EP: 222 John Conway w/ Redwood Services - Charging the Right Price in HVAC

In our latest episode of HVAC Revealed, we dive deep into industry insights with John Conway, the COO of Redwood Services. With over 30 years of experience in the HVAC industry, starting from his father's small construction business to his current role, John brings a wealth of knowledge and insights that every HVAC professional can benefit from.

Don’t miss out on this episode, to learn how to turn challenges into opportunities and set your business on the path to success.

Key Takeaways:

• Mindset Matters: The success of service calls largely depends on the technician's mindset and how they approach each call. Charging the right price and understanding your break even point are crucial for financial stability and growth.

• Value Over Price: Winning in the HVAC industry isn't about having the lowest prices. Offering greater benefits for employees like healthcare and retirement plans, and maintaining a professional brand persona, significantly contribute to long-term success.

• Strategic Partnerships:Redwood Services exemplifies a people-first approach, focusing on partnerships rather than acquisitions. This strategy prioritizes sustainable growth and low turnover by investing in employees and allowing management teams to thrive.

Tune in to hear John's firsthand experiences on growing a business, dealing with debt, succession planning, and much more. 

Find John :

On The Web: https://redwoodservices.com/
E-mail: john@redwoodservices.com
Linkedin: https://www.linkedin.com/in/john-conway-030087211/
YouTube: https://www.youtube.com/@redwoodservices1910
Instagram: https://www.instagram.com/redwood_services
Linkedin: https://www.linkedin.com/company/redwood-services-llc/

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Presented By On Purpose Media: https://www.onpurposemedia.ca/
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Sponsored By:
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Transcript

John Conway: 0:01

Today, and I still sometimes I run into service companies today, Thaddeus, that are 20 years later still not charging 3. 35 an hour flat rate. You need to be charging what it costs to run your business, period.

Thaddeus Tondu: 0:16

Hey, welcome back to another episode of HVAC Success Secrets Revealed with Thaddeus and Evan. Although if you notice, it's just me. If you looked at the screen, I did my best to put Machu Picchu on there. It's actually a llama. It looks like but I went into Canva and it was Machu Picchu is what I searched. Cause that's where Evan is right now. So he's enjoying some much needed vacation. off. So diving in to today, our guest, John Conway with Redwood Services. I am super excited for this conversation. A little bit of a backstory from him. He's been in the industry probably even before this took over a business in 1998, sold it in 2010, went worked for them for four years, moved into Nexstar. It was a business coach with the Nexstar network for over six years. Came on board as in the last four years as the COO at Redwood Services. And they they're actually a home service firm focused on investing in leading residential companies within the HVAC plumbing and electrical space. I asked him what his superpower was before we got going and it was keeping things simple. I know people have a tendency to complicate it and then he dropped four things which matter. For a business and I'm not going to tell you what those is you, what those are. You've got to watch the entire episode for us to dive into those four things. I'm super excited, but without further ado, this show would not be possible. Of course, without our sponsors. First up, we have Chiirp, Elite Call and On Purpose Media. So transform your home service business with Chiirp, the ultimate automation toolbox, capture more leads Capture more leads, connect instantly and skyrocket your sales. So Chiirp integrates seamlessly with platforms like Service Titan and Housecall Pro offering automated text, emails, and even ringless voicemails, boost your Google reviews and customer loyalty with your proven with their proven rehash program. So schedule your demo today and get an exclusive 25 percent off your first three months. Visit chiirp.com/hssr today today to get started and if you're ever thought about outbounding your desk, your database to fill your dispatch boards with lucrative service and sales appointments now you can do that. With Elite Call a US-based call center that does all of those things for over 20 years. Their dedicated teams don't just make calls. They directly integrate appointments into your CRM and fill your dispatch boards. Don't let your competition get ahead. Let Elite Call Connect with your customers first. Visit Elite call.let.net to learn more and last but certainly not least, On Purpose Media. Enhance your online presence with those guys. On Purpose Media, your go to home service marketing experts for everything web design, SEO, PPC, stunning user friendly websites built to convert visitors into phone calls, enhance visibility on Google and effective pay per click ads, minimizing wasted ad spend. So let's turn your presence to a lead generating powerhouse. Visit onpurposemedia.ca today to start your digital transformation journey. in the world. Without further ado, we'll be back on the other side. John Conway. Welcome, John, to the show. Thank you for taking some time out of your day. I know that you're traveling right now. So thank you for that. So I'll I'll get started with the most toughest question of all. What was your journey like? Walk us through the start into the HVAC industry.

John Conway: 3:12

Thaddeus it's I'll try not. I've been in the industry over 30 years now, so maybe I won't take you too far back. But I will tell you that I got in the industry working for my father's small new construction business that worked out of the sunroom of his home. 1994 where he had one truck and two employees and he thought it was a good idea if I ran duck work in new homes. By the way, I thought that was a terrible idea and so that's really where it started. All the way up through me evolving into growing the business, going out and selling, work to new to homebuilders and then just growing the business as a whole and evolved into me purchasing the business from my father in 1998. So roughly about five, four and a half, five years later and by that time we had grown from the business being 300, 000 a year to it being two, 2 million a year. And and it was mainly new construction, not knowing what we didn't know and, running around in that new construction industry, sometimes just a race to the bottom. Just how cheap can you do work? And so from 19 98 I started basically getting into the service and replacement business, but just not charging the right price. And so that's, if we start talking to me about price, you'll find that's where my passion's that because the service and replacement business is. A business that you have to charge the right price in. And I quite frankly I have this kind of saying that I basically say, what's the biggest myth in the industry. And that is the biggest myth in the industry is something called going rate. So I don't know if you've ever heard of going rate before, but going rate is what's the going rate for Freon? What's the going rate for a three ton condenser? What's the going rate for a fan motor? What's, what's the going rate for a water heater? Going rate doesn't exist. There really is no such thing as going rate or. Sometimes I'll hear people ask, Hey, what will the market bear? The price that you need to charge for your goods and services is what it costs to run your company. So don't worry about what it costs to run, heat them and cheat them. Worry about what does it cost to run your company? If you're listening to this podcast today, you're probably you're probably a professional service company. And if you're a professional service company, then, charge a professional fee. Thaddeus, you could come to Memphis and I'd be glad to take you to dinner. And, we could go over to the Wolfchase Mall and when we go to the Wolfchase Mall, we could eat dinner at Logan's Steakhouse. The steak's about 15 and the wait's about 10 minutes. Or we could go next door to J. Alexander's and the steak's 40 and the wait's an hour. Like, why are people waiting an hour for a 40 steak when they can get a, a 15 steak in 10 minutes? The reason is service, atmosphere, experience. When you deliver those things in your business, you're able to charge for it. So I met I spent, I'll speed this up, I spent 1998 to 2004 digging a hole. Not charging the right price. I do want to get into that. I think that'll be a fun one. Chasing builders on Friday afternoon to get, trying to get paid. and quite frank, frankly, I found myself in 2004 and 942,000 in the hole to carrier. I tried to get them to sell me 60 more thousand so I could say I owed'em a million, but for some reason they thought 9 42 was enough. And and at that time I met Nexstar joined Nexstar, and in May of 2004 and in February of 09, five years later, I was debt free, didn't owe anybody a dime. And and it was really through those Nexstar best practices And in 2010 I sold the Conway business. Some people say, why'd you sell the business? The fifth offer. That's when I sold the business and I spent four and a half years working for the guys that I sold to and enjoyed it. It was a good time. But I also felt like that I had a I wanted to give back to Nexstar. Nexstar had quite frankly changed my life. And so I wanted to give back to Nexstar. I had an opportunity. To go to Nexstar as a business coach in 2015, spent six years there. And basically at the end of 2020, early 2021, I left Nexstar to come to Redwood Services with Richard Lewis. and Richard's Redwood CEO. and I was just quite frankly, really impressed with Richard's vision to invest in the home services industry, but do it in a very different way than what you see the big companies do. So we have a, we have a kind of a saying around the Redwood world, Hey, don't do the stupid stuff. What's the stupid stuff? You've always bought carrier equipment, but now we're telling you, you got to buy Linux or you've always bought train, but now we're saying you got to buy Goodman. So one, we just don't do the stupid stuff. And and just also think about, Hey how, what a lot of the big companies do, you can pretty much imagine in the Redwood world, we try to avoid what some of the big companies do, but spent the last four years at Redwood building something special. And we know that we were building something special. We started with zero partners at the end of 2020. And today Redwood has 15 partners nationwide and we're absolutely having a blast and our partners are doing great. The businesses are growing. And we don't have high turnover. Just about every manager that was in the business when we became their partners, still the manager today. Still managers today and all of our owners are in place. I think all but except one of the owners have one owner group retired. But other than that, 14 of the 15 owners are still in place. And so things are going incredibly well. So and lastly, hey, thanks for having me today. So Let's have some fun, my friend.

Thaddeus Tondu: 8:30

All right. I'm looking forward to it and I guess going back to the, like the start of it in buying a business from your father, we've had a few people on the show that have went through that before. And obviously the emotional gamut that it could happen and even maybe potentially drive driving a wedge in a family, if it's not done the right way. Walk us through if somebody were in that same situation of, okay, I'm going to try to buy the business from my family so I can get my mom or my dad out. And I'm going to, I'm going to son or daughter, I'm going to take it over. What are some of the things that you guys did and put in place to be able to prevent that wedge from potentially being driven inside?

John Conway: 9:05

I told you when I joined, working with my father, he had the one truck and two employees and was doing about 300, 000 a year in revenue. And, four years later, we were in 1998, about 2. 1 million, even though all of it was new construction. My, the business was really bigger than my dad, even though it was a very tiny business in today's comparison, it was really a bigger business than my dad wanted to run. And so he asked to, Hey, can I go back and do my sunroom thing? And can I go back and do the small business thing? And by the way, all these builders that we do now are guys that you went out and got. And so we just mutually agreed for him to keep the original builders that he had. And for me to for me to take the new builders that I hadn't got, however, as it relates to an exit strategy, if you were to take that to today, and maybe not an exit strategy, maybe a better way to put it is it relates to a succession plan. There should be a lot of thought put into succession planning. And first of all, when, if you have a larger business, when I say a larger business, somebody that's got a business doing, 10 million, 15, 20 million in revenue. In today's world, those businesses have a lot of value to them. And quite frankly, it's typically more value than most likely a son or daughter is going to be able to pay. And so there is opportunities in the market where someone may want to think about, Hey, should I have an investor take, help with dad's equity and then also have some equity role to the next, generation of owners, which happens to be that succession plan model. So I think you should, I think people should really put a lot of thought into how to succession plan their business. Because especially the larger companies, they have a tremendous value and, there should be some thought put into that for sure.

Thaddeus Tondu: 10:47

In terms of the succession planning and putting that in place and even just exiting a business for that too, and you look at kind of both of them, I think there can be some common pitfalls that people fall into that are, or even myths that, that might be out there as well, I, you alluded to myths a little bit earlier in looking at. succession planning on a business or even positioning to exit. What's the I guess the largest single handed mistake that some people would do in doing that, in doing it the wrong way that they should avoid?

John Conway: 11:13

If you're looking to first of all, not having a plan. So not thinking not having a plan of, I w I would say also just making sure that you're communicating, like what is the outcome look like, and not having a a plan. The other thing is this succession or the exit doesn't always have to be about money. So if you make the succession and the exit all about money, I want to leave and I want to get as much money. As I can get for my piece of the business that sometimes doesn't always bode well for the business, and so if you put too much of the emphasis on about the money and not as much emphasis about your legacy. I commonly will say like people that care about their brand and people that care about their legacy and care about their people, they've fit, well in the Redwood family. But if somebody is just truly about the money, ultimately end up getting your money, but you may not like where you get your money from. And you may not like what happens to your business 24 months later, or even 12 months later. So that's a little bit of some of that. exiting or succession planning may just have to do with, either who becomes your partner or, what was your plan to get, to exit the business. And sometimes there's not a plan. And I think that's the first place is develop a plan, develop a timeline And that'll usually lend to, make decisions being made while you're in the planning mode, not while you're in the frustrated mode, for lack of a better term.

Thaddeus Tondu: 12:33

No, it makes sense. And I, it's a good thing money versus legacy, right? It's not always about the bottom dollar. And I think some people also take that to say, okay what about my team? What about my people? Who's all involved? Who's going to stick around? Who's not going to stick around? After that, according to the, person that buys it, right? And not necessarily their own thought process. And like some people after an acquisition will likely leave the business. They might not like it after the fact. And so looking at, that other side of the coin, once somebody has in moving away from the family side of things and into the actual purchase side of things the, I want to say the dark side of PE in a sense and private equity and there is, or just the dark side of selling a business, right? What happens after the sale? And we had Victor Rancourt on last year that, or last week that talked a little bit about this in terms of the emotions that went through him when he sold his business and all of a sudden he wakes up and it's just Oh shit, the baby's gone, right? What are some of the dark sides that people don't generally talk about when selling a business? From the owner side of things, the person that sold.

John Conway: 13:29

Yeah. So there is an emotional attachment to the business. It's your baby, you started it, I started something, in 1993 that I purchased in 98 that I sold in 2010. And the dark side of that can be, you're still going to drive up and down the road and you're going to look at those trucks in the future. And you just want to make sure that you've put them in the hands of the and those people in a position when you see those trucks, you're either proud to see those trucks or you're not proud to see the trucks based on what's, what's going on in your business. And so from, there is certainly an emotional attachment and and there's an emotional side to a business. There's a, to a transaction. So there's a financial side to a transaction. There's an emotional side to a transaction. And I can tell you that from a guy who's done this before, the emotional side will stick around a lot longer than the financial side will. And so be, and all of that just is really determined on who's your partner. Who do you choose to either sell a business to or take on an investor with? We don't, we, that's at least the way we think about it.

Thaddeus Tondu: 14:29

That makes sense. I want to go back to the debt thing because I think that's a fun story to be able to go into and looking at being almost a million dollars in debt to carrier. And I don't know if there were, there are other ones on there, but I know you, you almost bankrupt the company and turn it around, right? How, how did you end up in that spot in the first place to be able to say, Oh shit, I almost bankrupt my dad's company after I just took it on.

John Conway: 14:49

Yeah. Yeah. So good point. So first of all, how I, how you end up that way is just not. Charging the right price in the new construction business. So my business coach, Jim Hamilton, who was always my mentor, Jim Jim, first of all, taught me how to make money in new construction. So that helped. I like just couldn't get out of new construction because it was, a big part of the business. And so how we ended up there was one, just not charging the right price in the new construction industry, charging that going rate. That's why I mentioned to you, what's the myth in the industry. It's going right. And then going into the service and replacement business with that same mindset, I called a flat rate company when I got ready, the flat rate company, when I got ready to get into the HVAC, service side of the business. And this is in 19, 98. And I just said, Hey, what do you guys, what should I charge? And the guy on the other end of the phone said you should charge, it's a reputable flat rate company. He said what do you charge now? I said we charge 59 an hour. He said you can probably charge a hundred dollars an hour and 125 on the weekend. I said, okay, great. Send me the book. It sounds good. And they send me the book and I'm charging a hundred dollars an hour and 125 on the weekend. And I go through a year of it and I call the guy back and I said, Hey this didn't work very good. already had a way to lose money, dude. I didn't need like another way to lose money. I thought the service and replacement industry was supposed to be good. He said, Hey, what'd you, what are you charging? I said I'm charging, 100 an hour and 125 on the weekend. He said you charge 125 an hour and 150 on the weekend. I said, cool. Send me the book. So he sends me the book, I go through another year of it. I'm still bleeding now. I'm just bleeding slower. So it's like a slow death. And I do that for three years, that is. And that's where I landed at that, that 942 in the hole. And as I landed at that 942 in the hole, I go, look, this is not working. And that's really when I ran into Nextar and I went to and this was, by the way, I like for people to hear these numbers because this was in 2004. I went to the next our boot camp at the boot camp. We did our break even our flat rate pricing. And at that boot camp, my flat rate pricing came out that. My break even was 2. 75 an hour and I should be charging about 3. 85 an hour and, excuse me, 3. 35 an hour. And I called the flat rate company from the boot camp and I said, hey dude, what I just did this break even. It said I'm supposed to be charging like 3. 35 an hour. And he said, now where are you at? And I said, I'm in Memphis. He goes, oh yeah, most of those big metro areas, they charge about three, 3. 50 an hour or so. I said, oh man, that'd be really nice to know. 942, 000 ago. and so it really started there's when we started digging out of the hole when we got the price right. And a lot of people when they hear, Hey, you're charging 175 an hour and you need to go 335 an hour, Hey, should I raise my price a little bit? Should I raise this? Dude, rip the bandaid off, get your price right. Yeah, I basically doubled the price overnight. And then, in reality today, and I still, sometimes I run into service companies today, Thaddeus, that are 20 years later, still not charging 3. 35 an hour flat rate. You need to be charging what it costs to run your business period, and that's. You owe it to your, first of all, you owe it to your family, you owe it to yourself, you owe it to your employees. Cause as soon as I started charging the right price and we started making money. Then all of a sudden, our employee benefits went up, the type of trucks we drove went up, the amount of training we did and the things we did with Nexstar went up. And if you're not gonna charge the right price, you would just be better off, quite frankly, being an employee for somebody else.

Thaddeus Tondu: 18:08

But you've essentially bought yourself a job at that point if you're not charging the right price or worse You've bought yourself a job and then you've ran up debt and now you're in debt And you can't get out of it. That's not a good way to live and run You know at the other part too I think some people are scared of the word profit in business and not having especially if they don't know the And let's be real. When we're in the trades and any trade, for that matter, a lot of people are on tools and they say, Hey, I can start a business. They don't have the business acumen or experience. And this is where best practice groups come in place because they hear 20 percent profit and they're like, Oh, I never yelled it. I charged people. I be gouging people. I should just lower my prices to be able to not gouge people. At the end of the day, you've got to be able to make a living to be able to pay your people the right way. Tommy Mello is a good example of this. He knows that he's one of the most expensive in his market, but guess what? Every single one of his team members earns a six figure salary. Okay, now you're taking care of your people. And when you take care of your people, guess what? You can, you're allowed to be able to do that and charge the price because the people are bought in. If you're not, if you're paying them pennies on the dollar, they're never going to be able to, Go forward with a double, double the pricing. So through that experience, going from 175 to, three, three 35 or one 50 to three whatever the numbers were essentially doubling the pricing overnight. What sort of impact did that have on any of your current clients and how did you then reposition yourself in the market? One of the things that you talked about is the right calls on the board, right? That's the first thing, by the way, when I talked about the four things that we're going to talk about today, that's the first one is getting the right calls on the board. When you double your price, obviously that impacts a little bit of probably the call volume. So how did you transition for A, your current clients and B, prospective clients as they were coming in?

John Conway: 19:39

Yeah, so good question. So one of the I'll start with is that if I go back to my steakhouse example that I used earlier the first thing you got to, yeah the first thing you got to do is you got to prepare your employees for the price. The customer's actually not scared of the price. It's the employee that's scared of the price. It's the technician that's scared of the price. And those guys that, when I got out of new construction, I actually got out of new construction 2008, I had to exit the business because of the recession. But when I got out of the new construction business, went full service and replacement all in, in 2008 just four years after joining Nexstar the thing you got to do with that is you got to prepare your technicians, meaning they can't wear blue jeans and t shirts anymore. You're a professional service company and you're going to charge a professional fee. So the waitress over at Logan's, when she walks over to Jay Alexander's across the parking lot with. Blue jeans on, peanut shells on her boots, and her t shirt tied up at the belly button. That's not gonna work at J. Alexander's. And so she's not going to be able to serve a 40 steak that way. And that's the same illustration you have to have with your technicians. You got, the best way to say it is, Hey, you want to get paid like a professional, look like a professional. You don't get paid like a bum, look like a bum. So it's not really having to, customers are used to paying for superior customer service and they will pay for it. So you don't have to really warm up your customer base to that too much. You just have to deliver the service and the customers will pay for it. Toyota thought that people would pay for. Woodgrain dashboards and heated seats so much. They created a company called Lexus, Nissan thought Hey, people will buy a nicer Pathfinder. So they created Infinity, GMC years ago said, Hey, somebody will buy 150, 000 Suburban. We'll call it an Escalade and put a new grill on it, and so at the end of the day, people will pay for the level of service that you will deliver.

Thaddeus Tondu: 21:26

It'd pay for the name, the brand, right? And that's also the big thing too with it. And that's where you look at Toyota versus Lexus, right? The people see the Lexus and it's this prestige, right? And they know they're going to pay more for it. So in terms of getting the, and it's good that you mentioned the employee thing, cause I think a lot of people miss that mark of getting the right uniform. It's that brand persona when people show up to the door and do you put booties on, do you put a mat down? Do you, or do you have multiple shirts in? Yeah. Pants inside the vehicle. So that way, if you get dirty, you can change into it as a vehicle, clean on the outside and washing them daily. If it's dirty in your area, shit, come to Canada in the spring time, right? Wash you wash your vehicle 10 times a day and it's still never be clean. But some people understand some of the nuances there. If a person's driving around, right? Big, important things. In terms of the other part of the things of getting the right calls on the board, what other things should a business be looking at in order to ensure and maximize the right calls on the board?

John Conway: 22:14

Good. One of the things to keep in mind with this right call thing is the first thing you got to realize everybody's not your customer. So if you're a professional service company, everybody's not looking for a professional service company. Somebody's looking for Joe who works for the utility company to come by and fix it tonight when he gets off work. If he's not, if he doesn't have something to do with his family or this weekend, if he's not going to the lake and then you're going to try to compete with a guy on price, don't compete with him. You're a professional service company. So first of all, the right call has to do with, who am I marketing to? And some, and sometimes I use this analogy. If you're marketing for 29 tune ups, you're going to get 29 customers. If you're marketing for 129 tune ups, you're going to get 129 customers. By the way, if the 29 or the 129 is a problem, everything after this is going to be a problem. And some of it has to do with you marketing to the right zip codes. partners, we have a partner in Alexandria, Virginia. We have partners in, we have a partner company in Phoenix. We have partner in Charlotte where I'm at today. These are, those are extremely big markets, Indianapolis, Cincinnati. Sometimes you just can't market to the entire market, find like your favorite customer and market to your favorite customer.

Thaddeus Tondu: 23:20

Owning your backyard, as Billy Stevens says when you own your backyard now, you can't, you don't, you also create efficiencies in your business too, because now you're not driving all over the market just to service a client. You're being like ping pong ball and all over the place. You can, one central area works out really good. Obviously marketing plays a role in that. And If your marketing is not good, just call On Purpose Media. We'll help you out. But a perfect segue. I had to slide that in there. So a perfect segue into our Random Question Generator. And so today's Random Question Generator is brought to you by On Purpose Media, the local home service marketing experts. If you like, if you need a second opinion on your marketing, you're not getting the right stuff on the board, we'll reach out to us on purposemedia. ca. I will help you out. But John, the Random Question Generator. is just that. There are three random questions that I have here. You don't get to know what they are. You just have to choose. Do you want question one, two, or three? And then I'll read out the question to you. Sound fair? It sounds fair. All right. If you I was about to read off one of the questions, but I know that's not going to read off the three questions. So what question would you like? Question one, two, or three? Give me question number one. Question number one. All right. If you could donate a million dollars to any cause, what would it be?

John Conway: 24:28

If I could donate a million dollars to any cause, it would probably be St. Jude Children's Research Hospital.

Thaddeus Tondu: 24:34

I'm assuming that's local in the Memphis area.

John Conway: 24:36

It is Memphis, but it's a world renowned and it's for doing cancer research for children.

Thaddeus Tondu: 24:42

Oh man, my heart. I can only imagine. I have a one year old and a three year old. The stories that people share and show them I hope that never happens in my family. I hope it doesn't happen to any kid really for that manner, but yeah, great cause great choice.

John Conway: 24:51

And St. Jude is also they're, they do not charge any patient a dime. And so they literally operate the entire hospital for over 50 years, just on donations. So if you ever get an opportunity to be in Memphis, set you up a tour change your life.

Thaddeus Tondu: 25:05

Wow. That's and healthcare is different in Canada versus the U. S. versus other parts of the world. And to hear that they don't charge a dime is absolutely wonderful and phenomenal and an absolutely amazing cause. There you go. If anybody wants to rally around a great cause go donate to that hospital because John will put forward a million dollars when he gets it. That's it, all he needs is a million dollars. Perfect. Transitioning into there's a bunch of different things the person can go into, and I think we've already covered a lot of ground so far, the second thing that you mentioned to me before we got going is cause again, it was built on the premise, by the way of for everybody that's listening is that the business is the. It's actually not that complicated, right? You mentioned to that earlier that it's really not that hard. It's actually keeping it simple and that's your superpower, but people have a tendency to complicate it, which gets them down these rabbit holes of shiny object syndromes all the time and 942 grand in debt which by the way, that is a phenomenal story to be able to pay that off. Cause not a lot of people would ever be able to do that. Second one, converting the call. So now you've got the right calls on the board. Now they're coming in. Now you've got to convert the call. Walk us through that and what are some of the common pitfalls that people are experiencing or doing when it comes to converting the call?

John Conway: 26:10

Yeah. So right before I jump into the perfect, to the converting the call, I just start with the, I'll just go back real quick on the, what's the simple part of this business, get the right calls on the board. What's the right cause? The right cause basically, the right cause basically means you need to be working for the right customer. And you don't need to be working for the wrong customer. Who can be the wrong customer? Anyone who can't value your service. A home warranty company is not going to value your service. A property management company is not going to value your service. So get the right customers that you're dealing with and to make sure you have at least a, a good percentage of aged equipment calls on the board, especially for HVAC or aged water heaters for plumbing. So I'll just say this quickly and we'll jump into conversion. So get the right calls, convert the calls, charge the right price, you win. And we just have a tendency to complicate the crap out of this business. And it's just not that complicated. Get the calls, convert the calls, charge the right price, you win. And but then we go, we go get the wrong calls. and we don't have any type of process and we don't dispatch accordingly and we can't convert them. And then we don't charge the right price because we're supposed to charge going rate and when, then we lose and we go, I don't know why I'm not winning. Where, you got all three of them screwed up there. So on converting the call. actual converting of the call. And just for a little clarity or definition, most service companies will define a converted call is anything above the diagnostic fee that you charge to go out. So if you're a company that charges 79 to go out and your technician goes out there, He collects 79 and he doesn't do anything above 79 and he leaves with 79. That's not a converted call. Your technician goes out there and you can keep it as simple as a does a seven, goes out there, collect 79. The customer needs a filter change. I don't know. Maybe he charges 20 bucks for a filter and he leaves with 99. Okay. That's a converted call. So anything above the amount that I've charged to go out as a converted call. Obviously, different calls convert at different rates. But conversion has a lot to do also with just how thorough your technician is. My HVAC service manager, Chris, he used to say, Hey, pay the price for success, and the price for success is thoroughness. And years ago Thaddeus Consumer Reports asked homeowners, what brand heating and air conditioning system do you have? And I don't know. Did you ever hear what the answer to that was? The answer was Honeywell. And the reason it was Honeywell is because the customer views it as a system. We all know Honeywell does not make heating and air conditioning systems. They only make thermostats. Customers view it as a system. We're the guys who turned it into a furnace, coal, and air conditioner. So start treating the system like a system, and stop treating it like a furnace or an air conditioner. And in that you'll do a more thorough inspection for your customer and you'll convert at a higher percentage.

Thaddeus Tondu: 28:54

No, that makes sense. And because really like in, converted call can be anything when a call comes in, I booked it. Okay. Converted call. In, but taking it to this. Next level of, okay I've got the call on the board and now it's anything above the diagnostic fee. What would you a tricky answer? I think I'm giving you an out already cause you said different calls converted different levels. Average conversion rate if you're to blend all of the calls together that a traditional business would get What would you want to see for a conversion rate?

John Conway: 29:24

Typically if you're running maintenance calls, these are customers who have your agreement and typically that's about a 35 conversion rate call these are when you're actually running their maintenance visit you can make the math easy and say one out of three of them should convert to something other than just their, the fee they pay for the maintenance. When you're looking at an HVAC demand call that number is going to be, if you're a company that turns over a lot of leads to comfort advisors or sells a lot of systems, you're probably can convert about 65 percent of that to service. And then about 20 percent of them are going to turn into some type of lead or sale. And then you'll just have, on the demand side, these are people that have a problem. You just may have 5 percent of people don't do anything. Either they can't afford it or, they thought your price was too high or they didn't, didn't like the way your guy parked his truck or whatever. So typically on demand calls, about 65% Conversion rate on demand. 20 percent of the age calls or 20 percent of those calls will turn into a lead and about 35 percent on the maintenance side.

Thaddeus Tondu: 30:17

Perfect. Those are some good numbers for people to strive for. What do you normally see businesses at? So I guess when you guys probably do a deep dive on some of the partners that you bring on and before and after, et cetera. What are some of the average numbers that you currently see? Those are ideal. What do you normally see from other businesses?

John Conway: 30:31

Sometimes partners and even in my Nextar days I coached 111 companies at Nextar. And even at Nextar, you would, sometimes people might struggle a little bit with conversion on maintenance calls. And so that might that number might be more in the you might see them in the 20 to 25 percent range. A lot of that has to do with sometimes technicians will get head trash about maintenance calls. So they thought, Oh, there's not a good call. This is another maintenance call. But in reality, if you think about it, this is actually a customer who pays extra money to have their system service. So typically they're actually a better call, but A lot of those, a lot of the results, when I say call or job, when we run an actual service call, a lot of the results would really be determined by how the technician, runs the call. So if he thinks it's a bad call, it's probably going to be a bad call. Yeah, it's in the, it's in their mindset. And then on conversion rate on demand, those numbers I shared with your, we're certainly achieving those and sometimes above those, you may get, you may do get to a situation where if you're converting on the HVAC side, really high on demand calls, but really low on technician, excuse me, really low on tech generated leads, then that might be just in, a situation where you're repairing too much. Like you may have systems that need to be turned over, but they're not getting turned over. They're getting repaired. So once that system gets over about 10 years old you typically see about 60 percent of them will turn into a lead. But this is all, if you're following a process, if you have no process at all, and you're just haphazardly sending technicians to run calls and just doing whatever they want to do then these numbers are going to be Greek to you.

Thaddeus Tondu: 32:02

And I think a lot of them are Greek to some people, Rick, because they just don't know. They don't even know where to begin to even think. Find that data or analyze that data. If you're doing things in the right CRM system or FSM system that's a lot of your data is right there. Be able to do that, which also blends into the, to the third one is charge the right price. And we've already went along a lot, I think, on charging the right price itself with the stories that you had from the beginning. But if somebody were to listen, okay I hear that you at one point we're one 15, now we're 300. Making the numbers up just for math. You had to double it overnight. Could be 200 to 400, whatever. And this break even analysis, this break even point that you referenced, if you're to tell, if you're to coach somebody through how to find this break even number, what would you tell them? Cause I think some people just don't know.

John Conway: 32:45

Yeah. There's a lot of best practices groups out there that can help you with that. There's probably some calculators online to determine breakeven. There's flat rate companies actually have a tool to determine what breakeven is. Service Titan, I think, can even help you determine, what your breakeven is. There may be some, Excel spreadsheets or on breakeven, so that's the But, just learning, you really just break it down to like, how much does it cost to run my company, and then how many hours is a technician available to sell in a year? and then how many technicians do you have? So you can do the math and go, Hey, I got 10 technicians and they're going to work 2000 hours. And, if they can sell, 40 percent of their time. Then this is, how many hours they have available to sell. And this is what it costs to run my company. So now you at least know that's at least my break even to cover my operating expenses. And then of course I have to add their hourly rate and I have to add profit. And then you can charge a reasonable markup on your parts, and so it, there's a formula that kind of goes into it, but it really starts with what it costs to run your company. And, Thaddeus, sometimes in our industry, people get their head wrapped around, I buy a capacitor for 15 and I'm, and this thing says I'm supposed to sell it for 275. How do I buy a part for 15 and sell it for 275? Am I ripping somebody off? Is that not right? Where you have to get to in this industry today, and I'm sure it's this way in Canada as well, is what we pay for parts today almost has nothing to do with what we sell them for. And people can't get their mind wrapped around that. They think there is some multiplier of the price. And in reality, they just can't get their mind wrapped around the fact that what it really costs to run a company is what determines how much you charge for that capacitor, not what you pay for the capacitor. And that's a mindset shift for that people have to get their mind wrapped around is just understanding, what does it cost to run my company? And because there's, the way I say it is, look, there, there are only two people paying in this scenario. Either your customer's paying or you're paying. And if you're paying exceeds the customer paying, welcome to 942 and the whole.

Thaddeus Tondu: 34:49

And the other part, like you alluded to it of that price. There's the insurance, there's the fuel, there's the driving to get it. There's your guy's time in order to be able to go get it. And now one could argue you should stock a bunch of them. Okay, cool. You're still going to have to pay all those other things in terms of getting it out there. And so there's a lot of extra plus plus that a lot of people just. Forget completely all about which is that big thing. So now making sure that price is right. Shifting into that last one as you win, right? I think that's a pretty easy one because if you've got the right calls on the board, you're converting the call and you're charging the right price. That's where you then win.

John Conway: 35:21

Yeah, absolutely. Absolutely and the, what is win mean? Win is where freedom shows up. Some of the guys that you mentioned earlier, Victor and Tommy Mello and some of those guys are winners, and they didn't win by being the cheapest guy in town, they won by charging the right price. I was on a conversation with one of our partners last week, and it occurred to me out of the blue that our partner who has the average, the highest average sale for an HVAC install. Is also our partner who has the highest conversion rate. Wait a minute. That can't be right. I thought everybody wanted cheap. Oh, if I charge less, I'm going to convert more. No, the, our partner of, 15 partner companies nationwide and several hundred comfort advisors nationwide. The partner who has the highest average sale is also the partner who has the highest conversion rate. Only about 15 percent of consumers make decisions based on price. 85 percent of consumers will make decisions based on something other than price. You don't give them anything other than price to make a decision on. They'll certainly just make it on price. However, if all your customers are about price, there is something that you're doing that's making it about price. Like they don't all know each other. They don't all go Hey Thaddeus is on the way. You better talk him down. Like they don't all know each other and they're not calling each other saying that there's something wrong with your price. If every one of your customers or every is about price, are making it about price. And when you're, and if everything's going to be about price, you can't win, and what does win mean? It means greater benefits for your employees. It means greater health insurance. It means retirement plan. It means recurring incentive plans for agreement sales. It means newer trucks. It means newer tools. It means running a state of the art facility. And that's what winning looks like. And people want to be on a winning team and it means being able to pay people, what you should be paying them. I was talking to an electrical manager today and he was telling me about one of his best electricians who made 82, 000 last year. I said, Hey, that ain't going to work. You need 130, 140, 000 a year electricians, not 80, 000 electricians, like show that guy how to make 140, 000 a year and changes and we've certainly seen that with partners across the nation where people make more money than they've ever made before and it's phenomenal. It's gratifying. It's good to see.

Thaddeus Tondu: 37:34

I love that. And really that winning has so much bigger things than just an individual, right? Does your team win? Does everybody else win? Does the customer win because they're getting a great experience as well? It's a trans, it translates into every, Aspect of the business when you want to win a business while everything else wins and goes from that way. So yeah, now you mentioned Redwood and what you guys do a few times. Walk us through, thank you for dropping all the value so far before we get into what you guys do. So what exactly is it that Redwood does and how are you guys different from others in the market?

John Conway: 38:01

We basically invest in partnerships, and one of the things that we know makes us different, we, in the early days, four years ago, we used to think, oh, we think this makes it different, now, 15 partners later, we know this makes us different, and the big difference is that we invest in partnerships, we don't buy companies, we don't treat people like they've been, they've been bought and we quite frankly have a very people first mentality. And that quite frankly, extends to, like I said, 14 of our 15 owners are still in place and they're still running their business day to day. And I think one of the big differentiators for us also is you hear a lot about PE out there and you hear a lot of quite frankly, some of the stories are very disappointing and they're not very good to hear. And sometimes Richard and I know that we get thrown in that bucket. But in reality, Redwood is not P. E. We are basically funded by investors who believe in our people first strategy, who believe in not rebranding the company, who believe in not changing out the management team, who believe in not having a centralized payroll, who believe in, not doing your marketing for you. And quite frankly, because of our investors basically just allow the management team at Redwood to successfully run the business. We're literally coming along the side of some of the best operating companies in the nation, and we're literally adding fuel to these businesses. Without running their business for them, without making their decision. If one of our partners calls and says, Hey, John, how do you want me to pay your, my technicians? Keep paying your technicians the way you've been paying them. And by the way, if you don't like the way you're paying them, then I'm glad to give you some help on how to pay technicians or here's 14 phone numbers of our other partners, call them and ask them how they pay them. And I would just say for people who look for a partner Redwood is a great place. People who are looking to grow their business and they're looking to compete at a high level. We have 15 partners nationwide. That do a phenomenal job at running their company and taking care of their people. And, we didn't come alongside them to do their job for them. And we don't know how to market their business in Memphis better than they do. And, Minneapolis, St. Paul or Alexandria, Virginia. And so we're just, we're excited to be their partner and we've got a phenomenal team of support. And we're, continuing to invest in the home services industry because of our structure. And we've got a great team and Somebody needs me, reach out to me. Be glad to talk to you about an opportunity.

Thaddeus Tondu: 40:24

Perfect. And in order to be able to do that, john at redwoodservices. com is his email, if you want to check out their website, redwoodservices.com over there and love the fact that you guys bring in your systems and your processes and bring it into the business and don't change a whole heck of a lot. Really? Because I think a lot of times it goes back to the very beginning part when somebody sells the emotional decision and especially if they completely exit and then somebody comes in and guts their team. Now those people are out, right? And not everybody wants that. And so this is another way to up level one's business while still maintaining the emotional decision. everybody that is inside the business itself. Thank you for taking the time today, John, to, to chat with us, share some knowledge, share those the four things of the right calls on the board, converting the call, charging the right price, and then winning great four parts to the simplicity of the business. But before we do, I do have one final question here for you though.

John Conway: 41:13

Yep.

Thaddeus Tondu: 41:14

All right. What is one question that you wish people would ask you more, but don't.

John Conway: 41:18

Man, that's a good one. That's a good one. What is the one question that I wish people asked me more, but they don't. I think man, that gets, dang, that's tough. Maybe in the one question would be how many grandkids I have.

Thaddeus Tondu: 41:34

How many grandkids do you have?

John Conway: 41:35

I have three grandkids. One is about to be five, and one's about to be three, and one's about to be one. So that's the phenomenal part of the business that that's why I do what I do.

Thaddeus Tondu: 41:49

Yeah, to be able to spend the time with them and enjoy and spoil them rotten. So like any grandparent should do to their grandkids, except for my mom. Don't listen to this mom. Do not spoil our kids rotten. No, she already does. She already takes care of them quite well and but that's the thing. It's like when you're a grandparent, you get all the cuddles without the struggles.

John Conway: 42:04

Yeah, absolutely. That's right. We load them up with sugar and we send them home, right?

Thaddeus Tondu: 42:08

Exactly. I was about to say that exact same thing. You fill them up with sugar. They say, okay, bye. You're a problem now. Payback's a bitch. Yeah, it's we were, we're already starting to see that with our second kid because he's a climber and just doesn't listen. He'd be like he, you're like, don't climb on the table and they've like the little kids table or whatever and he climbs up there and I'm like, get down. He looks at you and starts laughing and keeps doing his thing. I'm like, okay, you know that I'm telling you to get down. You're just defiant is all that is. So yeah, my mom is probably saying payback. There we go. But great question. Glad that you're you're spoiling the grandkids rotten. You're filling them with sugar and sending them home all hyped up. Thank you for taking the time today, John to chat with me. Sadly, Evan missed a great conversation, so he'll have to catch up later. So, As we sign off every time, I guess until next time, cheers. Well, That's a wrap on another episode of HVAC Success Secrets Revealed. Before you go, two quick things. First off, join our Facebook group, facebook.com/groups/hvacrevealed. The other thing. If you took one tiny bit of information out of this show, no matter how big, no matter how small, all we ask is for you to introduce this to one person in your contacts list. That's it. That's all. One person. So they too can unleash the ultimate HVAC business. Until next time. Cheers.