, so it's— that is sort of— that is the benefit. So, um, I don't have to tear up your garden or your hardscapes or your street or your sidewalk. I can just line the sewer.

And multiple people's, right? So sometimes, yeah. it goes through multiple people's property and you have an easement and now you're digging on someone else's land and the liability.

Yeah.

I mean, it's dig— excavation's not a joke. It's a, it's a big undertaking for this stuff.

No, it's, yeah, it's real. It's a, it's a pretty big deal. And excavation for us has been good and bad. Like tickets are really good, but we've struggled with profitability in it and a lot of callbacks, a lot, you know, just a variety of issues. In excavating the more and more we do of it, which we do millions of dollars a year of excavating.

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Pipelining, it's exciting because you don't have to dig. So most of our issues sort of go away. And it's also a premium product because you don't have to dig.

Yeah.

So now, like, I could sell a sewer for $10,000 and I could sell a lining for $10,000. I would make far more on the lining and the customer would be happy. Happier, much happier. Even if I charge like $6,000 for the sewer and $10,000 for the lining, the customer would still be happy because they didn't have to pay $5,000 or $6,000 in landscaping, sort of that hidden cost at the end or the ugliness of their yard for a year while the dirt settles.

Exactly. Yeah. And can you, can you talk a little bit about what the machine looks like? How much did it cost? What, what's the process on that?

Yeah. So we started small. There's 2 different ways to do it. You can do like a patch setup or you can do what's called an inversion kit. We started with the patch setup and our buy-in was $60 grand or so, which was not a lot. Uh, we already had the trailer that it was gonna go in. We already had the truck. So it was really just that $60,000, uh, for equipment that we placed inside, inside the trailer. Mm-hmm. The complicated part was hiring. Like, that is a very special expertise to run this equipment. This is not—it's not like a normal hey, let's just get someone that knows how to excavate. This is like no, who has done exactly this before, and how do we just hire them and get this to be successful? So that took a little bit of time. But, um, so it was only $50,000 to $60,000. A full inversion kit could cost anywhere from $180,000 to $250,000. But what, what we've been trying to do is we want to just step into it. So half of the stuff that we bought for our kit can be used for the inversion kit. And we just want to make sure that one, we can sell it, we've got the right talent, we understand how it works before we drop a quarter of a million dollars.

Yeah, that makes sense. And So how has the— so you've been— how long have you had it? And have you noticed a really, like, what's the customer's reaction to offering both?

Yeah. Well, customers have been asking for it for years. It's just that we haven't— yeah, we just haven't been— we haven't made the investment. So people, people do know about it. They know that it exists. So it was actually kind of funny because we finally got the equipment and our team went through training last week. And we're doing our very first liner today. And yeah, yeah, so we're excited. And so, and the team that, that helped, like that we bought the equipment from, like, we trained down there last week, and then they're on the job with us today helping us line. And I think they do one or two jobs with us. But so people have been asking about it. So selling it is really going to be very easy. Because it's just like people already want it. Like they want, they don't want to dig. They just want this patch system. And there's already education out there in the market. So, you know, people know that it exists. Like, let's maximize every day. And that helped a lot. And then we also added lining, which is now a second crew. So that way, our, we hope our lead time is under 2 or 3 days now to get a sewer in. Like that's what we're aiming for. So we can line in the next day or two, or we can dig in three or four. So it'll be a little bit more feature than it's been for us. We've actually never really—I've never had to be concerned about the install schedule for excavation in four years because we've always been booked out a month to a month and a half, which I understand is a bad thing because we could pull up that revenue and do more and sell it for a higher price. But, uh, that's just been our reality.

I'm excited to, to get some updates as you start utilizing this more and see, um, the outcome of your Slack channel as, uh, I, I mosey on by for that workshop and all I hear is ding and I hear your voice saying, oh, we sold another liner. Oop, we sold another liner. Oop, we sold another liner. And then just be completely jealous of all of that. Um, So that's awesome, man. I think that's a really cool tool.

Yeah.

Um, it's one of those auxiliary tools too, like a duct cleaning machine or that, that tend to just add so much value to the business.

Yep.

Um, they're just high upfront costs. So, uh, I'm, I'm on board. I'm gonna stay on board cuz I mean, $60K isn't unreachable. I mean, it sounds like a lot in the, the initials, um, kind of standpoint.

Yeah.

But I mean, that's, you know, if, 3 or 4 jobs realistically, maybe 5 jobs, and it's paid off.

Yeah, I mean, the first job was $16,000. Um, so that's already making a pretty big dent, uh, in that. And then we think we'll sell more. Um, and a lot of it, I think we're just gonna send an email to our customers, making them aware of what's going on. Hey, we have this new thing. Here's what it looks like. Here's how the technology works. And we'll see if we get any leads. Other than that, our pipeline for sewers has always been full. So being able to just turn around and say, hey, I know you didn't want to mess up your yard, or hey, now we have these 2 options. So we've started presenting them in tandem and it's been going pretty well. Like we're, yeah, we're pumped. So big investment, but we're really excited about what that looks like for us.

Very cool. Well, if you like what you heard today and you want to follow up and see if John's New machine actually makes him some money. Follow along on our podcast, give us 5 stars wherever you listen, and go ahead and over to the webpage and check out ownedandoperated.com. Sign up for the workshop we're doing in September. We are really excited, really, really excited to meet some of y'all, really excited to get that camaraderie and to share some of the silver bullets and that juice. So hope to see you all there. And until next time.

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.