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John Wilson Part 1 | How to Scale Your Business 5x

John Wilson, CEO of Wilson Plumbing & Heating, shares the importance of understanding your strengths and taking calculated risks. He also highlights the marketing strategy that has helped him scale his family business.

Josh Smith (00:03):

Hello, everyone. Welcome back to the sharpest tool where we take the sting out of marketing. My name is Josh Smith. I am your host and the vice president of marketing here for home services at scorpion today, I have the pleasure of talking with John Wilson. John is the owner and CEO at Wilson plumbing and heating and Akron, Ohio. John is part of a really long legacy of home service in the home services industry. And his grandparents started Wilson plumbing and heating over 60 years ago. And John bought the company from his father in 2016. He owns multiple businesses, knows the challenges of home service business professionals inside and out. And his goal is ultimately to provide quality service at a fair price. So John, welcome to the sharpest tool, my friend.

John Wilson (00:44):

And that was, that was quite the intro. I hope I can live up to it.

Josh Smith (00:48):

I have no doubt. Usually usually the people that come onto the show, they can live up to the introduction.

John Wilson (00:53):

I'll try to live up to that too, but yeah, super excited to be here

Josh Smith (00:57):

So well, it's good to have you, why don't you paint a bit of a picture for us with a broad stroke. Tell me a little bit about your background, how you got into the family business. Yes.

John Wilson (01:04):

So I'm one of like most businesses, this size they're family businesses. So I'm one of seven kids. I was really the only one that took an early interest in the company. So like 10 years old, uh, you know, I was putting stuff away in the shop, sweeping floors riding around in the truck. I don't know that I ever had an amazing fascination with plumbing or HVC, but I really wanted to work for myself very badly. So most of my, you know, sort of early adulthood and teenage years, I fought really actively against being in the business. I didn't add, it felt too clean or I don't know. I just didn't want to do that. I wanted to, like at the time I wanted to start my own graphic design studio.

Josh Smith (01:49):

So you're an artist by nature a little bit.

John Wilson (01:51):

Yeah. I originally went to school for it, so, okay. So I, so I was going to do that and at 18 I ended up having some health issues. School didn't end up working out the way I had intended. So I worked in the business as it, as an apprentice. So I came in, went through our apprenticeship program, takes like two years, rode around with a guy named art who was a service plumber at the time, learned how to install boilers and fix toilets. And really just worked in the, in the tech position. After about two years, I moved into my own truck, which was a big deal at the time. I think I was 20 and I was really excited about it. I started going to school full-time at night for accounting so that I could still get back to what I wanted to do, which was buy a company.

John Wilson (02:35):

But by that time I had really developed a, an interest into what we were doing. And I saw that the company that we had then, which was a eight person, four or five tech company, could be just so much more if we just did, you know, the few things that I felt like we were missing just best practices and put those in place. So I started to really show an interest in my early twenties, went to school full-time at night for accounting. And then at 25 I bought half. I bought my mom out. Oh, wow. That was like, that was 10 to 25.

Josh Smith (03:07):

Wow. That's awesome. You know, used to mention that you noticed a few things that if we got these things right, then we'd be able to kind of scale the business in a way that we hadn't before. What things did you identify and what was kind of the most important thing to you at that point?

John Wilson (03:21):

Oh man, there was so much low-hanging fruit, you know, we were a million dollar, a year company that had been run like a lifestyle business for 35 years. So very little infrastructure upgrades. So our website was like from 2005. Oh yeah.

John Wilson (03:39):

Like, you know, not good. We were very paper-based and this was 2016. Right. So like there's technology out there. Uh, but we are fully paper-based. We are still doing time and material pricing. So, you know, we can move to flat rate. There was no incentive comp to sort of help build our technicians, uh, careers. I think those were all the big ones and we didn't know how to mark it because it was a lifestyle business forever. So yeah. New customers came when they did the phone rang when it did and if it didn't okay. We're okay.

Josh Smith (04:11):

Yeah. How did you go about solving that particular challenge at that point in time for the marketing piece?

John Wilson (04:17):

Uh, we didn't, um, actually it took me about a year, so I bought in late 2016, mid 2017. I signed on with a company in one of the Carolinas to take over PPC management and we built our own website on Squarespace to replace the fifteen-year-old website. So yeah, that was about mid 2017. So th those were sort of the upgrades at that time was we built our own website. Wasn't very good. And we had someone who didn't understand home services manager, BPC.

Josh Smith (04:57):

Yeah. Yeah. It's a, you know, I know family dynamics can be a bit challenging to navigate at times, especially when it comes to acquiring the business. That's been in the family for so long. If you're part of a big family, there's multiple interested parties, potentially. How did, how did that go about, I know the opportunity came about, uh, you know, where you purchase your mom's share. What, uh, how did you go about navigating family dynamics during purchasing the business?

John Wilson (05:19):

It is super complicated. So the one thing that I had going for me at the time was that I was the only sibling that was interested. So if my siblings look at that company, eight people total, including my father, the owner, you know, he's working five, six days a week. She's, you know, it's like 60 hours. He's going out on Saturday to help with no heats, uh, really working in that business. Like very, hands-on still the technical mind behind what we're doing. So I think when my siblings saw that they're like, man, this doesn't look like an opportunity. This looks like a trap, right? Like I don't want to do that. And in their defense, neither did I, but I thought that I thought that I, you know, I was foolish enough to think that, uh, you know, we could work around that. So it was not an opportunity in most of my siblings eyes at that time.

John Wilson (06:08):

So that was easy. Again, I keep saying at that time, because I think it's changed a lot, you know, as we've grown, you know, we're five times, six times larger than we were when I first bought half. It's a different company now people do. Yeah. So, you know, there's new waters to navigate than when I first did the, uh, the acquisition. But aside from that, I was the only interested party. And then we really wanted to Bulletproof the transaction to make sure that no one felt like they got cut out or that they got a sweetheart deal. So, so we sat everyone down and we're saying, Hey, here's what's happening. John's going to buy half of the company. I don't think we announced the amount, but we went out and got a formal valuation done by a professional accounting firm. It was like $4,000, but that helped, you know, and I paid to the penny what that was because we wanted to make sure we had a, it was clean in every way. And there wasn't going to be a sort of a deathbed brawl over, over the value of a company and someone feeling like they got shorted. Yeah.

Josh Smith (07:06):

Yeah. Now, did you get, know if you're talking to somebody who's going about navigating this, let's say buying a business from a family member. What was kind of like the one thing that you're like, man, if everybody knew this, when they were buying family business, things would go so much smoother. What's one thing that you learned from that experience that you could offer up as a piece of advice for somebody who's looking to purchase the business from the family today?

John Wilson (07:27):

Well, I think it would be two things probably it's what do the other siblings, how do they feel about it? Yeah, because I was talking to a guy the other day, a totally different industry, but he and his brother worked inside the company and their sister doesn't and they were talking about this family business that their grandfather started and they're getting ready to buy the dad out. And my first question is, what does your sister think? Yeah. He's like, what do you mean? She doesn't work in the business. I'm like, it doesn't matter her name's on the building. And regardless of whether you deem her to have merit in this conversation or not like she does, so you at least have to inform her of what's going on and you know, otherwise you're damaging relationships for life. And then I think that's the second one is my father and I have a really good relationship and we are so blessed to have that because there's mutual respect. There's a clear boundary of, okay, you're in charge. Okay. Now I'm in charge. Yeah. It wasn't a problem that said that's uncommon. And I think that I would really examine the relationship with your parents and make sure that you have a relationship of mutual respect because I've, I've seen plenty of businesses where the child bought in and they were essentially neutered. Like they didn't get full authority, they couldn't do what they felt like they needed to do because the, the matriarch or patriarch kept total control. And it just, there was no respect both ways.

Josh Smith (08:59):

Yeah. Yeah. Yeah. So obviously it's been a couple years since you bought the business out, you've been involved with the business. You've helped seen it grow pretty substantially. Tell me a bit about your role in the company today. Um, what's a day in the life of John Wilson look like

John Wilson (09:13):

Yeah. Uh, really different. So when I, I have a good understanding of who I am and I know what I'm bad at usually. So I'm not, I'm not good day-to-day and like there's no illusion on my end. All of my staff, there's no illusion like, so, so very early on like first year I kept dropping all these, just all the balls that I was holding and just, I'm not great with details. I'm really good at strategy. And I'm really good at capital allocation and anything. That's not those two things. I should not be the person in charge of it. Yeah. So over the past four years, it's really been getting me only doing what I'm good at and getting rid of everything that I'm not good at. People seem to want to make that harder than it is, but it's really not. Like I don't want, I'm not good at operating a company. And two, I don't like doing it that said there are millions of people out there that would love nothing more than to do all the things that I don't like doing. So we started putting general managers in place and now I'm able to just focus on strategy and capital allocation. So that's a long way of saying that that's my day-to-day now we're focusing on acquisitions and organic growth opportunities. So it's end of March. And I think we've talked to 75 companies since January 1st. We have two under LOI right now. Just put them under.

Josh Smith (10:42):

Oh, wow. That's awesome. Congratulations.

John Wilson (10:44):

Yeah. Thanks. We should double this year.

Josh Smith (10:47):

It's a big part of growth. And I know there's a lot of that happening right now, uh, in terms of buying up companies and companies merging companies selling. Um, and obviously, you know, we had a pretty tough year last year for our industry. Uh, you know, even though we're essential workers across the country, there are businesses that did great and their businesses that closed their doors that, uh, you know, they suffered through it. What was your experience over the past year with everything that was going on? And, uh, how did you get through 2020?

John Wilson (11:14):

We I'm a fairly conservative individual. I know. I just said I put two deals under contract and we're doubling this year, but I consider that to be manageable risk. Uh, we've doubled the forest. I'm not afraid of doubling again. So in 2019 quarter one, it was like the worst quarter of my life. It was total stress. I had a baby that wasn't sleeping. So that meant I wasn't sleeping. I was making bad decisions in the business. And most of them turned into, you know, financial. We just had a tough quarter. You know, we lost a hundred thousand dollars in like 26 days. It was, it was, it was a go, it was a race. It was really amazing, but we dug ourselves out of it within like two months. And the lessons that we learned and the conservative practices that we learned from quarter one, 2019 were used like that whole playbook was just written down and used in quarter 1, 20 20.

John Wilson (12:12):

So if we hadn't gone through that, we would've probably had a tough year. Instead we exited 2020 with a 30% top-line growth, 120% profit growth, five new people. And we took advantage of every opportunity that came. So in March, when the country shut down and people canceled advertising, we tripled our budget and we went on a hiring spree. We started a damage remediation company cause they were all going bankrupt. So we're like, that means the talent's out there. Right. So let's go get the talent, let's start a company. So conservative financial practices and, you know, jump when everyone else is not

Josh Smith (12:52):

Where everybody else sees despair and says, get out, get out. You're like, Hey, no devil down

John Wilson (12:58):

This time to do it. I'm going to eat your lunch. Yeah.

Josh Smith (13:01):

It's an interesting principle. You know, when you think about it, because people, people love to talk about it until the rubber meets the road and there's like, what are you willing to do in those instances? You think about even just like financial portfolios and stock and

John Wilson (13:13):

Well that I have the same practice there. You know, the market fell like crazy. And I tripled my stock portfolio in a month. Like when there's blood in the streets, you go like, that's it, that's the rule. Like, what's the real damage. Like what's actually going to happen the stock. Market's not going to go to zero. Yeah. That's not going to happen. And if it does, then I have bigger problems than the money that I just lost. Like we all do. So you know who cares?

Josh Smith (13:41):

Yeah. Yeah. It's just a game. Yeah. It's the AI and that's the game of business. And we, we often operate, I think business owners operate so much on fear. You see it a lot in the advertising world, just like you're saying, everybody's cut, slashing budgets. You know, it's like, well, that's not the way to grow. That's not the way you got to invest in order to make money. Otherwise like there's a certain threshold to take into account for inflation even right. That you should be investing to help promulgate your growth. If you don't, you're going to backslide because while you're not doing anything, everybody else is doing everything right. And so they're going to be that much further ahead of you. And it's great that you took that approach. It's very interesting to hear you say that you tripled your budget. The minute everything kind of fell down the whole,

John Wilson (14:19):

Oh, we got radio for half price. So yeah. Sign me up for two years. Let's do this. Like I'm not, I couldn't get this deal a month ago and I'm not going to get it in a year, so let's do it now.

Josh Smith (14:29):

Yeah. Thank you. That's incredible. So you had hired around five technicians, you know, last year and continuing to grow triple that only in a few years, you know? So from when, uh, from when you bought it, do you plan on keeping that kind of 30% growth pace for the next three to five years or what's, what's the growth plan look like for you?

John Wilson (14:49):

Yeah. So our minimum growth hurdle is 25% a year. Anything less than that just doesn't seem very interesting to me. Yeah. Yeah.

Josh Smith (14:56):

Um, how do you, how do you go about planning that strategy to achieve that now? Looking for,

John Wilson (15:01):

Well, we acquire, so I've acquired a company almost at least one a year, since 2016. Uh, we've started companies. So we have, we have to ground up concepts. We started a new location in a new Metro that we weren't working in and then just big old fat acquisitions. So yeah, I don't know, you know, it seems like trade companies hit scale at like 10 million, you know, that's when you've got your CFO, you've got a president running your company for you, you have HR managers, you have sort of everything that you need to, you know, backup and you have a million or so of cashflow year. So that sounds pretty good. So we'll probably keep growing aggressively until that point and then use all that cashflow to jump into a new vertical. Yeah.

Josh Smith (15:50):

You know, w w we've had a great business broker on, on the podcast. So we were able to pick his brain about kind of what he looks for in terms of brokering, H he specifically focuses on HVAC businesses, right. I'm curious from your perspective as a business owner now being into like kind of M and a space, the mergers and acquisition space, what are the things that you look for that determine whether or not a company looks interesting in terms of engaging in the conversation? Oh yeah.

John Wilson (16:14):

Okay. So we're 75 conversations deep this year. So I've got a lot of thoughts on, so I have two deals under LOI. So I talked to 75 companies. Two of them are worth pursuing. Okay. Which I think is kind of interesting. That's crazy. I'm trying to think of all like the craziest ones. So one was family dynamics was nuts on a few of them. It was just like, I'm not going to throw my hat into that ring. And they were beautiful companies, $3 million a year with a 10% EBITDA. Like this is, this is what dreams are made of, right. Like that's Hilary Duff. Uh, but yeah, like, you know, this is what you and I can't do anything with it because of how mismanaged it is. And it was the son that had like a wild ego trip. It was just crazy. And then, uh, some owners want six times that they don't understand the process, which is okay, most people never buy or sell a business except for maybe one time in their life.

John Wilson (17:13):

So they don't understand how valuations are done. So that is tricky. You're going in. And you have to explain to them how companies are valued and why would they take your word for it? Because you have a very vested interest in what you're telling them. So you have to, you know, be good about that. Usually we tell them to seek their own counsel, but the advice that their counsel give them can be good or bad. So we've seen some really like high multiples. Their counsel tells them, well, I've seen companies sell for this. Yeah. And me too, like to a billion dollar company, like your $1 million company that is barely profitable is not going to sell for a five times earnings. Like, that's not how this works. Yeah. So, okay. So that's all the stuff I didn't like. I think you asked what I did, like, so clean financials, a clear upside, like what can I do with it?

John Wilson (18:08):

There's different than what the seller did with it. Yeah. What is an unfair advantage that I have over any other opportunity that I have on my plate? What's the seller going to do? Because we usually want them to stick around for a year and it can be bought at a reasonable price. Yeah. But usually the reasonable price actually ends up being sort of the least consequential. If you find a deal, like as long as it's not an insane, you know, price, but because we're a strategic buyer for the most part, like I have an HVC company under contract right now, two and a half million in sales, 200,000 in EBITDA, 16 employees. So they're underperforming by most metrics. Like that should be a $4 million company, just industry standards. Right? Yeah. So clear upside. Yeah. What, what unfair advantage do I have? I know how to market, they don't. Okay. So I have an unfair advantage there and because I have a platform that's more than twice the size of that they are, I can just sort of tuck them in and barely notice the impact of 17 new employees that I have to train. So that's pretty cool. That's an unfair advantage. The seller's going to go on to full commission sales for me. That's great. That's a great exit. I love that. Excellent. Everything about that. Sounds good. Yeah. So that's usually what we walked through. Yeah.

Josh Smith (19:26):

So for some people who might not be familiar with some of the kind of acquisition language, um, you mentioned it a few times, uh, EBITDA or EBITDA. What, uh, what is that for those who might be listening and being like, what the heck is he talking about? Is he sneezing? I don't know. Yeah.

John Wilson (19:39):

Yeah. It does earnings before interest taxes, depreciation and amortization. So it's a really fancy way of saying cashflow cashflow. When you're looking at a business, like if you were to look at my company today and determine its value, if you looked at only the net profit bottom line, you would not see the whole picture of cash outflow to me, the owner, because we're not looking at my car that I put through the business. We're not looking at the, my salary. We're not looking at my assistant. We're not looking at depreciation, which some businesses can be hundreds of thousands of dollars a year in depreciation. And that's a non-cash expense. That's purely on your financials. So like, it doesn't affect your cash interest, which would not go to the buyer. So depending on the business, the difference between net profit on your like QuickBooks, profit and loss and the actual EBITDA, like cashflow to the seller could be off by a hundred percent. It could be dramatically different. Yeah. Yeah.

Josh Smith (20:47):

Awesome. Thank you for clearing that up. Now you mentioned an advantage that you have because you know how to market, which I love that answer. Obviously being in the marketing space, as long as I have been. So I wanted to ask you kind of curious here, what have you found a lot of success with? Let's say just over the past couple of years, since you've really dialed in your marketing over the years, what's been most important to you as you've continued to grow your business, you have your operating procedures in place. Now you have your whole process of training. So the S the SLPs are there, you know, the team knows how to run. Now. It's just like, let's, let's start marketing and building the brand in the space. What has become kind of your go-to in terms of where we want to invest our money right now with marketing.

John Wilson (21:27):

Yeah. So we've been on an interesting journey with marketing. We first turned on the marketing tab in late 2017 at like 500 bucks a month. Right. My current marketing budget is $34,000 a month. So in a couple years we had a very steep learning curve. Yeah. We've gone through a couple iterations of it. Honestly, I, one, I would have done this anyways, but I'm going to plug scorpion, like, you know, we have to, so in, you know, we start, we signed on, we started our own little website. We signed on with a company in the Carolinas for like a year and a half. And it just was not a thing. So early 2019, we signed on with scorpion. And that was a great move. So I'm just going to plug that out there. When we first started really investing in our marketing, it was all about PPC.

John Wilson (22:22):

Yeah. Which I would still recommend. That's where most people start. Like if you're not, if you're doing sub $10,000 a month in marketing, like you can do all of that digital. It, it just doesn't matter when you break $10,000 a month. The mistake that I made was I kept doing just digital and not understanding the marginal utility of those dollars. Uh, you get diminishing returns. Right. So what I found in my market is if I do $8,000 a month PPC, and now LSAs, but you know, I'll just all of that stuff. It used to just be PPC. You get in front of like 83% of searches with $8,000. That last 17% costs you like 50 grand a month. So I kept pursuing that last 15%, 17% and just not getting to where I wanted to go. So I think at one point we were doing $18,000 a month into BBC.

John Wilson (23:14):

And like, we're like, man, why aren't the results there? And then we're like, oh yeah, we're chasing the same repairs for just dramatically higher, uh, costs. And it just, you know, it doesn't scale, you can't scale PBC like that lead is $65, whether or not your brand is amazing or terrible, I guess it changes a little bit. If your brands look amazing. Amazing. But yeah, so right when we crossed the $15,000 mark, we started to look into what are the other mediums available to us? I'm going to say this here, cause I've said at other places. So I don't feel like I'm giving away an unfair advantage. Yeah. Marketing changes so frequently, but the traditional media has gotten severely under priced because everyone's going digital. So for the moment, it'll probably change in like six months. But for the moment, uh, traditional media is like bargain basement. So we've been investing a lot more money into that because other people aren't looking at it for probably good reason, harder to track the results, you know, listen to any sales pitch from a conventional radio station and you can poke a million holes in it. But at the end of the day, they still have a hundred thousand people listening to it every day. So we started trimming our PPC in 2020 and adding more conventional media to it, to have a more balanced approach. And now we're 60, 40 traditional to digital

Josh Smith (24:35):

Love it. You know, it's something that we've found as well. A lot of the data shows this obviously well-rounded strategy as you're continuing to move through the seasons from shoulder seasons to busy seasons and as your business grows to different stages.

John Wilson (24:48):

Yeah. Just different sizes. Yeah. I think that's the thing that we, you know, I hate marketing. I hate it. Like we're good at it because it drives results, but like, it is my least favorite thing to do in the entire world. Um, so I've always tried to find like a set it and forget it approach, which PPC gave that to me, here's the budget send me leads, right? Like that's not very complicated, but yeah, you definitely have to shift depending on what size you are and what size you're going to be by the, you know, next year dramatically changes how you attack your marketing. Yeah.

Josh Smith (25:24):

Yeah. Well, John, this has been awesome. You know, I'm a big fan of success leaves clues, and you've definitely give all our listeners, given all our listeners a number of clues to your success. And I know we're going to dive even more into that in the next step. So we're going to record. So for everybody listening, stay tuned, but I just want to take a minute to thank you, John, for your time for everything that you're doing. Anybody who wants to find out maybe a little bit more about what you have going on, John, where can people find you?

John Wilson (25:48):

Oh yeah, you can follow me on Twitter. I have a little mini following on there. It's at Wilson companies

Josh Smith (25:54):

At Wilson companies. Awesome. And, but what's your, uh, the domain for your, for the business that people can go check it out

John Wilson (26:00):

And Wilson plumbing and heating.com,

Josh Smith (26:02):

Wilson plumbing, heating.com. Awesome. John, thank you so much for your time. I really appreciate it. It's great to have you and we'll have you back soon. Great. Thanks. Awesome. For everybody listening, wherever you might be listening at, definitely give that subscribe button, a little tap and hit that little bell. If you're listening on YouTube and subscribe wherever you might be listening at and on all of the podcast, places and platforms share a review. If you're enjoying the content, if you know somebody that needs to hear what John had to say, definitely share it around with your friends. And until next time from all of us here at the sharps tool, talk to you soon. Thanks.

Speaker 3 (26:34):

[inaudible].

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