In short
The Intrinsic Value Podcast - Episode MI320: Owning and Operating a Holding Company with John Wilson
Podcast Overview
- Title: The Intrinsic Value Podcast
- Network: The Investors Podcast Network
- Episode Title: MI320: Owning and Operating a Holding Company w/ John Wilson
- Guest: John Wilson, CEO of The Wilson Companies
- Host: Patrick Donley
Episode Description In this episode, John Wilson shares his journey from overcoming personal debt to building a successful home service holding company. He discusses the lessons learned from his entrepreneurial family, the significance of the right partnerships, and the importance of acquisitions in scaling a business.
Key Takeaways
- Personal and Professional Background
- John Wilson is a third-generation entrepreneur in the home service industry.
- He faced consumer loan and medical debt but turned his life around through hard work and self-education.
- His father used a plumbing and HVAC business to finance real estate investments, providing John with early exposure to entrepreneurship.
- Forming a Holding Company
- John formed his holding company to consolidate and manage his business operations in the home service sector.
- His first acquisition was a plumbing company that was struggling financially but offered significant learning opportunities.
- Acquisition Strategies
- John emphasizes the importance of strategic acquisitions for growth.
- First acquisition: A plumbing company on the verge of bankruptcy, bought for $110,000.
- Focused on improving operations by changing pricing strategies and enhancing marketing.
- Finding the Right Partners
- The right partnerships are crucial in any business venture.
- John highlights the difference between being a passive and active owner, stressing the need for involvement in operations.
- The Role of Focus and Team Dynamics
- John discusses the necessity of having the right people in the right roles within an organization.
- He explains the process of creating character archetypes for recruitment to ensure alignment with company values and culture.
- Challenges and Learnings
- Transitioning from one generation to the next in a family business can be challenging.
- John experienced struggles due to differing risk profiles between him and his father.
- He emphasizes the ongoing journey of learning and adapting as a business leader.
- Looking Towards the Future
- John aims to grow his holding company to a valuation of $100 million.
- He is focused on the importance of organic growth over acquisitions in the near future.
- There are plans for workshops aimed at helping other entrepreneurs scale their businesses.
Additional Insights
- Reading Recommendations:
- *Traction* by Gino Wickman
- *Rich Dad Poor Dad* by Robert Kiyosaki
- *The Everything Guide to House Hacking* by Robert Leonard
Conclusion The episode encapsulates John Wilson's journey through self-education, operational challenges, and the intricacies of running a home service holding company. His insights provide valuable lessons for entrepreneurs and investors looking to navigate the complexities of business growth and management.
Contact Information
- Twitter: [@WilsonCompanies](https://twitter.com/WilsonCompanies)
- Podcast: [Owned and Operated](http://ownedandoperated.com)
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Transcript
Automatic transcript. May contain errors.0:00You're listening to TIP. Being the CEO of a small business, like I said earlier, in my mind is the ultimate form of investing. You are actively operating, you're actively dealing with how to handle cash off your balance sheet, how to create something bigger in a very active way, which is fun if you've got the stomach for it. It's a lot more fun, I think, than sort of like a passive REIT or one of the many other options out there because you can create very real value as an active participant.
0:33Hey, guys. In today's episode, I got to sit down with John Wilson to learn about the world of home service holding companies. You'll learn about how he bounced back from consumer loan and medical debt largely through hard work and self-education, why he decided to form a holding company, what his first acquisitions were, the importance of picking the right partner, and so much more. John is a third-generation home service entrepreneur and CEO of the Wilson Companies. He's also a host of the podcast Owned and Operated, where he does deep dives into the world of home service entrepreneurship. John is on a quest to build a$100 million home service holding company.
1:08I've been fascinated by holding companies recently, and John was an inspiration to me for what he's been able to do at a really young age. And so, without further delay, let's dive into today's episode with John Wilson.
1:24you're listening to millennial investing by the investors podcast network since 2014 we interviewed successful entrepreneurs business leaders and investors to help educate and inspire the millennial generation now for your hosts patrick donley
1:49Hey, everybody. Welcome to the Millennial Investing Podcast. I'm your host today, Patrick Donnelly. And joining me today is a fellow guy from Ohio, John Wilson. John, welcome to the show. Hey, thanks for having me on, Patrick. This is going to be a lot of fun. I'm looking forward to it. I'm looking forward to it too. We're going to talk holding companies, your background, all kinds of stuff we're going to dive into. But I wanted to start off, You grew up in an entrepreneurial family. It's similar to mine. I really wanted to hear a little bit about what your dad did, the influence that he had on you, and then just some of these big lessons you took away from...
2:22I know you started working with him at a young age. So I wanted to hear a little about that. Yeah, for sure. So I'm a third-generation tradesperson in Northeast Ohio. So that's a big part of my identity is that I run the company that my grandfather started and my dad ran. Each of them ran it for 20 to 30 years apiece. And we just hit our 66th year, which is kind of crazy to me. So we've been around for a minute. So I started working in the business pretty young, 10 years old, was my first exposure to the business. And at the time, the business was twofold. My dad had a real estate portfolio, maybe 100 units, and it was just him owning it.
3:01It wasn't very complicated. He had just bought a bunch of houses over 20 years. And then he had this plumbing and HVAC company. And the company was a very small business. When I was growing up, they had three or four technicians. So very small business. And he ran the real estate and he ran the plumbing business as one C-Corp. So it was almost the best way I've described it is the plumbing and HVAC company was basically a maintenance company that he used for his real estate. So when they were slow, they were rehabbing houses and they were doing roofs and they were putting in bathrooms and all sorts of stuff.
3:36So when I grew up inside the business, I was working on both sides of that. So I would go in and I would help demo an apartment or help move a tenant out or whatever was going on at the moment. And then on the plumbing side, I would go ride in the trucks and I would go watch him estimate jobs or help in the warehouse, put away parts and sort of figure out how that worked, maybe help file in the office. Pretty accomplishable things for a 10-year-old. So growing up in that was kind of funny. As I thought about this question earlier, I thought back to when I was 15 or 16, and I thought that I was going to be a graphic designer.
4:09No one that grows up with a family business thinks they're going to be in the family business. Nobody does. So I thought I was going to be a graphic designer. And even at that point, when I was planning my life, it was, okay, so when I launched my own graphic design firm, there was never a question of the idea that I I would have to report to myself because I never really trusted anybody else to report to, which is probably, you know, I got that from my father, I'm sure. But so most of the entrepreneurial drive that I had was more of a drive for independence, some self-reliance, and that we could do this.
4:45You know, I wasn't really the, I wasn't the guy that like always started businesses or like Warren Buffett with his pinball machine thing. Like that wasn't me. I was just a fiercely independent individual that didn't respect anyone else's authority, but my own. So here we are today. So it was fun growing up in the family business. It was a lot of fun learning from my dad. And it's taken me a long time, probably too long to one, be thankful, but two, realize how many times he was right. Because there was a time there when the business was so different and it still is. It's so different. The business is literally 100 times the size that it was 15 years ago.
5:24So I thought, oh, the business is so different. I can't take lessons from what he's telling me. And in the past year or so, I'm starting to come around to the fact that he was right. He was right. He was right about this. And the size or the scope was irrelevant. He was right about this. And I was grateful to be able to have that learning as a kid. Now I'm thinking about how to do it with my kids. I have a three-year-old and a five-year-old. So as a kid, did your dad push joining the family business or did he leave that up to you? Was it kind of implicit that you would join the business? Yeah, I don't know.
5:57So I'm one of seven kids, so big family, right? And I am the only person in my family that worked as much in the business as I did. And obviously I took it over. I bought it. But my siblings would go through it. They would work in there for a summer, they would help out or they would sort of have stints. None of them seemed to be into it in the way that I was. And I certainly wouldn't say that I liked it at the time. I do now. But at the time, I just, going back to being fiercely independent, I needed money. I wanted to make money. I've always just liked to make money. So in order to be independent, you need to be financially independent.
6:34So at a young age, I was determined to be financially independent. And this was the easiest outlet for that. And I think it just sort of developed. So I was really convinced I wasn't going to take over the business. And then at around 21 or 22, I started to understand myself a little bit more. I started to understand the business and the opportunity a little bit more. And we started talking seriously about it when I was 23. So you mentioned graphic design. Was that something like after high school, you went to school for and studied? I did for about a semester. Yeah. So I was a talented artist throughout high school.
7:11So I had a lot of fun with it. I still occasionally enjoy it. But so it seemed like the natural progression, like I have this skill, I'm going to go develop this skill and make a living from it. So I went to college for it for about half a semester, maybe a semester. And then I ended up getting sick at 18 and health issues for kind of a few years. And that sort of led me back into the business because I had to have something that was flexible. And at that point, I was already somewhat skilled in the trades. So I'd been working every day after school for eight years, and I'd been working throughout the summers for eight years.
7:48So I was at 18, I was a somewhat capable technician, sort of off the rip. And that would be in HVAC and plumbing, right? HVAC and plumbing. Yep. So I was able to repipe homes at 18 or 19. I was able to replace water heaters, toilets, sort of most of the entry-level stuff for plumbers I was capable of doing at an early age because I had so much exposure to it growing up. So I went to school for graphics design for half a semester or a semester or so. And then I had to take a step back from that and deal with my health. And I worked flexibly as a technician for a year or so while I got my health under control.
8:22And it was around that time that I started to see what I could do. So I see all the books behind you. And I wanted to hear if money, investing, entrepreneurship, was that all discussed as a young kid? You're obviously a learner. How did that come about? We were exposed to it somewhat regularly. And I didn't know how much exposure we had to it until later on in my life when I met other people who had not been exposed to it. But my dad was talking pretty openly about the business that he ran. We obviously all participated. Most of what fascinated him was real estate. So yes, this is a third generation business that has endured for 66 years.
9:02My dad's main business was his real estate. And the plumbing and HVAC company wasn't quite an afterthought, but it was more like that was the vehicle that allowed him to do more real estate. So we were exposed to a lot as a family around real estate. So buying it, flipping it, how to do that, how to talk about 1031s, how to do self-directed IRAs, sort of these weird little niche ways to buy and hold real estate for a long period of time. we had a lot of exposure to as a kid. And when I was working in the business, my dad and I, for about seven years, we had a weekly lunch where we would talk about whatever.
9:39Talk about the business. We'd talk about real estate. We'd talk about whatever was on my mind, whatever was on his mind. And I was exposed to even more through that process. But it was a little bit different than what I had back here. So I shared I went to college for half a semester. Well, I ended up with student debt and then I had health concerns. So I ended up with medical debt. And then my first two minutes on here, I said I was fiercely independent. So I moved out the day I turned 18. So I had an apartment and I had a car and I had things that sort of stacked up inside my life. So at 19 years old, I found myself unemployed, not really sustainable income coming in and a reasonable amount of debt that was intimidating.
10:22And I think at the time, like at 1920, my credit score was like 400. Like, I don't even know if it can get that low, but it was ridiculous. It was terrible. So, you know, going into 21, the age of 21, my wife and I started seriously talking about marriage, which is now like if a 21 year old told me that today, I'd be like, you're out of your mind. But like, you know, I had a, I grew up fast, but still happily married. I love my wife very much. We just celebrated nine years. and I was like, I can't bring a spouse into this life that I've created. This isn't going to be good for her. It's not going to be good for me.
10:56So I set on this quest to better myself and most of it at the time was financial because that was what I was burdened by. So I developed a deep fascination. I went down all the rabbit holes everybody goes down that you read on Twitter, the Buffett, the Mungers, the Rich Dad, Poor Dad, the whole gambit. I've read it all. Unfortunately, later on, I've realized how one-sided that made me, but that's a lesson for breaking into your 30s. Say more about that. What do you mean just in terms of just focusing on finances only? Yeah. Yeah. So that takes you to a point and maybe for other people, it takes you all the way.
11:35But it was only within the last couple of years when the business crested a certain point that I realized that finances alone weren't going to do anything. And a lot of the people that I've met on Twitter have really reaffirmed that, that almost anyone can be an investor and money is kind of a commodity. And the real challenging thing is to grow and operate a business. And that's where actual value is created. So the way I see being the CEO of a growing small business is this is the most active investing you could ever participate in your life. right? Like you're investing cash flows, you're investing off your balance sheet, you're investing people.
12:13It is nothing but investing. But if you look at it purely financial, you're held back. And that took me a long time to sort of balance myself out with, oh, this business is big and it needs more than just me knowing how money works. I have to know how to drive demand, or I have to know how to hire executives at 26, or I have to figure out all these things that aren't just financial. So it made me a little bit lopsided that I've had to correct over the past few years. But I think that probably happens with anybody. But I was the money guy, and that was the thing that I did. And anything outside of money, I didn't feel very good at it.
12:49So I've had to balance that. So I wanted to hear about the transition of when you decided to go completely into the family business and then actually buying it, taking it over. And that transition from the second generation to the third generation, I want to hear about that? Because that can be challenging. Yeah, it is challenging. So my dad, we have a large age difference and that's probably the easiest place to start. Are you the youngest in the family or are you? I'm the middle. Yep. So my parents just got married late. And because when I say, I don't give my age to come off as impressive, I had a very unique set of circumstances, but I bought my family's business at 25, which is obviously very young.
13:30And in most cases, too young. And the reason that that happened was my dad was 69 and he had to exit. He had to begin segueing his way to retirement, which is not something that happens in most multi-generation businesses when the next generation is 25. So you'd normally expect a little bit of a different situation. So we relatively early in my adult life began talking about me buying the business from him. One, he was needing an exit. He was heading towards 70 and he needed to know what the off-ramp was for this business that he had created. And I was working full-time in it. So in his mind, the natural progression was me, which I'm grateful for that I had that opportunity.
14:11So we started talking about it. And by that point, I had turned around that 400 credit score thing to be a somewhat savvy young investor. So I had some cash that I could do something with. I was capable of participating in an event pretty young. So it took us about two years. It wasn't short by any means. And it was mostly negotiated over lunches, which is funny because 10 years later, that's still how I negotiate deals because that's how I negotiated my first one. That's how I do it. We're going to talk over lunch weekly for a long time and then I'm going to buy you. So that's how I did that one.
14:43So we hashed it out for about two years. And what we ultimately decided on was I was going to acquire 49 % of the business and he was going to retain 1951. So controlling stake. So we would become partners. So I was 25, it was 2016. And October of 2016, we consummated the partnership and we co-ran it together for a few years, three years till 2019. We didn't have a timeline, which looking back was a big mistake. So my dad and I have a great relationship. We love each other dearly. And that was probably the only reason that our relationship survived those four or five years was because anytime we would have a disagreement, we would sit down and literally say like, hey, our relationship is more important than this problem.
15:32I still handle conflict in the same way. So we would sit down and we would resolve our conflicts. But the problem ended up being I was 25. The business was very small, incapable of supporting two owners, a million dollars of revenue. And he was 70, breaking into his 70s, early 70s. So as he was putting on the brakes, I was willing to take on more risk. And those are two things that obviously do not go well together. So we really struggled with vision and we really struggled with handoff. What was the timeline? So in late 2018, we began talking about me buying the other half. So about two years in, I could see that this was starting to get a little bit sour.
16:11I was unable to progress on things that I had to progress to, in my mind, grow the business. I felt handcuffed and I was handcuffed as the minority partner. So that was the agreement that I made. And he was struggling to take on the risk that I was willing to take on at the time. So we started talking about it in 2018, summer of 2019, I bought another 49%, leaving him as a 2 % owner. I don't really know why we did that. I think he just wanted to remain an owner. A fun anecdote now is that 2 % is worth multiples of the amount that I bought the 98 % for. You should have bought the... Well, it's not even that I should have bought it.
16:46I think it's cool. I was given an opportunity at 25 to do something that no reasonable person should have given me an opportunity to do. And to be able to pay that back literally is the ultimate honor of my life. That's incredible. That's incredible. So I'm very excited about it. So the big mistake that I mentioned is we should have set a clear timeline. Like, hey, we obviously have different risk profiles. We're obviously moving in different directions here and that's okay. We're in different sections of our life. How about we say exactly four years or exactly five years or exactly three or whatever it ends up being, but we should have done that.
17:19And then we should have segued the role better, which that was really the biggest struggle that we had was even after that second transaction, we still co-worked together and we still struggled with some of the same stuff despite me owning 98%. So it was more like cap table was irrelevant in the face of family. So he officially retired about a year ago. So he worked for another two, three years. And his role got smaller and smaller as the years went on. Which he was happy to do, like he was happy to let go of the reins a little bit? I would say no, but I think he got some coaching from some friends that you sort of have to, because the businesses at that point had just massively outgrown his participation, which is okay.
18:02My dad really liked, again, his main business was real estate, and he was far better at it than I am. And the plumbing company was not the main focus. The plumbing company became my main focus and it began growing very fast after that 2019 transaction. And so he really felt like a fish out of water inside the business those last couple of years. Just he liked the small business. He liked to have, you know, very control oriented. He liked having six to 10 people. I have 145 employees today. It is a different animal and it requires a very different set of skills, even just walking into the office.
18:40And he struggled with that transition. Let's take a quick break and hear from today's sponsors. Even Einstein had blind spots. That's why modern science is built on the idea of peer review. Investing may be more art than science, but that doesn't make peer feedback any less valuable. The tricky thing is finding qualified people who are interested and willing to help vet your investment ideas. That's why we built the intrinsic value community. It's a place to connect, share ideas, learn, and get feedback. Nobody ever wishes they'd spent more time buried in spreadsheets, but connecting and building relationships with others who may be smarter on a topic than you, but who are also schooled in value investing, that's valuable.
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21:21To begin getting smarter about investing, just visit theinvestorspodcast.com slash get started with stocks. That's theinvestorspodcast.com slash get started with stocks. And for a limited time, you can use code stocks15 for a 15 % discount at checkout. All right, back to the show. So let's get into when you started making, you were focusing on the plumbing company. You still had the real estate holdings, but when did you start making acquisitions? And talk to me about creating the holding company and those next steps that you did? Yeah. So I created the holding company when I was 23, still the same one that I have today.
22:01At the time, it was filled with random stuff. So I would fill it with a little bit of extra cash. I would fill it with whatever. I would buy public stocks. I would participate in very accessible REITs. I didn't really know what I was going to do with it. Let me step back here. How did you at that time know about a holding company? How did you structure portrait. Talk to me legally. How did you know about all that stuff? That's pretty rare for a young guy like that. I was obsessed with finance. I was obsessed. So I'm not a half measure individual. So when I said like, hey, I became the finance guy, I became the finance guy.
22:38That became the thing that I felt like I was a core part of my identity. I read everything I possibly could. And I'm a ferocious reader. I've read like crazy my whole life, mostly because of insomnia. I just read at night. So to this day, I still go through about three to four books a week, and I have for decades. So when I get fascinated on a topic, I just snag whatever I can. So holding companies specifically, I learned about them from a blogger called Joshua Kennan, who was doing what we would now consider to be a holdco. And he was buying businesses. He had some privately held stuff. He had some real estate.
23:17He was doing some public market stuff. and it was interesting. So I followed along on the journey and I sort of modeled what we were doing after that. Relatively young, I called my attorneys to make sure that what I was doing was relevant. So is it structured as a C-corp? It's an LLC, which ended up creating some complication later. So probably should have been a C or an S-corp. But yeah, so legally, it's an LLC. The complication that it created is an LLC can't own an S-corp unless it's a single member LLC. So I could never, in our current structure, it would be very complicated to sell shares inside the Holdco, which there's ways to sort of shift that around, but it would cost quite a bit of money.
23:58So yeah, ferociously read, found bloggers on the subject, read any book I could on the subject. At the time, Holdco wasn't a common word. This was nine years ago. So it was very hard to find information. But the information that I did find, I was able to cobble together Holdco. So talk to me like the next acquisitions. You've got the plumbing company, you've got the real estate and the portfolio. What was your first acquisition? Yeah. So about a year into running the plumbing company, as I said earlier, two owners in a million dollar business is a tough gig. This is just not enough money, right?
Read the full transcript
24:32So we had to grow it. And that was where our differing risk profiles really shown. My father had talked with a company that wanted to sell. He was struggling since 2009 to come back from the recession. This was nine years later. I sent out a hundred letters and five people responded, this gentleman was one of them that we had already had this intro level conversation to, but we didn't close it. They had been talking about it for years, but I don't know if they knew how or if they didn't have the energy or I'm not sure why, but they didn't consummate the transaction despite talking about it for years.
25:07So that became the mission was about a year and a half in, I bought a second plumbing company that was about to go bankrupt. So they had been losing money for every year for the last 10 years. They were surviving off a very small line of credit. They were doing 750 ,000 in revenue, shrinking every year. And they had 12 to 14 people on staff. Is that too much staff, would you say? In my mind, it's like, how does a plumbing company lose money? Yeah. Well, there's a lot of ways. We don't have enough time for that question. But yeah, it was too much staff. It was badly managed. It was badly managed.
25:43The owner was attempting to be a passive owner in a very tiny company and the people that he had equipped to manage were not capable of managing it. So I bought that company for$110 ,000, which was the debt that they had to pay off so they didn't go bankrupt. And I did it with a seller's note and some cash. I didn't have$110 ,000. I think I had 30 grand at the time in the business. And I gave most of that as the cash down. We're actually, anecdote here, my last payment on that business is next month, which is crazy to me. But that business kickstarted my life because it doubled the size of the business overnight.
26:20So we went from two 10 to 14 employee businesses to 27 overnight, which now 27 doesn't seem like a lot, but I was 26 years old. Everyone was double my age. and I had no idea what I was doing. So it was interesting. And they were on the verge of bankruptcy. So distressed acquisition. So a lot of stuff going on there. But we got a hold of it pretty quick. We changed the pricing. We changed the incentives. We added marketing. I don't really know how I knew to do all that at the time, but we did. And the business grew. So what I had finished 2016 at 1.6, 1.7. And 2018, we finished at 2.9. So big, big jump.
27:03And a big jump in profitability, big jump in the change of my life, and also a big exposure to what acquisitions could do. From my perspective as a young, not very educated, self-education, you can see all the books, not very educated person, I just doubled my business. And that was the easiest thing I'd ever done, despite it being very, very difficult. That was the easiest thing I've ever done. So I saw the power of additive deals and I wanted more of that, obviously. So, hey, if you can go all the way using acquisitions, I later found out why that was a terrible idea. But if you can go all the way using acquisitions, then you should do that.
27:37So I started 2019, we launched a company. 2020, we launched a company and we bought one, bought two. 2021, we bought three. 2022, we bought one. And 2023, we bought one. So we've slowed down on it. So it's a mix of acquisitions, but you said you're also doing a few startups from scratch? We did a couple brand launches. Yeah. We shut one down. The other one still runs today, four years later. In my research, I was listening to one of the podcasts and And Brandon is your partner, correct? Yeah. Yeah. He's now a partner. He bought in last year. Okay. So tell me how you guys connected, like how you guys do the division of labor.
28:23Go into a little bit of those details. Yeah. This takes a lot of work that we mostly got wrong. So Brandon is my COO and president, and I'm the CEO. And we met through Indeed. It wasn't that deep. I needed an ops manager. And what I was looking for was I was looking for someone that had implemented a franchise system before because I wanted someone that would systematize our business. We were 3.4 million maybe, and I was starting to see some cracks. And this is back to my comment about how I was not well-rounded. I didn't really feel like that was my strength to fix that. I felt like my strength was the financials.
29:00looking back at$3 million, you have to be strong in everything because there's not enough money at$3 million to be strong in financials. So he came in as someone that was better than me, still is, at putting the pieces together. And Brandon is extraordinarily impressive in his own right. Launched a company at 16, sold it at 19. Landscaping, right? Landscaping. Yep. Worked for the competitor that he sold it to. And that entire time he was going to school and paying his way through college. It was incredible. It was incredible. So when I hired him to run the company, he was 23 or 24. And he was just graduating college debt-free because he had paid it off by working full-time running a 60-employee landscaping business as a 22-year-old.
29:46And it was just an amazing story. So I met him and I was like, this is the guy. This is for sure the guy. And he was, and he is the guy. We were just very fortunate to find him. The way we divide labor has changed a lot over the years. We've consumed a lot of content. Most of it's wrong, I would say, compared to what actually has to happen. Where people get very worked up into this, and I was guilty of it too, the operator and the visionary, there's five different ways you can say that. Did you read Traction by any chance? Yep. We're an EOS company. So we believe in most of it. We believe in most of it.
30:19Where I struggle with is the CEO has to be an active participant in the business. And that took us a few years to really get right because I bring a lot of energy to the table. And whatever I'm going to run at is going to break in a good way normally. And then we're going to put it back together and it's going to be better. But I have to make sure I'm playing in the right fields that work with my strengths and Brandon the same. So we tried to get it right over the years a few times. And sometimes what that looked like was me not really doing anything for a couple months, which isn't very productive because I thought that I was supposed to be the visionary instead of how a visionary can look is very different depending on the person.
30:58And Brandon was supposed to be the operator. So we sort of went with that model. We gave it a shot and we didn't end up achieving the results we wanted. We grew, but we didn't really grow personally. So we've really got a better blend of it in the past year, I would say. The business has reached, it's funny now, but just compared to in this conversation, how it started, but the business now is about to do$2 million a month in revenue. So what that looks like now is very different. and I just sort of have my departments that I head and he has his departments that he heads. He has most of the company, maybe 70 % and I have 30, but that works a lot better.
31:30So what I ended up taking was I took recruitment, marketing, accounting, and infrastructure. And so basically everything that I needed to grow. So I wanted the cash to pay for it. I wanted the marketing to drive it. I wanted to run recruitment process so I could handle who gets in what. And I wanted infrastructure so I could force vehicles to be acquired in the timeline for these three other things. And that's been a successful division of labor for us. And his focus is wholly on revenue growth operations and gross margin. Got it. What is the holding company? What's the portfolio look like today?
32:07Looks a lot different than it did a couple of years ago. So we've bought nine businesses at this point and we are very centered inside Northeast Ohio. So what's happened is over the past few years, we've ended up combining them more and more. So we are now down to two brands from those nine acquisitions that we've done, and we just continue to integrate them. So last year was a big transition for us moving from these five, six locations down into one headquarters. We've rebranded multiple of the business units. We combined teams, combined accounting, and we sort of unhold code the trade companies.
32:40And now the hold code still exists. We still have plenty of real estate. We still have our media business and we have the trade companies, obviously the Goliath of all of that stuff. But the trade companies themselves used to be a hold co in their own right, and now it's just one big company. The reason for that is one, we're geographically focused. And two, as we were growing, we realized that by attempting to grow through this way inside the same sort of industry segment, we were slowing ourselves down. If I looked at a competitor that was my same exact size with the same exact amount of customers or calls or however we want to measure that, I would be a worse operator than them because they are more focused.
33:19So it created a disadvantage because we had five payrolls, five QuickBooks accounts, 10 bank accounts. So we ended up getting operationally slow. So last year, we smashed it all together and made one large trade business. That makes sense. I was listening to some of your podcasts and you had mentioned a franchise, Mr. Handyman, that it sounded like you were really excited about the possibility of a franchise. Talk to me about that. Have you done franchises? Are you interested in pursuing them or why or why not? I'm very interested in franchises. I think they're fascinating. So the easier way to start on this is if we're thinking about growth strategy.
33:58There's a couple of different ways to grow a business, inside home services, for most markets. Okay. So as I say this, someone in Dallas or something is going to be like, I don't have to follow those rules. And I'm like, yeah, you don't, you're in Dallas. For most businesses, you end up having to add ancillary services, adjacent services. So if you're in plumbing, one day you are going to probably add HVAC. You're probably going to add electric, probably going to add sewers and drains, you're going to add whatever else. And that's the natural progression. And I struggled with that for a long time because we were small.
34:32And it's really hard to add brand new capabilities that are totally unlike your core business. HVAC and plumbing, we use them interchangeably. Those are totally different things. Totally different marketing, different staffing, different phone answering, I mean, different everything. So we really struggled with getting mass around each trade. I mean, HVAC, I'm seven years into this and HVAC just hit its own mass in the last 12 months. It just became self-sufficient the way we think about self-sufficient. And that was at 20 employees with two managers and$4 million of revenue. So it just became a decent business for us.
35:07So we struggled with that for a long time. So when I saw franchising, what I saw was this opportunity to do what I liked the idea of was just be radically focused on this one thing. because it gets so much easier. It obviously adds many more complications. So I'm not trying to, you know, it's the easy way. Being geographically distributed is very complicated, but I liked the idea of being narrowly focused, being able to hone in on training your staff to be amazing experts at these four or five things and learning how to drive lead flow like nobody else on these things and just being radically focused was really attractive to me when I was struggling with adding new capabilities.
35:51We didn't end up doing anything. It's still on my brain, but we didn't end up doing anything mainly from a lifestyle choice. I really like putting my kids down to bed at night. And I know that if I did anything in a different city, that would be an issue. And I haven't needed money since I was 28 or 29. So more money isn't interesting enough to miss that. So I didn't end up doing anything because the way you grow franchises is multi-unit. You get more geographies. I didn't have the depth of capital or talent to hire the people or promote the people to go launch those for me. Maybe one day, I think it would be fun, but we would have to be kind of a Goliath.
36:31The way I think about multi-location, like multi-geography now is 70 million in your core location is a time that it starts to make sense for your second one. And that's been reaffirmed by a few people that have done it before me that did right around 60 to 70.
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40:14All right, back to the show. So I wanted to hear about getting the right people on the bus and end in the right seats and how do you incentivize people? That is a huge part of all of this. So I wanted to hear some of your thoughts about that. How have you found the right people? Get into a little bit about that, if you would. Yeah, for sure. I mean, it's the whole game. This is it. This is the thing that matters. So people's complicated and we've messed up a lot. And I'm sure whatever I say today, I'm going to listen back to in a year and be like, that idiot. it. He had no idea. Just like if I said something a year ago, I'd be like, ah, you're a fool.
40:53But people are tough. So Trish Higgins from Chenmark, she was kind enough to be a speaker at an event that I host, HoldcoConf. And it was 2022 and it was our first year doing it. And she came up and she got on the stage. And it was funny timing because I was in the middle of what she was describing. And she and I had an after talk and I was like, oh my God, that really resonated. And I sort of described where I was at. And she's like, oh my God, you're in it. And I'm like, I'm in it. But so when they first launched Chenmark, they acquired like 14 companies in two or three years. And they said they spent the next two or three years figuring out who the heck they were.
41:31And at the time, I didn't get it. I got it when I talked to her, but I read that first in a newsletter or an interview or something she did a couple of years ago. And I was like, well, I don't know that I get that. I get it now. When your organization goes through massive change, you know, we tripled in five months in the end of 2021. And it has taken us every bit of two and a half years to figure out who the heck we are. And a part of figuring out who the heck we are is who's the right people to be on the bus and how do we talk to them and how do we bring them into what we're doing? How do we attract them?
42:02And how do we make sure that this is going to be a win? And my philosophy on that has changed. It's ever evolving, but it really, it almost feels like a cop-out answer because I think if you don't get it, it's hard to describe, but it really dials down into core values and what is the organization about? What is the beating heart of your organization and what are the non-negotiables? And when you really dial those in, you can sort of work backwards into who is this perfect person or this perfect archetype. And I know that that's a tough answer because some people think it's fluff and it probably is.
42:39But for us, it really got us aligned around who's right and how to talk to them. And then we set up the organization and we set up our life, our day-to-day work style around, well, how does this person want to be here? If we want people that are driven to win, if they're going to be transparent with the customer, if they're going to want to be around their coworkers and if they're going to be accountable and they're going to do what they're say they're going to do, then how do we create a work style that drives that? Because that solves everything that you ask the question. How do we incent them?
43:11Well, what type of person do you want? That's going to tell you how you're going to incent that person. How do you create promotions or how do you create career paths? How do you write job descriptions? It is all based on this sort of archetype. And what I would advise people to go through is this exercise that we did. We already had our core values established, but when we scaled up our recruitment team, it was kind of challenging to explain to them my perspective on it and what I've seen in hiring hundreds of people at this point, the good, the bad, the ugly. And what we ended up doing was we created a character archetype like you would in marketing.
43:45Like, hey, you've got Spender Sally, and you've got Nervous Ned, and you've got all these different things. So we created archetypes by position with what the ideal candidate per position was, what they tended to like, how they would demonstrate their behaviors inside an interview, how they would talk on the phone, how to handle when you walk up to them. And we worked backwards into that off of our core values. What's the core identity of this person? How do we build a company that would attract the exact people that we want to hire and retain? And then the next step was how do we go hunt them down?
44:18Because recruitment is as much of an outbound game as it is an inbound game. You can't wait for people to come to you. And the only way to find that out is how do we standardize who we're going to hunt. I only want white-tailed deer. Great. We're going to be able to hit that. One of the archetypes was we want an installer, a plumbing installer. Some of the behaviors that we had to communicate to our recruitment team as they scaled is, you know you're talking to an installer the moment they pull out their phone and show you work that they did. That's an installer. 100%. You know they're an installer if they liked to play with their four-wheelers and fix stuff as a kid.
44:55That's a technician. That's an installer, 100%. You know it's a salesperson if they're going to walk in with some BDE. They're going to walk in thinking they own the place and they're less concerned about what they're going to do for you and more concerned about how you're going to support their winning. That's a salesperson. And how do we align that role to make sure that they fit? So I know that was a long answer and it wasn't necessarily tactical, but I think it starts with figuring out who you are as an organization and then designing the everyday life of your people around who you are. Because that's going to be how you retain them.
45:29It's one thing to hire people, but it's a totally different one to retain them. Yeah. All that is super interesting. I wanted to touch a little more on acquisitions. So when you've made an acquisition, Sivia Kaczynski made a couple points that I thought were really interesting. He said, you would not buy a business unless if the owner were to drop dead the next day and still function. So that was one point he made that I thought was interesting. The other one was he looked at length of employment for the employees. How long have they been at the company? And the longer, obviously, the better. So I wanted to hear a little bit.
46:03Do you look at that kind of thing? What is part of your buy box when you're making an acquisition? Our buy box has changed a lot over the years. We look at stuff. I get a lot of DMs. and one of the more frequent ones is, hey, I have a deal. What do you think? And I start asking questions that I suspect that they've never even thought of. And it's like sort of nuance-y stuff. So how deep is the leadership bench and what's their average age? It's a big one. I don't think most small business acquirers are thinking about that. How many phone calls do they get a day? That's one of our leading indicators if I'm buying that business.
46:38That's a hard piece of information to get? What's gross margin by department? Again, not complicated stuff, but just when I asked this to potential acquirers, they're like, I have no idea. I've never even thought about that. And I'm like, this is the buy box, right? If it's below 40 % gross profit, I don't want that. When I go to buy a business today, if I bought a business today, that business would be shut down in 30 days. And almost the only thing of value that that business can give me is their phone calls. That is it. Their financials are borderline irrelevant. Their revenues, their sales process is probably terrible because they're probably small.
47:13And if it was a good sales process, they wouldn't be small. Their recruitment process is probably non-existent. Their vehicles are probably old and in need of repair. Their assets are likely old and in need of repair. They likely don't have any type of actual marketing efforts that are standardized and to drive process. So the only good thing that I get is phone numbers. Sometimes not even text because you just don't know what their hiring process were. We've brought companies that half the company was convicts. You just don't know. You have no idea what, if any, process they went through during hiring.
47:45So we mainly focus on the tangible. So gross profit is somewhat helpful, even though it will not be replicated in our business, but it tells us some price sensitivity. What are the customers willing to pay? Do they have a sales process? Is it going to be tough to retain their team? If it's a 35 % gross profit or 40 % gross profit, they don't have a sales process. It's going to be tough to retrain their team. If they don't have a lot of phone calls, then why am I buying them? I could just spend money on marketing. We usually don't buy fleet anymore. It's just a hassle. We tell them to auction it off.
48:15So the buy box has gotten really, really small is my point because we've done enough of these that, and I think it'd be different if it was five years ago. It obviously was because I bought companies that in hindsight, maybe I shouldn't have. But we're now at a point where we can drive more growth organically than through acquisitions. It'd be a very unique acquisition today that we would do inside our own market. Now, if we were breaking into a new market, maybe that's a little bit different. So to go back into the buy box, what's gross profit percentage, ideally by department, was the number of phone calls that they get a day.
48:47Tenure of technicians is interesting information. We usually find it out. They usually hand that out pretty quick. How deep is the leadership bench and what's their average age? That's going to tell you just technologically, can they keep up with what we're going to do? Those are the big things that we care the most about because it tells us quite a bit about the business itself. The rest of it, we almost did a couple small deals in December that were under$2 million in revenue. and they got enough phone calls a day for it to be interesting. Their customer list size was interesting. I think one of them had a technician that we were going to bring on, but we have a very strong recruitment process.
49:25So we don't really need the... We can find and source our own people that will go through our process. So we think it's better, but they ended up following through just because of price. So the buy box is just smaller. And when I do go to do deals, I just take on less because I see unless it's a real special deal, it's kind of a hassle right now versus we're growing 5 % to 10 % organically month over month right now without an acquisition. So in 2024, we're budgeted at a 70 % increase over 2023. And that's without an acquisition? It's without an acquisition. Do you have any plans then for 2024 to make acquisitions or you just don't need to?
50:06Not really. I mainly, I don't want to derail the train. I mean, if we're on track for that, which we are on track for that, then why on earth would I jeopardize that? All I'm going to do is muddy the water and I'm going to distract my leadership from what they should be doing. They're going to get caught up in things that are just irrelevant and they're going to take their eye off the ball, which that's been a big learning curve the bigger the company's gotten is how narrow. Scaling a business, all you're doing is turning generalists into specialists repeatedly. That is your whole freaking job.
50:39Taking somebody from 15 tasks to two. If they take their eye off those two tasks, where they are now world-class experts at those two tasks, it makes a mess. I could see acquisitions in the future. I don't think 2024. I could see something in 2025 or later as the team gets bigger. I really see this 40 to 50 million a year as a a good indicator that I can get distracted. Because right now, I don't think I can get distracted. We're too in it. It was very tough to break the 20 million plateau. And I don't want to lose sight of that. But at 40, 50 million, we have scale, which even at budgeting higher, we don't have real scale in some departments.
51:21Accounting doesn't have enough scale. Marketing doesn't have enough scale. Recruitment could use more scale. And it feels hard to take your eye off the ball at this point. I wanted to switch gears a little bit and talk podcasting. So you are the host of Owned and Operated. I want to hear a little bit. We've had some overlap and some of our guests. I wanted to hear about just some of the guests that have inspired you, some of the lessons you've learned, why you started the podcast, how it's helped the holding company touch on some of that. I just like to learn and I like to talk to people and one-on-one.
51:53I really get a lot of just enjoyment out of talking one-on-one to people about things that I think are interesting. So when the show first launched, we were a$4 million business, 3.8 actually. And so at the time, what I was focused on was how do you grow through acquisition? I was reading a lot about it on Twitter. I'd already done three or four by that point, but I wanted to standardize it to be more. I wanted to get to scale. So most of my... And the podcast has sort of followed the journey of what I'm interested in, which at the time, what I was interested in was how do you acquire to grow?
52:26So most of our initial guests were Mike Botkin buying up landscaping companies or Michael Girdley running a holdco and how to run a decentralized holdco. The folks from Permanent Equity, Emily Holdman came on and talked about how to do it at scale. And that was what was really interesting to me at the time. It still is. What the show has developed to now is a personal curiosity inside home service, services in general. I just think service businesses are fun. And as we're talking about my journey here, this took a lot. This has been seven years of my life. And for most of it, there wasn't a roadmap.
53:04And there won't be a roadmap from here on out. There's a certain point where you're the world's expert at your business and nobody's coming to save you. And we are past that point. So what it became was sort of what I wish I had seven years ago of like, hey, if I had known how to implement a marketing strategy back in 2016 or 2017, my life would have been different, I assume. The business would be farther ahead. I talked about my imbalance earlier, being so focused on finance. I didn't get good at marketing until seven months ago. Now I consider myself very good at it, five out of 10. 10 out of 10 being ungodly, five out of 10 being good enough to drive real results and one out of 10 being what most home service entrepreneurs are.
53:47Whereas I was also that. So I really had to sort of correct that. So what I wished I would have had was more of a resource. So I cobbled together a Holdco in 2013 was when I first incorporated my Holdco based off a blog by a guy named Joshua Kennan, who I need to go meet this guy. He lives out in California. I would love to meet him. He's changed my life and he has no idea. I've reached out to him a few times. He's on Twitter, but DMs closed. But yeah, he's changed my life. It's been incredible. I learned how to buy businesses. I still never graduated college. I'm on my third dropout. I learned how to buy businesses from the books behind me and from his blog.
54:28And now I've bought nine. So yeah, no, no, you can learn. But I wish I had these resources when I was starting off because it would have smoothed the ramp. So a lot of the content we have is around that or my just curiosity of how does a pool service company work? I've never thought about that. Or how does a gum blasters company work? Or can you get a power washing business to scale? I don't know. And apparently you can. We just had Aaron Harper on from Rolling Suds. You can do that. And I was like, you can have an eight figure power washing business. I thought this was like a neighborhood hood kid with doing some driveways.
55:05He's got some real power players. So that's just been it. And intellectual curiosity and service businesses and attempting to make an easier ramp than I had seven years ago. So that's my own take on why I'm podcasting and doing any of our stuff. We write a weekly newsletter. We have these little events and it's all for the same thing. It's like, I just want to be a source of information that I didn't have seven years ago. I mentioned the workshop that somehow I found out about the workshop that you were doing up in Cleveland, but you've got one coming up in March, I believe. And it's about breaking a$5 million revenue.
55:44I'm not sure the exact title, but I want to hear about who's it designed for? If I go, what am I going to learn? So most of the good stuff in a home service company happens at 5 million. That's when the business has three managers. You can have a recruiter. You can have an accountant. It becomes less of a firefight and you can really start to reinvest inside that business. So 5 million is a pivotal size for home service entrepreneurs. So we created just a workshop on like, hey, here's what you need to know. Stuff I didn't know. Stuff like when do you hire your first accountant? When do you hire your first recruiter?
56:23How do you think about getting lead flow? What should I be focusing on at 2 million? How do you hire managers? How do you promote them? How do you incent them? How do you create a culture that works? So that's a lot of what we're talking about is that 5 million is a big deal because that's when you can really start rolling. It might take you 10 years to get to 5 million, but it would take you another year and a half to get to 10 because you built at 5 million. You have enough to reinvest into new marketing, new vehicles, new staff. So it's a big number. It's an important number. And frankly, after 5 million, there's a lot of groups out there that can support you.
56:55So I'm a part of Nextar and I'm not as good as Nextar. I'm learning from Nextar every day, every minute of the day. So my hope was that companies will get large enough to be able to go to one of the several communities that can take them to the next level and that they can also hit their dream, whatever theirs is. Mine is 100 million in the next seven years. But if it's 10 million, then there's a lot of groups out there that support you. But the under 5 million is pretty underserved. So the conference, it's a couple of days. Are you leading all of it? Or do you bring in guests that are doing home service holdcos?
57:31That's two and a half days. Yeah. So I'm leading most of it. We do have a couple, I do have a few friends in the industry that are going to come in and handle certain topics. It's in my physical business. So we'll also have some of my team members come in and talk about their specialty. And the idea was I've been to shops that were much larger than me and they were sources of inspiration for years. And I'm just forever grateful to the, I can think of three right now that changed my life because I was able to go in and, oh, this is how it looks at 10 or 12. And okay, so this is how call takers work and you have them separated from this.
58:04And so that's why we do it at our location is because we want to sort of open the doors and show people what it was like, because I know how impactful that was for me seven, six years ago. And now it would be two of, I'm trying to get into Chris Hoffman's place. That would change my life too. That would give me years of things to work on walking through his facility. So I'm angling for it. This has been a lot of fun, John. I really appreciate your time. Is there anything that you wanted to touch on that we haven't had time to discuss? I don't think so. Well, I would leave it with a comment, which we're here to talk about investing.
58:38And obviously my version of investing is probably a little weird. But I think that being the CEO of a small business, like I said earlier, in my mind is the ultimate form of investing. You are actively operating, you're actively dealing with how to handle cash off your balance sheet, how to create something bigger in a very active way, which is fun if you've got the stomach for it. It's a lot more fun, I think, than sort of like a passive REIT or one of the many other options out there because you can create very real value as an active participant. 100%. I really agree with that. I interviewed a guy, real estate guy, and he said the same thing with regard to real estate, that he just loved the control and the ability to, like I said, have more control than you would just investing in equities or just more traditional investing.
59:29You've got way more flexibility, control, lifestyle design, all of that. So there's a lot of great stuff. For our listeners that want to find out more about you, maybe attend the workshop, how can they get in touch with you? Yeah. So I'm on Twitter at Wilson Companies, and you can check out our podcast or whatever at ownedandoperated.com. Which I highly recommend. There's some great guests that you've had on there, really informative stuff. So thanks, Sean. This has been a lot of fun. Thank you. Yeah, this was fun. Okay, folks, that's all I had for today's episode. I hope you enjoyed the show and I'll see you back here real soon.
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From the publisher
Patrick Donley sits down with John Wilson to learn about the world of home service holding companies. You’ll learn about how he bounced back from consumer loan and medical debt largely through hard work and self-education, why he decided to form a holding company, what his first acquisitions were, the importance of picking the right partner, and so much more!
John Wilson is a 3rd generation home service entrepreneur and CEO of The Wilson Companies. He is also host of the podcast Owned and Operated where he dives deep into the world of home service entrepreneurship. He is on a quest to build a $100 million dollar home service holding company.
IN THIS EPISODE, YOU’LL LEARN
00:00 - Intro.
02:03 - Why self-reliance and independence drove his desire for his own company.
08:12 - What John learned from being a 3rd generation entrepreneur.
08:37 - How his dad used his plumbing/HVAC company to buy real estate.
12:49 - How the transition from the 2nd generation to the 3rd generation went.
22:40 - What his first acquisition for the hold co. was.
29:08 - The importance of picking the right partner.
34:33 - The benefits of buying a franchise.
34:49 - The importance of being radically focused.
41:48 - Why the whole game is getting the right people on the bus in the right seats.
47:32 - How his buy box has changed over the years.
53:00 - Why he launched a podcast and much more!
*Disclaimer: Slight timestamp discrepancies may occur due to podcast platform differences.
BOOKS AND RESOURCES
Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Kyle and the other community members.
Recommended Book: Traction by Gino Wickman.
Recommended Book: Rich Dad Poor Dad by Robert Kiyosaki.
Recommended Book: The Everything Guide to House Hacking by Robert Leonard.
Check out the books mentioned in the podcast here.
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SPONSORS
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Connect with John: Website | Twitter
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