#157 Your Questions, Answered: Commission, Supplier Leverage, and Training Strategies

People are clearly gonna care about compensation a lot, so your compensation has to be top of the industry or close to it. Here's our core values. Here's how we live them every day. Here's what we look for. Here's what winning means to us. Everyone probably has more experience than you. Can someone on the other side of the world do this? Wilson just wrapped up the year in the low 20s, and we were pumped. I mean, most of the industry did not have that same level of success. And when I think about who was a huge partner for us, like top of the list was ServiceScalers. We've been working with ServiceScalers for a couple years now and they've helped us drive best-in-class SEO, best-in-class PPC, and dominate LSA and GMB marketing. They've been a huge partner for us and we're really grateful for that partnership 'cause it's helped us to take down 46% year-over-year growth. As we think about our budget next year, we're aiming for the low 30s and one of our most strategic partners is gonna be ServiceScalers. They're gonna help get us there. They're gonna help us ahead of AI. They're going to help us keep our SEO relevant. They're going to help keep us on the top exactly where we want to be. So make sure you check out servicescalers.com. Sam and his team over there is just a bunch of killers. So thank you, ServiceScalers, for your partnership. Okay, welcome, uh, to another live, uh, for Owned and Operated. I think this is our 3rd or 4th one. I appreciate you joining us. I'm gonna do some quick reminders. If you have any questions, Just throw them into the comments and then I'll read them off if we have time. And otherwise, we have a bunch of questions that come in from the newsletter and a bunch of questions from the Facebook group. So we just sort of work through those questions. I will attempt to prioritize the ones that come in through comments so that I can be a good resource for you. All right, first question. I think this actually came in from Twitter. Because we were working on, we've been talking a little bit about hiring and hiring around attitude. So, what do you ask during a job interview with a potential hire and what don't you ask? Good question. I think what don't you ask is really pretty straightforward. We don't ask the stuff that it's illegal to ask. And you can Google it like, hey, what can't you ask during a job interview? Not allowed to ask about kids or family or, Any other potentially discriminatory things. So I really just think Google that, talk to your labor attorney on what you cannot ask. What we do ask— I read this, I read something, I think Mike Gurley said it on Twitter, and the concept was the best way to tell what someone will do is look at what they have done. And, um, so that's usually most of my questions when I'm interviewing is based around that. Like, hey, whatever you've done in the past is the most likely scenario of what you're going to do for me. So do you have a track record? Tell me about action steps you've taken. Tell me about improvements that you've made, uh, through your department. Walk me through your day-to-day and how that fits. Um, but the, the best indication of what someone's going to do for you Is what they did for somebody else. Can an HVAC business be successful with a different model, such as new construction as a focus? Obviously, I actually think we answered this one last time too. Yeah, of course. You know, there's we had someone on the show, I think two months ago now. My good friend Matt Ballard, you know, sixty-five million dollar HVAC new construction business. He runs circles around me. He's an awesome operator. The business is incredible. I personally just find new construction to be playing on hard mode, so we really try to avoid it, and we recommend other people who are not ready to play on hard mode also avoid it. What is best-in-class cost per lead and CAC for new install leads across channels? Cost per lead, a lot of it depends on like where you geographically are. So what market are you existing in? So, you know, my cost per lead in Cleveland is going to be very different than than a cost of lead in Phoenix, which is also going to be different from rural Florida. So we're all going to have different cost per leads. I think it's probably mainly dependent on your job revenue. So if I have a job that's $10,000 and I can afford to spend 10% on marketing and my close rate is 33%, Then that means I can spend $330 on each lead that I would get for that because I'm going to close 1 in 3 leads for a total advertising cost of $1,000, $999 against a $10,000 job, which puts me at a 10% marketing revenue. So best in class is just, are you hitting your numbers? Or can you get down to 5%? That's best in class. You know, there's some companies right now, like big, big companies that are really struggling, um, and they're spending 30 to 40% on marketing, and that's just not best in class. So, um, obviously it could be competitive pressures, could be a lot of different things, but, uh, I would just say best in class is running below 5% marketing and still maximizing your opportunities, but up to 10%. Okay. When you were much smaller, How did you run or structure employee trainings, technical and non-technical? Did you mainly leverage supplier trainings and/or CertainPath? If it is manager-led, did the manager come up with the curriculum? As the leader, how did you make sure the training was as effective as possible? We structure training in, uh, 2 ways. Um, one is non-technical training. So that could be sales training, that could be customer service training, that could be, you know, updates on the iPad, that could be financing. Any number of non-technical subjects could be handled with that training. And the way we do that is honestly, we just calendar it out. We used to do it 10 weeks at a time. Now I think we're at 52 weeks at a time. Like, we know what the next year of training is going to be. And we've already assembled the links for the videos and it's sort of like repeat. And the nice thing is when you schedule that far out, you just literally repeat it. So, you know, it takes 7 repetitions to really get something into someone's head. So when you're doing trainings, like, it's okay to repeat it. You know, if you have a 13-week training cycle for non-technical, If you're gonna— if you talk about options and the importance of options and how it works in week 1, you will need to repeat it by week 4 or 5. Like, you're just gonna want to keep hammering that in. So when you're— when you're prepping to create a training program, um, the most of the focus is like, this is the basics just over and over and over again. And all you're doing when you get big is just getting really good at the basics over and over and over again. Um, and like deliberately. Yeah, so you can run a 13-week training and just repeat it 4 times, basically once a quarter. You know, every— hey, every first week of my training I'm doing options, every second week I'm doing, you know, how to use this, every third week I'm doing the explore stage. Um, and just on and on. You just repeat it when you're done. It doesn't actually need to be that complicated. I think we really overcomplicated it. Uh, the second part of this question was, do we leverage supplier trainings, uh, and absolutely we do. So that's the second aspect of our training. Well, we do a fair amount of technical training. I actually feel like this is a big area of improvement for us just because our technicians are asking for it more. So clearly we're not delivering yet, um, but I do love that they're giving us that feedback. I think that's really cool. So, um, yeah, so the way we do technical is we lean a lot on our suppliers. So a really good example is, you know, there's a new refrigeration, uh, refrigerant coming out, uh, right now, and we have to get our service techs and we have to get our installers up to speed so we can safely handle this new refrigerant. Um, so we've been sending them to trainings, we've been sending them to courses, uh, and it means a lot of downtime, or it means mornings, you know, we'll have Aprilaire come in pretty frequently, talk about their products. Uh, and the idea here, it's twofold. Like, one, we want safe team members that know what they're working on so we can be really effective technical experts. And 2, it does just increase sales. If people understand the product lines that they're selling on a deeper level, they will talk about them more, whereas if they don't understand it, they will never bring it up. You know, something like sewer lining is a little bit of a new technology. It's confusing. You know, it's not as simple as like, let's dig a hole and replace a pipe. So your drain techs aren't going to really feel comfortable bringing that up as an option if you're not training them on how that works, when it's a good fit, when it's not a good fit, and like how to make it effective. So yeah, we, we do leverage our suppliers significantly for training. I think probably to the point of one training a week is held by a supplier, and we're looking to ramp that up more. As we add more technical experts to the companies. What are ways you incorporate your mission and values across the company? What are techniques you've used to get everyone on the same page? This is something I really feel like we're a work in progress on. We're better than we were, but we're not where I want to be. I think Chad Peterman does a really good job. So if you listen to his podcast, he does a better job than I do, and he talks a lot about it. Uh, and he has been forced to get better at it because he, he runs a geographically dispersed, uh, business. So I think they have 10 or 11 locations now. And, uh, so he's, he's had to be much more, uh, deliberate in his communication than I've had to be in one location. Uh, so I really have to— I'm trying to learn from him and pick that up. So what we've done is we talk about it a lot. We put them on the walls everywhere. We hire and fire by them. We give awards based on our core values. Uh, in every quarterly, we talk about, you know, who's— hey, who's the core value, you know, uh, person? Who, who in your team do you feel like lived out our core values the most? Uh, what's an example? Um, it comes up a lot during our praise. So if we're giving public praise, we'll often talk about which core value that they really hit. Where we would like to get with it which I've seen some companies like really deliver well, is at the start of every meeting they hit their core values. Like, hey, here's our core values, here's the one we're focusing on right now, here's what this means to me. And I was at a place maybe a month or 2 months ago, and every single meeting, every single meeting that this company starts, it starts the identical way. It's like the same 4 PowerPoint slides, and it's like, hey, We're X name. Here's our core values. Here's how we live them every day. Here's what we look for. Here's what winning means to us. And like every meeting, like it doesn't matter if it's senior leadership, executives, tech training, every meeting starts the same way, which I really love that level of execution on core values. So I really feel like we're a work in progress. Hopefully in the next year or 2 years, we will be best in class, but I don't think we're there yet. How do you factor in commission pay? What happens if the quality of work requires a return service visit? When do you pay out the commission? So I think we just did a short on this the other day, but there's basically the spectrum, 3 main options, but you know, can kind of be a spectrum in between there. One is like full hourly, there's no commission at all. The middle is hourly plus a commission. So usually what we see or hear and what we've done is like $30 to $45 an hour with a 3 to 4% commission on their performance. And then the final option is full commission. So those are the 3 basic buckets that you can pay. My personal preference is somewhere between the hourly and 4% commission or the full commission because it Uh, aligns your, uh, your goals. Uh, what happens if the quality of work requires a return service visit? Honestly, that's pretty straightforward. If someone did a bad job, like, they should be— they should be docked for it. One of our— you know, we just— the last question was like, how do we live our core values? One of our core values is accountability, which is we do what we say we're gonna do. And, um, if we're doing a bad job or if we're not doing what we said we were going to do, then like it's our core value that you're held accountable to that. Uh, and that's how we live that. Some companies, uh, don't, and I think accountability gets thrown around a lot, but we really believe in it and we try to live it. Um, so if the quality of work requires a return visit, then that commission is going to get docked. And when do you pay out commission? Uh, we pay out commission, um, We pay out commission once a month for the hourly plus commission, and we pay it out every payroll, which is every 2 weeks, for the full commission, uh, people. How have you gotten comfortable and confident in leading people who may be older than you or may even have more years under their belt in the industry? Any tips here would be appreciated. I think that's just time, uh, And probably respect. So I, I have a— I took over the business, I started running the business when I was, um, I think 23, and everyone in the world had, uh, more experience than me. I was a 23-year-old. Like, everyone probably has more experience than you, and if you come into that understanding that, and if you come into that with an open mind, um, and with respect for how much more experience they have than you, Then you're probably gonna do okay. I think if you come in like a cocky whatever, then yeah, it's probably not gonna go very well. I remember when I was 26 and it was my first acquisition that we merged into our primary business. I was 26 years old and the business went from 13 employees to 27 overnight. And the entire business— I was the youngest person in the business, like, not, uh, and it wasn't close. I think the next person was like 10 years. Um, and the vast majority of the, of the team members were in their late 40s to mid-60s, so roughly double my age. Uh, it was, it was, uh, weird, uh, at first, but the weirdness went away pretty quick because they, they did a great job of treating Uh, me with what I felt like was respect, and I feel like I gave that respect back. I asked a lot of questions. Uh, I don't know the answer to most things. I think if you can approach things with a heart of humility and really try to understand where someone's coming from and understand, like, hey, they, they know the answer, they just know better than you. Uh, they've been doing this for longer. Mm-hmm. Um, and just asking a lot of questions. And I feel like, um, you can see me live that out now. Like, that's all kind of the whole point of the podcast and all of this is I get to bring on people that I respect and admire and who have way more experience than me, and I get to just ask them questions on how they did it. So if you sort of listen to how that goes, that's, that's how I did it 10 years ago when I was new, because I still feel like I'm still learning and I'm still a junior. So I really think the only tip I can give is like, be humble. You probably know almost nothing. And just ask a lot of questions. The next question is talking about simple is scalable. A few months ago, we got our call center on Avoca, and Avoca is an AI call center solution for home service companies just like me and probably just like you. They have a couple of different products, but the one that we like the most is their Coach product, which listens to every single phone call and runs it through a rubric to help our call takers improve. And this is a really big deal because we take hundreds, sometimes thousands of phone calls every single day, and it's just too much for our trainers and managers and leads to keep up with and effectively train. So it lets us do ride-alongs on almost every single call every day. Click on the link below to go to Avoca and make sure you use the promo code OWNED for a special discount. Do you have any examples where a specific process became too complex as you grew and you needed to take a step back to simplify In order to grow forward, go forward? I would say a few. Um, a good example, we actually just did this. I'm sure I can think of a few more too, but, um, simple scalable. So the something that we just did maybe 2 months ago was we were really struggling with our job types. So our call center over the last year went from roughly 4 or 5 call takers to, uh, 20-ish. I think we're down to 15 right now. And it got really complicated because we were trying to get granular detail by job type. So we, I think we had 90 job types maybe 4 or 5 months ago. And those 90 job types, what they did was it got us really good detailed information on like, okay, this is an AC repair, or this is an AC service. And You know, each trade had 30 job types, which is a lot of job types, uh, really. That's a lot. So, you know, fixed faucet, fixed toilet, um, there's a lot going on there. Uh, and, and Brandon, my president, he did a really great job of seeing, hey, this is a, this is a problem. Like, with 90 job types, what that does is like, yes, if it worked perfectly and if we had total control and it was amazing, uh, we would have the most granular details ever. Uh, but the reality is it doesn't, and it doesn't because it's really hard to train 20 call takers on— and some of, many of them overseas— on what's the difference between these different job types and how do you book it into the right one. So we actually spent a tremendous amount of energy rebooking job types, fixing booked jobs, and sort of like backtracking, which slowed down the entire rest of the business. Or, or, you know, we dispatch based off of job type. Who's the right tech for this job type? Who has the right skills for it? Who's capable of taking this on? And because we kept making mistakes, we'd send the wrong tech to the job. So we simplified our job types, and I think we're down to 6 to 8 per trade. I could be a little bit off there, but we went from 90 to like 20, which was a huge change. What that ended up doing was it ended up shortening our call booking time. So our average call went down. Our number of mistakes went way down. which was a huge improvement. Feedback from the technicians was better. And that thing that we did that was really detailed and focused and all that stuff, all it ended up doing was creating a giant mess. So, you know, simple— a sort of more crass way to put this that I've heard is like, build your company as if an idiot is going to run it, or an idiot's going to be in every single position, because one day they will. And how— so that's what— that's the crass way to put it. The polite way that we try to put it is, how can we document this job in such a way that someone in the Philippines could do it? How can someone on the other side of the world perform the tasks that we are asking to be completed? And if it's too complicated to explain over a few minutes in a Loom and a standard operating procedure, then it's probably too complicated and we messed it up. So we're really in a state right now where we're constantly reiterating on our processes because we are continuing to find that our processes are a huge bottleneck. One that we have a big pain point on right now is install coordination. Huge bottleneck, causes a ton of backlog, causes a ton of slowdown, and actually decelerates revenue. Kind of significantly, like to the, to the tune of $100,000 to $200,000 a month. And just because we're not able to complete the amount of administrative tasks a day in order to, you know, stay on top of our install coordination process. So that's one that we're currently attempting to unpack. And how do we shorten it up? Or how do we add a software here? Or how do we create looms and, and You know, we keep coming back to how can someone on the other side of the world do this? Because if they can, and they could do it with a few minutes, uh, you know, a checklist, a few minutes of a Loom, then we nailed that process. And if they can't, then we didn't. Does a company need to have health, vision, dental, and 401 benefits to get top talent in this industry? What are the most important benefits to get top talent? Yeah, I mean, obviously. Yeah, of course. Uh, I would say that the only benefit that you missed, uh, is like, what's your compensation? Like, it has to be top comp. So people are clearly going to care about compensation a lot. Um, so your compensation has to be top of the industry or close to it. Uh, you generally know you're doing well with compensation when your competitors call you and ask you to stop. Uh, which has recently happened for us, which I thought was kind of funny. Um, they explained to me that I did not have to pay the amount that, that, uh, that we pay, and I said, I know. Um, so yeah, have top compensation. That helps a lot. Um, and then yeah, health, vision, dental, 401. Look, if you want the best in the industry, then you have to treat them like the best in the industry. You have to give them good stuff. Like, hey, we want the best. And you are the best, uh, so let's treat you like the best. I, I don't think it's that deep. I really think, uh, that like the, the benefits that were just described were basically table stakes. I think that if you really want to attract top talent in the industry, you should be figuring out what your benefits look like outside of, uh, above and beyond health, vision, dental, and 401. Like, what does your PTO look like? What do your holidays look like? What does advancement look like? How do you continue to grow inside the organization? What does training look like? How effective? How often will you invest in that person and what does that look like? What was your biggest move to save on expenses pre-$10 million? I feel like my experience pre-$10 million was not most people's. So I would say these days, if I was thinking about it, it would be a lot of overseas hires and as much AI as possible. People are your biggest asset, but people are also your largest expense. Payroll is your biggest expense. So anytime you can reduce the total burden of payroll and continue to grow, that's a good thing. You know, I talk to companies that are $5 to $8 million, and they'll often have a similar level of complexity with some of the issues that we have, but they don't have the budget to hire for it. And that sucks. So like all of these tasks still need to be completed. You know, someone still has to install, coordinate, someone still has to purchase, someone still has to run a warehouse. It's just when you're, you know, a $10 million shop, you have 15 people that can participate in that. So move as much as you can to softwares and Philippines and then bring in, in-office, your most important roles and responsibilities. That's how we think about it. So even to this day, Um, you know, accounting is really important, so we're gonna have a lot of that in-house. Uh, but for the things that are a little bit more tactical, like, you know, check this box, check this box, like accounts payable, you know, or AR collection calling, um, yeah, sure, send that to the Philippines. That's great. Save a lot of money. Uh, our NextStar experience, why you went with it, expectations going into it, and what you've gotten out of it so far. I have just nothing but awesome things to say. About working with Nextar. Before we were with Nextar, we were with a best practices organization called CertainPath. And I also have great things to say about CertainPath. So CertainPath is a really great organization to help you get from, you know, like, I think the organization started with the concept of getting the owner out of the truck. So small, you know, 2 to 3 man shops. And I think their average contractor is probably like $3 or $4 million. And it was really great. And we learned a ton from it. professionalized a lot of our practices, and it was very helpful. Where we started to struggle is once we crossed that $15-$16 million mark, and we just didn't have what we felt like were the tools that we needed to succeed at the new level that we were playing at. That was the expectation going into it, is that we would get those tools, which I would say absolutely, we've gotten those tools. NextStar has been a really big win. We've learned a ton, we've hired the right people, and, and even more importantly, we've gotten connected to A ton of amazing people inside the network that are really helpful. So a lot of our learning has just come from being connected with other people inside Nextdoor. So if it's— if Nextdoor is an opportunity for you, I would highly encourage it. We get a ton of value out of it. I can't say enough good things. CertainPath, if you're the right size, is also wonderful. Rebecca's got a great thing over there, and I just really admire what they built. So I think both are really good. Just probably depends on where you're at inside your business. Service packaging, what to know, how to approach it. Have you found a particular series of words that work well? Good, better, best, bronze, silver, gold, basic, standard, deluxe. We're putting a ton of energy into our packages right now, so timely question. I'm gonna start with we have 6 core services, or that's how we think about our business, and we've been thinking about it that way for a little over a year. But it's sort of the— these are our bottom of the funnels. So, you know, not too complicated. And if all we did was these 6 things, the business would move forward. So, you know, it now becomes our job to do these 6 things. What we've been doing is we've been designing packages around those 6 things. So how do we build a water heater package? How do we build a generator package, an HVAC replacement package, water filtration package, panel package, sewer replacement package? And, um, it's been a lot of fun. Uh, honestly, I got— I've gotten a lot. I've learned a lot while sort of packaging these up. Um, so I'll give the names, uh, but I'll, I'll talk about how to approach it a little bit more because I think that's going to be really valuable for people. So the, the bottom option, uh, it can be the, you know, good, or it can be whatever. I personally like 5 options. Uh, that's what we've been running with is 4 to 5. Yeah. It should be stripped down of value. You know, you could almost call it the landlord special, which we literally did, uh, for the first 2 months of packaging, is we called it the landlord special because it was, hey, this is the cheapest thing. We do have this option and it is available to you. And I, I think that's probably the biggest benefit of packages and how to think about it and when to offer it is you don't— you want to be a company that anybody can work with ideally, and you want to be able to have an option that fits. The bigger you get, maybe when you're smaller, you can be a little bit more, you can be a little bit less deliberate about it. But like, we want to be presented as, yes, we're a premium option, but we do have an option that fits all budgets. So that's how our bottom-tier option looks. Landlord special, 1-star, good, whatever you want to call it, is fair game. And then the further you get up into these options, whether it's 4 or 5 total options, The differentiators become much less technical and much more quality of option, like quality of life. So, you know, option 3 is like, you know, gold or whatever you wanna call it, is good. Like it's close to best-in-class equipment. But what really sets the difference from the top options to the middle options is gonna be the warranty, prepaid maintenance. Those are the big wins for both the customer and for us. So we set ourselves apart with our topmost options by, hey, how do we give you a lifetime warranty? Or how do we give you a 20-year warranty for this product and also give you the best-in-class product? So that's how we approach packages. So landlord special to very best-in-class with lifetime warranties. So how do you make the most overbuilt, you will never have to think about this again option, all the way down to this is the cheapest thing that we could possibly offer with zero bells, zero whistles, But it'll give you heat. So that's how we approach options, and anything in the middle there is A-okay. Naming it, you can pick your names. We've done good, better, best. We've done bronze, silver, gold. We've done, you know, basic, platinum, optimum. Yeah, I think you can pick it. I don't know that there's like the perfect naming structure for this. And that was it. So that was packages. I think we could probably honestly do a couple shorts or like a whole episode on that if that's valuable. It works and sales do increase and customers are happier with it because they get a lot more bang for their buck. Lifetime warranties is a really big deal. Like it's a big, it's a big winner for everybody. Okay. That was our live. So I appreciate you tuning in. If you are interested in hearing more and seeing what else we have going on, check out ownedandoperated.com. I think this is going to go on our podcast. They usually do, uh, and wherever it is that you're listening to podcasts, make sure to give us a 5-star review. Helps us a lot. Thanks for tuning in.