#242 What Every Contractor Needs to Know to Make the Jump to CEO

You can't be a CEO if you work at a W-2. Main goal is to make sure that other people are doing what I love.

I am leading 150, 160 people. That's when I started to really feel like a CEO for the first time. Each of my leaders has a team. Some of my leaders' teams have teams. And that's when it really started to feel like, okay, this is the owner's hell.

Like you've just stepped straight into owner's hell.

We can be our own worst enemies. Hey, if we want to hyper-execute hyper-fast, in some cases that can be awesome. It can also absolutely bomb the business. Welcome back to Owned and Operated. I am your host, John Wilson. I run a $30 million home service company in Ohio. Today I'm joined by Jack Carr from Jackquisitions. Jack runs Rapid Plumbing and HVAC in Nashville. Today we are talking about the 4 steps to becoming a CEO. Thanks for tuning in and make sure you like and sub.

Welcome back. I have to say it, but, um, I haven't said it in a long time.

Yeah, feels good.

CEO. Tech I think it's not only tech to CEO, it's just like field employee, a W-2 moving into a true CEO position.

Yeah. What's the path to CEO?

What's the path?

What's the path?

The first step?

Are you a CEO, Jack?

I don't think I'm a CEO. Oh, people ask me that and I like actually don't know my title. I think it's founder. Yeah, maybe founder-owner. Yeah, but it's not CEO yet.

Okay. Yeah, I've— I started calling myself CEO 5 years ago. It's probably early. I would say now, like, I'm probably CEO. Like, I think that's what it is. Everyone knows leads are tough to come by, but what if they weren't? Service Scalers is the no BS marketing team for contractors, and they're running SEO, PPC, LSAs, and Google My Business campaigns that actually bring in customers, not just clicks. They've delivered consistent leads for me tied to real revenue, and they can do the same for you. Sign a 12-month contract and your first month is free. Click the link below to get started. Service Scalers. No BS, just leads. Yeah, let's dive in.

Sweet. So—

4 steps.

4 steps. I think the first step is the move to actually owning a business, right? You can't be a CEO if you work at a W-2. So whether you're a technician, whether you're a baker, whether you are a CPA, the first step is actually going out and starting a business, is getting your LLC.

Buying. Or buying.

Yeah, yeah, yeah. It's moving into the ownership position. So now you are the owner of some kind of business.

Like, so in the first stage, uh, you bought a business, you launched a business, whatever it is, and you're like performing the work that you are selling. So like, if it's, uh, if it's HVAC, if it's an accounting firm, if you're a baker, like you're the baker, you're the accountant, you're the HVAC tech.

You're doing the work on the daily.

Yeah, you're performing the task.

Yeah, which is—

That's like step 1, level 1.

That's a good step. Yeah, step 1.

And then You had the entrepreneurial seizure, like I'm just quoting E-Myth Revisited.

Yeah.

Yeah, Michael Gerber. So like a baker loved to bake, they launched a bakery, they found out that running a bakery is not the same as enjoying to bake.

Yeah, they, they have too much work. And then so the second step is they hire help.

Yes.

They hire help and they now have people baking that bread for them, doing that CPA work on the daily for them. The daily operations or the task is being owned by somebody else, or at least shared by somebody else, but most likely owned by somebody else. Well, then you move into managing that person.

Yeah. So you're managing the people performing the work. You're managing the plumbers, you're managing the bakers, you're managing the lawyers, you're managing the technicians, whatever it is. So like, what do you think the pitfalls of that stage are? And how do you think you— like, moving from stage 1 to stage 2 is kind of straightforward. Like, you just literally You get so overwhelmed in stage 1 that you hire your first employee and boom, you're in stage 2. So like, that's the step. But like moving from like, what do you think stage 2 looks like and how do you move from it?

I think stage 2 is actually probably one of the hardest stages to get out of because of the fact, right, is you've just gotten help, but yet you don't know whether you should still be in the field. You still kind of dabble in the field or other, or whether you should be moving into a managerial role. And what does that look like, right? You're a good baker, you're a good lawyer, you're good at whatever that task was, and that's why you started this, but then you realize, oh, someone has to run a business. I'm actually not going to be doing that anymore. I need to understand it, but that's not my main goal as an owner. My main goal is to make sure that other people are doing what I love.

Yeah.

Um, so as an HVAC owner, like, I'm no longer servicing units. I'm managing people in the field servicing units.

Yeah.

And so that's the big pitfall, is actually making that separation and then moving into a role and understanding a role that is management.

No, I agree. I think I see a lot of, uh, it— well, it's easy get stuck. So it's easy to get stuck because you don't know what your job is. And I think that's a, I think that's a big one. You don't know what the next step is. And it's hard to invest.

There's a huge cost.

Yeah, there's a huge cost to moving, you know, from that stage 1 to stage 2, you're adding more executors. So you're really just adding more people that drive revenue, you're adding more bakers, you're adding more accountants, you're adding more whatever, these are revenue productive individuals. So Hopefully. Yeah, hopefully. So the more you add, like, the more revenue. So like, this is only a win. But moving from stage 2 to stage 3 is like sort of the very first time you start to introduce infrastructure, and infrastructure has cost. And maybe that's a CSR, maybe you have to, maybe you have to move out of your garage and into, you have to rent an office now, and that's $2,000 a month. Maybe you have to hire an office manager or a manager in general. So like, there's a big step up in cost, and I think that Like, that is hard and it's probably intimidating because that's a net new position. They've never hired a manager. Like, what does that look like?

Well, also, right, a manager should be driving revenue, but a manager doesn't directly produce revenue. So it's purely an expense function. Yeah. So for it to be clear, like, this is moving into step 3, right?

Yes. Yeah, that's, that's step 3. We've, we have the 3 to 5 people baking the bread, you know, Doing the lawyer work, doing whatever. We've hired a manager over those people. We've stepped back slightly.

Yep.

Uh, and we're now more of like an operations head, uh, like almost leaning towards general manager type role. And we have someone managing the executors, the people performing the tasks. So we're now managing one manager.

You're managing one manager, but you also, like you were saying with infrastructure, you probably have other folks that are supporting that function, right?

Yeah.

So you're having call takers or somebody answering the phone or someone doing bookkeeping. So now in level 3, you start to get more people who are much like the manager, are not directly producing revenue, which makes it pretty difficult as well.

Yeah.

So it's a hard move. I don't— I think that if you're able to wrap your head around the idea, though, that I need to separate myself from the actual work, I don't think that this step is mentally difficult. It's probably fiscally really difficult.

Yeah.

But from like a personal mental standpoint, like you've already, you're already a step out of the business. So this one is not, not, not too difficult from that, that aspect. But yeah, some of the big pitfalls here are this is the owner's hell. Like you've just stepped straight into owner's hell.

Yeah.

It's like, hey, you're trying to grow from that 1 to 3 mark. depending the business, you know, vertical.

Yeah, yeah.

But you're trying to grow from that 1 to 3 mark and cash is tight.

Well, you, yeah, you invested in managers, you invested in infrastructure, you probably have softwares now that are a key part of your business. Yeah, like it gets really tight. This stage kind of lasts for a long time. Like if I think about the stage 3, this managing manager stage, that is a That's like from almost 2— in our— in plumbing, HVAC, electric, that's from like $2 or $3 million to like $15 million.

Yeah.

That's almost the same stage. Now, that's a huge difference. That's a 5 times revenue difference. But a lot of what you're doing is just replicating, and you have to build new functions. You have to, you know, you're going to go hire more field managers, more service managers, more, you know, branch managers for bakeries or like whatever we're dealing with here. And you're just gonna keep doing that. And then as your team manages the execution, you're gonna be building out the accounting function.

Yep.

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Yeah, definitely. And all of those functions cost money and all of those functions require headcounts and managers call. And once again, because we're in this industry, it's very hard to not draw linear definitions, but like call center managers. And now you have probably a lead staff. a lead accounting staff, not just a bookkeeper anymore. You probably need somebody who's going to actually manage the books a little bit better. Yeah, maybe make some models. You're going to need somebody who's maybe running a warehouse.

Yeah.

Like it just keeps going on and on and on until you get to that $15 million mark.

Yeah, I think so. You're, you're managing managers.

You said, though, at one point that that number you would— you're saying 10 or 15 right now, but at one point you said Hey, I wish I would have started at 10.

Yeah. So, I mean, now you're talking about transitioning to stage 4, and I think we could really go to— we could talk about what stage 5 looks like in my mind because I'm not there yet. But, you know, stage 4, you're managing senior leaders. And the difference there is you're managing leaders that are managing managers. There's a new layer of leadership instead of just a 1 or 2 layer org chart. You might have 4 layers or 5 layers of people because like the way my org chart looks is I'm at the top. Brandon, uh, my COO, is right underneath me. I have a controller, I have a head of HR, I have a director of marketing. And then, uh, Brandon under him has a line of directors. He has 3 directors reporting to him. They have frontline leaders reporting to them. Then each of them has 8 to 10 techs. So Brandon has multiple layers of leadership under him.

Yeah.

So he really starts sort of accelerating Kind of fast. So that's stage 4, is we're now— we're not directly managing the, the frontline leaders, we are managing the senior leaders. And that is a totally different type, a totally different stage of, uh, CEO.

Is that where you believe that you actually are the CEO?

That's when I started to really feel like a, like a CEO for the first time.

Yeah.

Uh, it's like, okay, I'm I am leading 150, 160 people. This is a real thing. Each of my leaders has a team. Some of my leaders' teams have teams. And that's when it really started to feel like, okay, okay, yeah, I'm probably actually a CEO now.

Yeah, right.

Because I think the funny thing, anyone can be a CEO with $99 and you go buy an LLC. But when do you feel like you're in the role?

Yeah, I think that's, that's probably pretty accurate to the job description of a typical CEO as well. It's like managing leadership positions, C-suite team potentially.

Yeah.

It's not, hey, I have 2 staff and I go around, I'm CEO Jack. Yeah.

Yeah.

I've always had a weird feeling about it, so I just call myself an owner.

It's a, it's a weird title. It's a weird title to give yourself. It's— yeah, it's a weird title. So, you know, as, as I think about my title over the years like this, journey that we just walked through is the journey that I walked through. So I was a plumber and I started, uh, I was hands on the tools until like 23, 24, and then I went part-time as a service manager. Like, we only had 3 people in the field, but exactly the same thing. I went half-time into the office, half-time selling. So like still executing, but like trying to keep things moving.

Yeah, I figured.

Adding initiatives like flat rate and you know, ServiceTitan and whatever else. I bought another business and I went from managing field team members directly to managing managers. And I was 26, it was 2018. We went from 13 to 27 staff members and suddenly I had 3 managers reporting to me. And it was like, took a couple years to like figure out what that was supposed to look like.

Yeah, right.

Okay, how do you measure managers? I barely know how to measure like the, Field performers. And then, you know, a lot changed and also not that much changed for the next like 3 years. At the end of the day, it was bringing on managers, bringing on more team members, figuring out infrastructure. And it only meaningfully changed again when I felt like, okay, I'm— this is a totally different game that I'm not quite sure how to like work with. When there was senior leaders managing teams themselves.

Yeah.

And that's— that is just harder. You know, everything's a little bit slower. You know, I remember even 2 years ago when I was one— when there was one less layer. Yeah. I mean, there was one less layer in like 2023. And I think about some of the actions that Brandon and I took on like how we grew as fast as we grew. And it happened because there was one less layer. We were this much closer to the, the thing that we do that actually matters. We were this much closer to the sale, this much closer to the lead, this much closer to the call center so we could to like really monitor booking. And moving from that stage 3 to stage 4, you're, you're bringing on senior leaders. And if you do it wrong, like you're stepping out of the thing that got you there. And you have to really trust this human being to do an, um, like excellent job. Yeah. At running what you've built so far and making it better.

Yeah. I love the boat analogy, right? The boat analogy is like you are a small speedboat.

Yes.

And like you're in control of the jet ski and like you can pivot and change. But the minute that you—

Now we're a cruise ship.

Yeah.

And, and arguably not even that much of a cruise ship because we still have the benefit of one single location. And I think that is the next stage that we're bracing for where leadership— I'm going to look back fondly at one location where I can walk in and touch and feel and, hey, if there's a problem, I'll just go talk to them.

Yeah.

No big deal. And going to multi-location, multi-state is a different state of leadership where, hey, how do they report into the COO? How do they report into finance? How does HR help? Like, it's a different— it's different.

Next step.

That's step 5. And, uh, you know, I hope I do well.

Yeah, sweet. I mean, I think that, like, that's a really good breakdown because I— you see all the other people in step 5, like the Chad Petermans and all that, who are at that stage, the Tommy Mellows, or he was, um, where they're really just expanding multi-locations. And so how are you looking at, like, moving into that? Because I know me, I'm sitting in step, you know, 3-ish, moving into step 4-ish. But still, I know I have quite a bit of a ways, but I start to feel myself slow down. Like when I need something or I feel like there needs to be a change in the business, it dramatically is slower. And like, I'm trying to figure out how to manage and handle that. I have to imagine it's the same thing going on with you.

Mm-hmm.

Whereas once again, you're not down the hall, you're not at the water cooler. Like That moves even slower.

Yeah, but a lot of peer mentoring has helped me with this, um, because it was really frustrating at first. You know, if you're used to a certain speed, then it gets really frustrating.

Well, that's why you got into it, right? You're an executor. Yeah, you're a plumber. You were able to grow quickly because like, hey, that's what we do. We get stuff, we get stuff done.

Yeah.

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What I have been grateful that I've been able to learn over the last, especially 6 months, I would say, but like a year, is It's kind of really good when something is too slow, because what that usually tells me is I don't have a process for that yet.

Yeah.

If something requires my personal input to lift, we don't have a process for it. And if it happens twice, then we need a process for it. So I've started to get really grateful for these moments where I'm like, oh God, this is really annoying. This is the 3rd time that I've asked for this thing. Like a year ago, I would've been like, whose head am I about to roll? And now, now it's like, oh, well, yeah, like we don't have a SOP for that. There's no way that someone can just produce this 'cause no one's job is built around producing this. So let's go figure that problem out. So, uh, yeah, I, I think that has helped a lot. When things do need to move fast, you do need to be able to get them to move fast. But I think that that is a function of your senior leaders. Hey, this is highly urgent. This is highly important. We have to fast-track this project for some reason.

Yeah.

Yeah. But yeah, I think it's stages. I don't think there's a right or wrong here. I think it's stages. And I think that what I've gotten really grateful for is, one, when something really slow, it's good. We found a gap. We need to go fix that gap. But two, we can be our own worst enemies. As leaders where, hey, if we want to hyper-execute hyper-fast, in some cases that can be awesome, that can move the business forward. And maybe we direct that perfectly every time for years. It can also absolutely bomb the business.

Yeah.

If you're trying to tell the entire team to turn left when they've been turning right for 2 years, it's not going to go well. So it's sort of some insulation from our own worst habits, That people are more involved in the process. And you, you as a, as a leader, as a CEO, have to more fully explain why we're doing this. You have to more fully get buy-in.

Yeah.

Because you need those senior leaders to push that initiative forward urgently and quickly. So I've been really grateful because I've spent a lot of time like messing that up, basically. You know, not learning because I did it great, but learning because like, I'm like, why is this not moving? And then I'm like, oh, there's no process for it. My senior leaders don't understand why it's important. And I'm trying to do something that might not even be in the best interest of us. Like, maybe they're right.

Yeah.

Yeah.

No, I'm with you. I'm— and on the back end, what I'm trying to understand, because this is what we're running into personally, is I'm like, I'm sitting here going, this is hitting home. Because what we've been focusing on recently is I'm going, I'm implementing these things with senior leaders and they're not happening. Why are they not happening? Yeah. And we have a process, but we actually have an issue of it's not the process, it is the accountability after.

Oh, totally.

So yeah, that's— and that's part of the process, but like, that's the piece of the process I've been missing.

Yeah.

And so on the back end, nobody's following up, and including myself, with senior leaders.

Totally.

And so it's, it's an interesting way that you're phrasing that, just because it's like I'm seeing like that's where the process is missed and now I have, uh, some words to put to it.

Yeah, yeah.

Sweet.

Um, as you're moving from what, 3 to 4, you think? 2 to 3?

We're moving from 3 to— or yeah, 3 to high 4s hopefully at the end of this year.

Sweet. And then I'm moving from, I hope, 4 to 5. So we'll see how it goes. Yeah.

Oh, oh, on stage.

Yeah, yeah, yeah, yeah, yeah, yeah. If you like what you heard, make sure you check out ownedandoperated.com, like and sub for more.