Our Biggest Business Failures (And What They Cost Us)

Today we're talking our biggest business failures.

That first item is my $13,000 ad spend weekend.

Oh yeah.

And we only made $7,000.

The first time we tightened up purchasing, we saved $80,000 a month.

Ooh.

Any given month, we might accidentally overspend $10,000 from software licenses.

Any other big misses that have really been material to your business?

The mistake I think I made, and maybe this is the mistake, Welcome back to Owned and Operated, a podcast where we talk about growing home service companies. I'm your host, John Wilson. I'm the CEO of the Wilson Companies. We're a $40 million plumbing, HVAC, and electric business out of Ohio and Indiana. For fun, I run this podcast where I talk to my friends about how to grow their home service companies and the industry. Today I have my very good friend Jack Karam, the CEO of Rapid Plumbing, Heating, Cooling, and newly added Electric down in Nashville, Tennessee. Welcome back to the show.

What's going on, John? It, I bet it feels good to say Ohio and Indiana now. You are a 2-state company.

That feels really good. It, it does. You know, there was something when I, when I was, Like early 20s, I told my— I bought the business from my dad and I told my dad like, hey, one day I want to have the biggest company in, you know, this part of the state. I wanna be the biggest company in Akron. And even one day past that, I want to be in multiple states. And, you know, my dad was just like, okay, like—

Whatever, buddy. How?

Yeah. You know, it's like 3 plumbers or whatever, like walk me through it. So it has been kind of fun to like reflect back on that, like, John at 20, what his thoughts were on what he could do, and seeing out that hey, we actually could do that. So we did. We did. We did do that. We're now two-state.

That's cool, man. That's that's really big stepping stone too.

Like yeah, it feels it feels good. I think we've talked a little bit about it on the show. I think at some point we have to do like a debrief. But yeah, we've added two companies in the past. 40 days, uh, and we're looking at 2 more right now. And it's a very active part of our, of our business in early 2026. We're actively acquiring, actively bringing on new markets.

Yeah, man, that's awesome. Uh, you don't want to talk about today? We'll debrief another day.

I think we can debrief another day. I think we could do a whole episode on like, here's what we saw in this deal, here's what we did. And I think that would be, I think that would be kind of interesting because we made some Like one of 'em we doubled, and I was telling you about this on the phone earlier today. Like, that's crazy. Like we literally doubled this business. The other one that we took, it was losing money when we got there, and EBITDA I think is like $40,000 to $50,000 a month now. And we did that in 30 days. 30 days.

Yeah, it's so dope.

Yeah, so yeah, it's, yeah. I mean, I'm a little tired, but like, yes.

Yeah, I will say that our conversations have been a lot more business, straightforward business oriented, and less John just shooting the shit. So I do miss that. He's in it. But I'm glad that you are— you're doing well. And how's February been wrapping up for you then with the 3 businesses?

Yeah, February is good. February is really good. So our core business, not a lot of growth, maybe 2 or 3%. But when we add in the other businesses, I think it's a plus 30% month, like year over year.

Wow. That's huge. Yeah.

Yeah.

And just— I mean, February is like the worst month as well. Historically, I think for all services.

February's rough. And then 2025 was rough for a lot. You know, we've done it. We did a deep dive on 2025. And I think, you know, from what I'm hearing, most people in early '26 are feeling good. And I mean like most people, the contractor, the homeowner, but even the vendors. So what I think is kind of interesting is just like, The ripple effect that comes from a slow back half of '25. So slow back half of '25. Well, okay, Carrier, Lenox, Trane, all their earnings calls are like very depressing, right? Lots of layoffs in manufacturing and in distribution. A lot of the service providers are like tightening the belt because they aren't— maybe they're churning more people who are trying to save money. So it's just, you know, the bigger our audience gets, the more conversations we're having. And it was, it, it felt, uh, I don't know, it was just interesting. I remember having tough times in my business over my whole career, and the back half of '25 was like a tough time that everybody went through together. Like if you were a manufacturer, if you were a distributor, if you were a service provider, a software, a contractor, everybody was fighting in the back half of '25. So early '26, everyone seems to be feeling pretty good, which is exciting.

Yeah, it's interesting. And I don't think the weather helped. I mean, obviously we are not— we're a home service business. This is a home service podcast. But the big part of home service is definitely HVAC. And it's very strange. The weather this year has not been overly helpful. But we did get that one big storm through the South.

That was crazy.

That helped out a lot of contractors. But I'm still talking to contractors out in Denver who, you know, crazy, they haven't had a winter like they haven't had.

Well, I was in Salt Lake City last week I got off the plane and it was, it was 40 degrees warmer in Salt Lake City than in Akron, Ohio. Like, it was ridiculous. I went from wearing a coat to a t-shirt. Yeah, like, it was crazy. And then we skied Snowbird that day and I was literally on the top of that mountain in a t-shirt.

Yeah, so we'll see how the, the end of the year shapes up too, because I know, yeah, again, you and I are both big skiers, so I always watch the snow reports and I just saw like Mammoth Mountains in California and Tahoe just got absolutely dumped on. Multiple feet of snow for multiple days. And so like maybe on the backhand, half of February, March, they'll actually get a winter and it'll kind of continue to pop, which I wouldn't be mad about.

Our winter seems to be over here.

Yeah, it's 70 here today.

It's 60 here today, 60 yesterday. Now what's been really interesting, and maybe we do an episode on this, but just like how to sell during the slow season. Actually, we should do an episode on that. I'm writing this down. So what's been really interesting is, hey, we're February. Back half of February is usually when we enter our slump shoulder season. Dude, we're fucking killing it this week. Yeah. And this is the warmest. This is like 60 degrees. And we sold on Monday, we sold like 70 grand of HVAC, which our daily budget's 35. So we sold double daily budget yesterday. We sold 40 or 50 today. We sold 50. And I'm like, what the fuck is going on? Like, this is, you know, it was 0 degrees 3 weeks ago and we were struggling to sell equipment. And this week we're just like, You know, here we go. Maybe tax return money's coming in. We're seeing a lot more finance approvals. So I'm not sure what the macro is, but it's interesting.

My only wonder, my only fear about this is that on the back, you know, I'm just hoping that because we're seeing early spring, it feels like, like the weather based on weather performance that we're not seeing our normal like April in February. And then we hit April and it's like, oh, it has been 70 for now 4 months straight and 70, 75. and sunny and like now it's hard. Like, I just want to make sure that we're not hitting that is my hope. That being said, I mean, I still think we're getting through a lot of the last bit of that snowstorm, Snowmageddon.

Yeah.

And people are, people are fixing stuff. So that's my hope. Yeah, but we shall see. It'll chalk up to what it is, what it is. We don't have control over it. So.

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Ooh. Are we talking business failures across all businesses that we've ever done, or are we just going to stick to home service here?

I mean, I think we— you could do either. I'm going to stick to home service.

Okay, I'll stick to home service. It'll be more pertinent, I think, because, uh, failures in the wine industry— oh yeah, although fun to talk about, uh, don't necessarily— and consumer packaging goods don't pertain to a lot of HVAC stuff.

Yeah, yeah.

Oh my gosh, you should start this one, I think.

Wow.

Yeah, I'm gonna just—

Just 'cause I've had more, like way more.

Softball kick that can down the road.

Okay, so when I think of the biggest failures that we've had, I mean, they've almost always been tied to like cash flow, like every single one, and not being dialed in It's like process turns into cash flow. So maybe cash flow was the result. So I mean, God, dude, I could think of 20, right? Like where, hey, we took on this project or we did this acquisition or we bought these vehicles or whatever because it looked like a P&L win, like it was more profitable. But our processes weren't locked in, so we ended up not understanding the actual investment that we were making and the time to get a payback, and like what the cash flow impact of that was going to be. And again, I could think of like 20 examples. Some of them were just like a big new construction project, and some of them were like—I talked about this a lot at the end of last year—but we made a ton of capex decisions in early 25. That I should not have made. Like, I wouldn't classify them as my biggest business failure, but they were definitely like a bad decision.

Um, before, before you go further with that, do you feel— so I'm trying to think, I'm kind of, um, segmenting this though— is do you feel like those decisions kind of around what, what you made and where you failed, those, those feel like further down the road decisions, right? Like you couldn't have made those mistakes early on. Do you feel like that?

Well, the, from the mistake I think I And maybe this is the mistake, is I didn't bring on a controller soon enough because everything was tied to not having clear visibility into my numbers where we would make a decision as if we were making it inside a vacuum and there was no ripple effects. But hey, there's a lot of second and third ripples that come from a half a million dollar new construction project or $200,000 of inventory or Whatever it is. So maybe that's the issue is like, hey, we started acquiring companies really early and growing through acquisition and we didn't prioritize a clean accounting system. And because of that, we didn't know what we didn't know inside our own business.

Okay. So then actually the opposite of what I was saying, because that's actually my biggest failures, I think, in the business are all resolving around not having the correct data and then not making the right choices based on that data. So mine's— my first one's super easy, and I think a lot of contractors do this at some point in their career. And that first item is my $13,000 ad spend weekend.

Oh yeah.

So we've talked about this.

Yeah, we have. It was $17,000 for us, but yeah, we've had that. We bring that up all the time.

Yeah. So it was winter 2 years ago where we— it was another snowmageddon situation where I was running calls. I didn't have the time to turn off LSA ads. And by the end of a -2-degree week or weekend in Nashville, which doesn't happen regularly, we had racked up a $13,000 bill.

Yeah.

And we only made, drum roll, $7,000.

Oh my gosh.

So we ran all weekend and paid, we paid $4,000 to run calls all weekend. But the issue was that there was a giant miss in our kind of in our back office because I wasn't in the office. So between capacity, are we full, are we not full on capacity, what have we spent, what kind of stuff do we have turned on, turned off. So we didn't have the good data, or we had the data but we weren't processing it correctly to be able to make good decisions like, hey, we are full, all P1s, turn it off.

Yeah.

We were more focused on like this idea of more calls the better because we can just continue to run calls and run calls and run calls and make money. But the reality of it, when you're paying $100 per lead, per call is that at some point you do need to turn that off based on capacity. And that sounds like a no-brainer, but I think that—

I don't think that's a no-brainer at all. Everyone has done that.

Yeah. And I think that the good lesson is actually not in this like extreme scenario, but this good lesson actually flows over into regular like operations. Right. Because it became kind of fundamental post that point to like understand what our capacity was, our max capacity. Yeah. And then understand when we turn on and off marketing as a whole, like as a company, because there is a point where if you have 3 technicians and you have 5 calls on each technician and they're all P1s and you have the next 2 days booked, like you should turn off marketing. And if you don't, you're wasting money. And so we— it's an active drill that we do every single day now. So without that, like that's the big loss. But it's also the long-term win is like we paid a $4,000 $5,000, $7,000 lesson in capacity planning and marketing planning. So that was our big, big loss where we learned a ton.

I feel like mine is similar where like what I said was it's cash flow, but it's cash flow because of a process problem. Like that's a process problem. Another easy one would be like, hey, how do we approve field team members to buy on the credit card? Like, that's a process. And when you tighten it up, you can probably save like 10 grand a month. I think I've said it on this show, but the first time we tightened up purchasing ever, we saved $80,000 a month just from like literally having to have people approve POs. It was outrageous.

That's where I was going next as well, was my— our second big loss was not— was allowing technicians to buy on credit cards with no PO or process to Yeah, approval. Validate an approval.

Yeah. Hey, is this needed? Is this truck stock? Is it, you know, yeah, it's a lot. You know, we brought this up earlier on the show, but we had a company that we just took it over and we've done well with it so far. And the single biggest impact that we made was on day 1, we turned off their purchasing and their purchasing for materials went from $65,000 a month on average To $17,000.

Yeah, ours dropped $30,000. I think it was $31,000, $37,000. It was like a 3 and then like a line. I forget which exact it was, but I do remember $30,000+ a month in purchasing.

It's absolutely nauseating. But yeah, it's a process and controls problem where, hey, if we have this control to prevent our Google Ads from overspending or We have this control before someone signs up for a new software. Like software licenses is a huge pain point where any given month we might accidentally overspend $10,000 from software licenses because frigging every software in the world charges by user. Like Gmail charges by user, Slack, ServiceTitan, Aircall, like all of them. Like we've had credit cards try to charge us by user. I think Ramp has a buy user fee. So yeah, just kind of, just kind of crazy. But yeah, all of it tied to the process of how you're functionally running the business, which was something that I didn't take very seriously when we were smaller. And then when it, it turned into real money.

Yeah. And then going back, another giant loss in the last 4 years was my first year of running business where I didn't realize— and I think this actually ties into this vendor idea that you're working on right now. Um, is that I didn't understand the ability of negotiations of material pricing. Uh, and so I think I've told people there's a certain vendor here in Nashville who I will never work with, and I refuse to work with ever. I do not let their salespeople in my office. I do not talk to them. And that is because they let me run a year with them, my first year with them, at full retail price, like the worst pricing, even though I was spending $400,000 with this. They never offered to renegotiate, which, I mean, I don't blame them. They're saying like, hey, I'm not going to give up a free discount to you. That being said, you know, as a new person in the industry, you know, it's my bonehead mistake. But I do think that, that the bigger idea is understanding that there's a vendor rebidding process that you should be doing with every vendor regularly, quarterly, sending out RFPs, or at least discussing with them new pricing and new strategies to—

Yeah.

How you can reduce overall COGS. So that was a big one.

Customers today expect pricing online, and whether we like it or not, homeowners want transparency before they ever even pick up the phone. So we decided to lean into that, and that's why we use Contractor Commerce inside Wilson. It costs us about $1,600 a month, and we run it across HVAC, plumbing, and electrical. We use it for things like generator install estimates, water heater estimates, full HVAC replacement estimates, and it's producing real revenue. There are months where we've driven $20,000, $30,000, and even $40,000 in booked sales directly through the platform. We've had double-digit jobs booked in strong months straight from our website. What this really does is it turns our website into a guided sales process. Customers can see their options, they can see pricing ranges, and when they contact us, they're way more educated. If you're trying to modernize your sales process and capture demand that would otherwise bounce, it's worth looking at. Go check out Contractor Commerce and book a demo at the link below. It always blows my mind. We're like heavy M&A mode right now, so we're talking to 2 or 3 owners a week, which for like a non-PE fund feels like a lot, right? But I'm continually finding that I'm like, hey, like your materials are 47%, 45% of your total income. Like, that's a lot. When was the last time you talked pricing?

Never.

And they're like, I think like, you know, '95. And I'm like, my guy, like, you gotta do something here. You gotta have a conversation. You know, you're spending $1 million with this person. You have— you do have to be able to have a conversation with them.

The interesting part that I keep running into, because I've had this conversation now 3 or 4 times in the past couple months, and the one kind of theme that seems to keep Yeah. ...cropping up, which I always enjoy, is this theme that like, oh, no, these guys are my buddies. This vendor has done me well in the past, or they're a friend. They're going to treat me well. But ironically, those seem to always be the people who are getting hit the hardest, is they get this personal relationship with some kind of vendor or distributor. And then what ends up happening is because they're friends, they don't renegotiate as hard, or they believe that the service and quality makes up for 10%, 20%, 30%. And yeah, in my opinion, it never does. Um, but I, I— that theme keeps recurring is like, hey, no, no, they're, they're good. Like, they're my good friend. Like, they wouldn't do me like that. And yeah, lo and behold, they did them like that.

Yeah, totally. Well, you know, I was, uh, I was talking with someone It was, it was a tech, it was like a tech executive from ServiceTitan. This was maybe 3 or 4 months ago. And we, we were just talking about the industry in general, uh, just like, I, I think AI came up and like, uh, you know, different services or whatever, but like primarily software-based. And the conversation was interesting because he, he said it in a way that like instinctually you and I know. Like the industry knows. I've just never heard it described quite like this. And it was people love the trade, like software providers or wholesalers or whatever, love the trades because it's very, very easy to get ahold of the decision maker. Like the principal is you, the principal is me. It's not complicated, right? Like you're not going through Walmart. It's not some big bureaucratic thing. You can just call the guy. you'll probably pick up. They also, like, it's a high relationship, high trust, which is easy to drive additional margin. So exactly that, it's easy to sort of, you know, not be a great partner. And I will argue that the best vendors are very thoughtful about, like, partnership, and they are constantly helping you find ways to save money. So I would just, like, throw that out there for the world. Not everybody's Bad at it, but—

Don't disagree. It's more of a generalistic statement though across the board. It's like, hey, my friends are the ones—

Well, and that's the last one is they don't have the sophistication to check. They're not gonna rebid. Even if they did rebid, they don't even know where to get the data. You know, we're a— and the problem's kind of funny. We get 200 invoices a day from our vendors. That's a lot. That's a lot of volume. So there's just not many industries out there that get that much invoice volume from their vendors tied to small jobs all over the place. And there's not a sophisticated tech stack to catch it. I think this is becoming more and more of a thing. I have a lot of friends that have like built their own tool to like catch problems and like filter through it and like find opportunity. But it is a challenge. So I go— I don't— I think those 3 things make it very easy, make it very easy.

So those are some definitely big losses. It all seems to be around information and understanding, though. It's like, what's this theme here is? Yeah, not having good data has seemed to put yourself in bad situations, whether that's not having good data to know what you— you know, who— how to get better pricing or where to get better pricing, not having good data to make good decisions on your marketing, not having good decisions on you know, projects because you don't have the right controller. So it all comes down to this idea of like data. And ironically, I think that's why ServiceTitan, not to shout them out, but like that's why they win is they have the ability to drive a lot of that good data. But you have to be able to have the time and patience to input it and get that good data in.

Yeah, I do think it— I do think it's all data and it's finding like these different ways to plug the hole. Like some of it's purely a talent problem, like Hey, I need a controller and I need a good one, right? And my biggest, if I was gonna classify like really all of my big mistakes have been a lack of understanding. And the biggest lack of understanding was how bad I needed a controller $30 million ago, right? Like I needed it, like if I ever move on to another project, I'm hiring a controller at $0 of revenue. Yeah, basically. Like, yeah, we're handling that one right away. Because I think it's the most important thing.

Any other big misses that have really been material to your business?

I mean, yeah, the biggest ones were all cash.

I know that there's one for both of our businesses was not understanding during an acquisition the full extent of how much construction will affect your business. I know you had that in electrical, and I had that in plumbing when we bought a plumbing company.

Yeah, and to me, that's the same thing as like a controller and like cash is like, hey, if I would've known better, how I think about like cash management is gonna be very different with construction than a service business. And if you're used to running a service business, like, hey, I run a service business, I have 100 grand show up in my bank account every day. Like, that's what we got paid for from yesterday, or like financing jobs or credit cards or checks or whatever. And like, you're just used to that and to suddenly change and like, hey, you might not actually get paid Maybe a couple weeks, maybe a month, and like that's just a part of the deal is tough. So yeah, but I also think that's a process problem. That's a we didn't that's a data problem. Like I didn't know what I didn't know, and I didn't know how important cash conversion cycle was, and I didn't understand the cyclicality of construction projects. So I think it's all the same thing. But that's definitely another great example of like we got tripped up and I see a lot of people get tripped up on these big construction things. If you're not built to run it, then you're not built to run it.

Yeah. Yeah. And I mean, we've talked about this quite a few times before, but yeah, that one, that one was a big hit for us just because it was a really difficult time where we lost money for a lot of months to try and figure that out for the end-all be-all result to be, to be just shut it down, like shut down the construction site. Don't even try. It's not worth it. It's $1 million top line a year, but it's going to cause you more headaches in the short term or the long term. Both terms. All terms.

Yeah. I mean, some people do amazing at it. Like, we were at HolcoConf last week and there were 3 people there that run incredible construction businesses.

Yeah, but they're only construction businesses. I think that's the key.

They're only construction. And that is the key because they're running at like a 35% gross margin. For a service business, that would kill you. You couldn't afford a CSR, you couldn't afford marketing, like you couldn't afford the things that you need to run a service business. For construction business, that's a fucking gravy train 'cause your overhead might be like 7%. Like you've got like an estimator and you and like, and that's it. And like, it's a very lean structure. One of the guys there, his name's Chad, we're gonna have him on the show, but he runs a, I wanna say it was a $50 to $60 million big construction plumber in DFW. And average project size was like $2 or $3 million, like big projects. And I thought he said he had like 15 office employees, like 15 for like $50 to $60 million. It was like crazy. I was just like, who are they? Like, what are those positions? But just totally different.

Yeah, and I think there's another big portion to that is also how you're buying, right? So you can actually buy a construction business business on debt. You, you can physically do it. Yes, it is physically possible. Yeah. But is it recommended? And the answer there is absolutely not, because any kind of fluctuation in either pay cycle or building cycle can destroy your business within a month. And yeah. And so like, that's the other side to it, is understanding that, hey, well, we're buying businesses on debt, we have debt in the business. So like, really having that construction arm just doesn't fit Yeah, no, it doesn't.

Yeah, there was another guy, Adam, at Holdco Conf, and he's bought like 5 or 6 construction businesses, plumbing. I wanna say he's like $16 or $17 million of revenue now, maybe $20. It's somewhere in that range.

Adam in Utah?

Yeah, yeah, yeah, yeah. He's a cool guy, but I wanna say he pays like a 1x or less.

He pays less than 1%, which to me that makes a—

that makes a lot of sense.

He does a lot of revenue share agreements too. Yeah, we think we're known that, you know, the same people. Yeah, yeah. But yeah, he's the only one who I've seen buy multiple construction businesses. And actually, I know there's a few people, so like, I know it's possible, but he's one of the few that I've seen actually like do it regularly and kind of roll them up in an area and do really, really well because the way he buys it makes sense. But it's not like heavy debt load.

Yeah.

So like, that's, that's one of the big keys. I just wanted to say like, you know, that's, that's a big portion of why ours didn't work is we can't get cash cycle. You can't wait 60 days to pay people and we can't buy nice trucks and then have them running and doing, you know, rough-ins. It just doesn't make sense.

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Oh yeah, thousands. There's some, there's some probably around recruiting and making sure that you actually listen to John Wilson when he says have a recruiter at $3 million.

That definitely helps.

But we talked about that one recently, so I'm not going to beat that dead horse. Essentially, the only key to that is have a recruiter at $3 million or have some kind of recruiting function that's always recruiting because losing 2, 3 people overnight is a very real possibility. And in a business that has 10 people, 12 people—

We had a branch lose 2 people last week. It was like out of 10. It was a lot.

Yeah. I mean, that's 20%. 20% of your revenue generation is gone.

Everybody, if you've got a huge mistake, we'd love to see in the comments below. Uh, we'd love to, if you wanna talk about it, tell us what you messed up on. Yeah. Tell us what you messed up on. Um, make sure you like, sub, and give us a 5-star review wherever it is you listen to shows.