Speaker 0What's the password?
Speaker 1Don't talk about it. Be about it.
Speaker 0Welcome in to the 2th-of-point home services VIP room. Where we invite you, the listeners and to hang alongside some of the biggest, baddest and most successful VIPs of the home services industries. You never know, it's the prize guest, we'll show up next. So let's get this party started.
Speaker 6It was up to the point of the series. It's your boy. Welcome to the home services VIP room. That's the to the point home services VIP room. We got a couple of VIPs in here today. No, it's not you or it's not you, Chad or you Aaron. Sorry. We're past that. You guys are just my boys. But it's also good to have my two new co-hosts in here. Excuse me, my one new co-hosts. Back for a second week in a row, A.G., I'm so proud of you. Chad, look at them, go. It's like we just sent them off and he's going and doing this thing. So proud, Aaron.
Speaker 2I've got to be here again.
Speaker 6Okay, loosen up a little bit. Your face is ready, ain't that embarrassing?
Speaker 2I was in Phoenix and I got some burn light over the weekend. You know, you weren't there when I was there. So I didn't get to spend any time with you.
Speaker 6That's right. I wasn't. I apologize. And you lost a couple thousand bucks to what I missed. Sorry, man. Yeah, I'm sorry. I really missed that. Oh, participate in those things. Hey, listen, it's gonna be a random thought before I introduced our guests. I was driving Mason to school this morning. And I hadn't done this in a while. We were talking about idioms for a while. They're for a while, Chad, you remember doing that? Like, I just was come up with things like, oh, I feel the baby out with the bath water. I'm like, what the hell does all those stuff actually mean? Well, I had one of those things pop up with my head today. John probably knows the term, feels the baby out with the bath water. For no other reason, then you probably just started before, not referencing your age whatsoever, John. But it was cut a rug. I heard it's them saying, cut a rug on the radio. So that's one of the things that's like, you know, I'm like, I wonder what the origin origin was of Cudderug. So I'll bet you, John, you know the answer to this. Do you know what the origin was? The origin was of Cudderug.
Speaker 4You know, I'm going to give you the best gas and the first thing that comes to my mind for what I do know about this. And I think Cudderug was actually a dance.
Speaker 6Okay, so you're really close. I really love that you're acting like you don't know. So, yeah. Yes, so Cutter Rug was like back in the like 20th century from the early 20s, 30s, 40s, it was when you were dancing so hard, John, you know, doing a little spinning, flipping around and like you were, but typically they were dancing on rugs and a lot of instances, not just Jim Flores, and so you was dancing so hard that you were gonna cut through the rug.
Speaker 4Yep, yeah, a little bit kind of like Alan on Sonfeld, right?
Speaker 6I'll be used to cut a rug back in the day, John. He still does.
Speaker 4You know, I'm ready. Yeah, I can gritty. I can I definitely have the gritty downpat and uh and then
Speaker 6Really? I mean, well, you have camera on, so it's... You only have the only grist, you only gritty on very special occasions.
Speaker 5We've seen them pull it out twice. One was when we got something over the finish line that took two years to materialize, and the other one was when we did our transaction last year, we got John to pull out the gritty. And I can share the, I can share the footage. It's on point.
Speaker 6I would love it. If you could share that, we're going to cut it right into this. Uh, so you can share that. We're doing it. Um, Aaron's fair move was always the Roger Rabbit. Um, that's a, oh, that's a classic classic move. And then Chad's just an old macaron. You know, he loves the old macaron. And like that was probably the simplest one that we get him to do. Um, everyone's so I can get him to do an arm pump. I don't want someone, we'll see.
Speaker 2Yeah, you don't get your dad doesn't move out on the dance for, every time we have anything going on, he always just kind of hangs way back, way, way back.
Speaker 6I try, I try, it's still hard. I mean, with the nickname 22 Savage, you think he'd be out there dancing a little more, but he doesn't stop.
Speaker 3Well, that's my cup of tea.
Speaker 4And I can tell you, Justin Jefferson would be highly irritated at what I call the gritty.
Speaker 6Hey guys, you know what? Also not, you know good to go ahead and take a nice fun mood and somber it down a little bit. Sad news about Brandon Clark, your Grizzlies. He's a, he's a, he's a desert vista guy. He's a Phoenix Phoenix, but from out here, I was sad. Well, he's like 28, 29 years old.
Speaker 5Yeah, young guy, bunch of injuries, my kids were, were in tears. The Grizzlies have caused a lot of pain in our, in our household, but obviously someone dying is,
Speaker 6Well, it's kind of equivalent to being an Arizona Cardinals fan. Just so, you know, it's pretty bad, pretty bad out here. But hey, good news is we got the hardest schedule, you know, an average schedule for next year, which is just what we needed. And I'm so grateful that the Cardinals bumped my seats up another $3,000 a year. So that was, thank you, Michael Bitwell. You piece of shit. So yeah, I am 24 years later, still paying it. So who's the idiot? I guess it's me. Okay, so maybe I should get into the actual episode here. So a couple of the guys you've been here talking on here We got Richard Lewis CEO Rebwood services who I we met back in I met in 2020 I think it was first time I met you Richard somewhere around there. Yeah, and also John Conway Oh school legend man. Conway services back in Memphis, Tennessee. Also, I think you still see you over there Rebwood John All right, I'm still the CEO of Still a little bit of cranking away. Next start coach, let me know. I know Chad, you worked with John Reckley. But two great guys, man, I've been able to witness Richard specifically your journey from almost start to today, which is really cool and the success you've had. And like I said, I've told you this before. I said it on here before. I think of all the different private equity platforms that have come alive during all this period. I feel like Rebwood is one of the ones that did it. What I feel was the best. really taking care of the contractors, the individual brands letting them do their things supporting them. And what's interesting as I look at today, you guys did your, I think it was about a year or so ago, you got your, you know, you did your 1.1 billion dollar valuation, I believe I got that number. Is that right? Yeah. You about a year ago or so has it been that long? Yeah exactly here we go so congrats on that big deal and you guys continue to to grow but john and your your episode that you did with us was actually back in July of 2021 and it was the first episode that I missed and Chad stepped in and was the co-host with tall Paul at the time and interesting enough I wrote this down I thought it was it was really cool I think this is a look back at what has shown through today on the success of Redwood Services and that is that episode was putting people in process over profits, which is something I believe very much if you see my little shirt reputation over Avenue, a big believer, and you do you do good, and the end result is great revenue that comes from it. And then in the richer, when we did yours, it was back in 20. I can remember, it was like middle of the year, 24. But it was ribbed with your eyes to 400 million at the time and keeping the culture. So two things focused on the human beings in the business. Once in a sense, I'll link so. But congrats to you guys. Happy to have two VIPs in the VIP room. Boys, welcome.
Speaker 5Thank you. Thanks for having us back.
Speaker 4Yeah, of course, excited. You know, when I think Christmas, I think about those two statements you just made, um, one of the things that I like to tell people today is that, you know, Richard and I met in August of 2020, you know, where I'm mass six feet apart and had lunch together and, you know, one of the things I'm most proud of is that today, you know, six years later we're still, you know, we're still doing today what we said we're going to do with that lunch in 2020. And you kind of heard it from myself in 21 when Chad and I were together on the podcast and then of course Richard reiterated again on 2024. And you know, so those are, um, you know, that's the thing that I'm most proud of, you know, building something greats phenomenal. And but building something great the right way, you know, just sets such a whole other level. So, um, have a huge appreciation for Richard's leadership and vision for that. And then everybody that's on the redwood team, like catches that vision when they get here. And we all run together.
Speaker 6Hey, listen, when when I first met you guys and Adam came in, I met Adam at the same time, was that in the we work space where you guys into a new office thing because it had been was that now we were in a we work back then okay, and I think the only difference between today and then is we're just able to do this at a larger scale.
Speaker 5But all of the kinds of principles that we put in place when we started this business, because John and I lived the other world. So we know what it's like when you're not putting the contractor first, when you're not putting the teammate first, the only difference today is, instead of a thousand teammates and a hundred million of revenue, it's three thousand teammates and a lot more. And so, I totally agree with John. I think it's we're most proud of the fact that we've been able to continue to really build this around people and it's easy to say it's hard to do and so I would agree with John.
Speaker 6Well, my hope for this particular episode and then to Chatty P and AG, guys can just chime in on whatever with whatever you're thinking, but here's where my hope is for this one is. It's always nice when we get guys like you on who might be looking at things from a different perspective or through your own lens, from your experience of cross multiple brands, multi-location, John, you have a different background than Richard, but now Richard, you're like a, I mean, think about what you've been through since 2020 and last six years, it's like been a a heck of a road, you probably learned a ton. And so I'm really interested to hear both your perspectives. And I'm going to ask a few questions that I hope you guys are willing to answer and if it's PC's and fine, that's my name, but whatever I want your real answers. But I just want the listeners to try and get an idea of what your perspective is on current state of just the home services, future state. And even, you know, I feel like we talked about it for a long time and we kind of stopped and it's just like the blackstone deal happened with champions group which I thought was fantastic for our industry. I think it actually extends the runway for opportunity for contractors who might want to go down this path and still maintain a decent multiple, competitive multiple. I just want to get your guys as legit perspectives and then some of the questions John, I want you to put your contractor hat back on and think about it that way and Richard just, you know, say the course man like I want to to leverage that brain years to so I want the two different perspectives, but maybe what we can do is maybe John just shared I'll go ahead and kick this off with you. is how different are things today from your perspective versus your Conway services, like Conway services days, like is it as a come from a contractor perspective? Is it, you know, same show different times on like is it, you know, is it a, maybe just share a little bit like from your perspective, because you were, you know, I think, great side business, super strong business, you know, in a good market, you know, but in a different different times, right? So like what's your perspective on just today? Like how things are in the industry today as a contract?
Speaker 4You know, I think the industry is definitely different than when I ran my own service company. And what I mean by the, by the industry is different, really the landscape is different. And so in any, in any sizeals market, at all, and doesn't even have to be a huge market. There's going to be scaled players there, and there's going to be players that are supported by a family office or private equity, and maybe another way to put it is, they're just going to be one, two, three, maybe five or ten in big markets, sophisticated players in the market. And so it just is, to me, a little bit more of a challenge for mom and pops to compete, especially as it relates to the marketing side of the business. It's still a fragmented market, still a very, very fragmented business. So even the biggest players in the market may, you know, may only have, you know, two to four percent market share. But if there's, you know, if you're in a big market and there's 10 to 15 scaled sophisticated players on the market, well, they may own 25 to 30% of the market to collectively. And so I would say one thing that's different is, you know, from like when I ran my own business, is there are more sophisticated players in most markets that are really tough to compete with. And I think that's a good thing. You know, you have to bring big boy persists to the marketing table to kind of keep up with that, you know, keep up with This fan side of the business There are things that aren't different some of the things that aren't different is just around blocking and tackling You know, hey at the end of the day, I still got to get calls on the board. I got to convert the calls and I got a charge of right price But do those three. I'll usually win, you know, and And so the blocking and tackling of the business, the execution of the day-to-day, you know, still exist as it did when I ran the business myself.
Speaker 5And just to add a couple things, for sure, the scale players in a market and the increased sophistication of local competition, I think, is a huge component of why today is different. And by the way, I think we're still in the early innings. I came from a world in pest control where it was super, super consolidated industry. And I think our industry has a long way to go before it gets to that. But in addition to this scale player dynamic, I think a couple of additional dynamics at play here versus when John have his businesses, the reliance on technology and how important that is and just understanding and being not cutting edge, but at least being able to keep up with technology. I think the consumer today is very different than it was in the early to late 90s when John was in the prime of his business and how to communicate and how to interact with customers. And then just the world of digital marketing. I mean, By the time you figure out, if you can never figure out marketing and Chris, you know this better than anybody, as soon as you get a hold on it, something changes. And just the need to constantly have your finger on the pulse with digital marketing, it's just getting harder and harder, I think, to run a small business. And that's why I think more and more contractors are saying to themselves, I want to do this, I want to have my own business, but I want to have the support a group like Redwood so that I can do the fun stuff. I can hire, I can develop, I can do all the things support my local community, but I want someone else to figure out the Google algorithm. I want someone else to figure out which technologies to use. And so I think the change has actually made our value proposition at Redwood stronger over the last five plus years.
Speaker 3a question for John. So, probably Richard as well, but you know, you guys go in and you guys have done, you know, acquisitions where you're buying a scaled player in a place and then Richard you and I talked a month or so ago about kind of this tuck in strategy. I guess John, when you go, and I think this would be good advice for listeners who are like, That's great. I want to build my business. We're in the hell do I start? Like what is broken? Because I feel like people that I talk to, like they're not even sure what's broke. They're just like, I can't get over this hump. When you go do, let's just use a tuck-in for instance, like, and obviously there's maybe not as much. There's not as much to change because you're rolling it into another one, but like what do you see from these column three to five million dollar companies like where are they missing like what is the piece that's like you can identify right off the bat like this is good because we can we can capitalize on these things because they're just not doing them.
Speaker 4don't understand the leadership, you know, like there, you know, sometimes at that level, there's a ceiling on the leader in the business, you know, and so that's the first point, you know, someone gets a business to five million. They think they've arrived and hit the pinnacle and, you know, sometimes I have this statement that I'll say is like, come on man, just think bigger, come on, like, like you got to sometimes shock them a little bit to go, you know, think, think bigger and And then, and typically, you will also see, they just miss opportunity calls, they miss identifying opportunity calls, they miss having goals, you know, when, you know, a lot of times we're going in, you can just, you know, start asking people in the business, hey, what's your goal today? And, you know, some of them are trying to get off by five, you know, some of them are, you know, they don't, not very goal oriented. And, um, So, I typically find when good people are given goals, they usually just try to go achieve them if you happen to tie the goal to their paycheck, it typically helps them go achieve them better. And so being goal-oriented, they're typically missing Chad, you know, opportunity calls, tech-tenorated leads, dispatching properly, you know, those are just few of the, a few of the high level, you know, in that dispatching properly kind of goes through, you know, Sometimes people will joke when I say sometimes you got to kick Bernie Sanders out of the dispatch seat, you know, and get get somebody in that seat that'll, you know, treat the business like it should be treated and get the right people on the right calls.
Speaker 5And just just a comment on that as well. I mean, nothing we're going to say is earth shattering because it's, it's a lot of basics, but to me, the three kind of themes I see when we're looking at businesses that are just stuck, one is a lack of process. So they just answer calls, they just dispatch leads, they, you know, everything is just, we kind of just do what we do. And there is a best practice way to run these businesses and it's not to mean that every business has to do with the exact same way, but there are defined and kind of agreed to best practices after years of trial and error. So I think process is one area. I think a huge one is people. So you look at these three to five million dollar businesses and it's it's the owner or it's the owner and her husband and that's that's it And there's not this depth of management and so I think people's huge and then one that gets lost a lot is around budgeting A lot of times we'll see businesses that are at three million of revenue and you ask I'm, hey, what's your goal for this year and the goal is, I want to do more than last year and the businesses that we've seen get to 10, 20, 30, 70 million of revenue every year they are budgeting, they're holding themselves and they're team accountable to something and they're driving the business towards a vision. I think that's When you're just off on your own, it's hard to have that self-discipline to really hold yourself accountable to a budget. But I think that's a big thing that we see between those that are growing and those that are stagnant.
Speaker 6Hey, real quick. Chad, you said something. I don't want to forget it because maybe think this question. Where are you guys seeing the most margin leakage in these businesses? Like is there some common space where you're seeing like this margin leakage happening in these companies that you see or those size businesses and I guess I could open this up to to you chat and Aaron as well like I'm legit curious if there's some consistent spot where you're like, yep, I know I'm going to look here here and here first because this is typically where it's at.
Speaker 4Um, and, and. And depending on the business also materials as well, but certainly just not having efficient labor and not managing to efficient labor, you know, having overtime, you know, being understaffed and then just driving overtime. So it's, you know, obviously the two main components are labor and materials and of gross margin and labor's probably the biggest side of that and, You know, having businesses and in some of these answers by the way, Chad, don't change if it's a tuck in or a platform, like some of them are, it's the people component, but, you know, also just not being aggressive enough on pricing like not knowing that, you know, if you think about, especially the size business is that that you guys operate. I mean, you know, I want to say it costs more to run your business every year that it did the year before but quite frankly in business as a size of your business costs more to run it every day than it did the day before and if you're not able to move pricing fast enough or there's some belief that You know that there's a going rate, you know, in the industry, which there's not, then you're going to get leakage through price and then of course your teammates are going to need to pay to pay more and they're going to want to pay more and And so if you're not moving your price enough, it'll it'll creep into your margins pretty quickly, especially on the labor side.
Speaker 3I would say one of the big things. John taught me this a lot of way back in the day when our supplier was trying to give us a price increase because well, you don't need to take that I said well, no, they're going to give it to me and he said well, no, here's how you respond. We we are we're not accepting price increases so apologize. I said really that's all I got to say it worked. But I mean, when I look at, you know, we, we typically buy and kind of that three to five million dollar range of revenue and like the first thing that I always ask for is their equipment pricing. Because like these distributors and manufacturers, it's crazy what they're charging some of these smaller guys for equipment. I mean, it is just, it's obscene. Frankly, I mean the fact that like, They're paying so much. It is hard to price and stay in there. And to me, that's where, you know, I think you've got to be looking at it. You've got to be looking at multiple lines just because you've been a so-and-so dealer for 20 years. Like, that's great, but they keep hiking your price. Like, maybe time to look. in a different direction for a different piece of equipment and leverage kind of these distributors against each other to get some better pricing on this equipment. It's not going anywhere but up. It's crazy to think about. I used to think when we sold a $10,000 system like five years ago, I was like, oh my god, they must have bought the biggest baddest thing that we have to offer. And now it's like 20, 30,000 dollars and a lot of that is just driven by the equipment price, which is just crazy to me.
Speaker 2I got it. I want to fall back up on something like Richard and you guys are talking about besides if you don't mind moving the topic back to something. So I think there is, I agree there's four things, there's people, systems, leadership, and then you, right, in the moderate. And so, when you guys are talking about this a little bit, I think Richard, I think there's a great underlying story and read, read that. I think might need to be articulate is like, you built the great of the claim of people, like, how did you go about doing it? Most of us are always trying to build team infrastructure, find people, you found John, you found all these people, you organized them from scratch, you got them involved, and you got it going. So, you know, when you think about building out a leadership team, I think that's, I think that's an underlying story that, may not be told, at least from my view, from knowing where John came from, some of the people you have, your background, and then you kind of collected this team. The other thing you said, we got to plan to do this, had you collaborate that and create that team to get to where you did enough, in a very short amount of time to be honest, in a very successful way. So, how did you do that? If you don't mind just sharing, had you get to that?
Speaker 5I honestly think that's the number one most important thing for a leader of any organization to do is just around yourself with people that are way better than you in any particular area. I think it. started with the self-awareness on my part to know that if I wanted to build the most amazing platform for residential HVAC and plumbing contractors, I needed someone that knew about that industry. Like, I'm a home service guy, I'm not an HVAC guy, I'm not a plumbing guy. And so the first thing I needed to do was find the the number one person in the country that knew how to run a profitable business and could coach and share the same value system as me and that's when I met John and I like to tell people it's probably 60% hustle and 40% luck. Like, it is luck that I got to John through someone else, through someone else. And so I think just being scrappy, refusing to settle for mediocracy, and then just getting lucky. And then, you know, I think it really does come back to not having an ego and being self-aware enough to know, okay, we need John in order for this strategy to work. And then we're going to need a bad ass CFO. We're going to need a bad ass controller and just saying we're not going to settle. And you know, I will interview a hundred people to find the right person. We just don't settle. And in the few times over the last six years where we've gotten a wrong, we have made changes very quickly. I mean, there have been people that have worked for Redwood for three days. And you don't always get it right. And I think being willing to admit when you don't, and making a change quickly, is super important. But, This business, like I said, with a three to five million dollar contractor, you're only going to go as far as your team can take you. It's the same for a business that's going to do 750 million of revenue this year. It's only going to go as far as the team can take you. And the bigger this business has gotten the less reliant on me. It's gotten, and now it's true for John as well. Like John used to be able to be on site every month, every, every one of our partner companies. today we're just too big for that. So now John's having to have a team around him and those people are having to have a team around them and I think one of the biggest challenges to keep this business as special as it has been moving forward is to make sure that you know there are 64 of us now at Redwood they all have to care as much about the business as John and I did in those early days. So I think Aaron you're totally spot on with this topic.
Speaker 2So I want to follow that up and let these gentlemen jump into. So, you know, you hear this? And I think, yeah, you got, you got lucky with John. John, John, I know John obviously from back in the day or next day days, but I don't pull follow question on that to say, you know, you guys have been scaling and, you know, sometimes the person that got you here won't get you there. So how did you make sure that you pit these people that really could scale with the business? I mean, that is accelerated gross and a lot of people need to change who they are and a very quick amount of time, right? Like you're revenue and your operations, grow faster than most people do. So how did you get that aligned with this group early on for the success that you've been able to do with revenue? And then how do you keep that going? I mean, you know, John's band with the grow in this role or whoever I'm going to pick it on John anyway is awesome but, you know, his role to grow in what you advanced. So how did you pick that and then John did you follow up with like, How did you stay ahead of that relationship, too, on your side? Because I think this is important for people to understand that all management levels, especially at scale that you guys are doing, then multiple locations and brands and businesses, it's complex, right? So don't turn that over to you.
Speaker 5John, maybe I'll start and then you can go, I think there are three characteristics that make this possible. Number one is you have to hire for where the business is going to be in the future, not where it is today. So how do we hire a CFO for a $40 million revenue business that person we would have outrun Sean within a week? But we knew Sean had the ability to be the CFO with a billion or $2 billion business. So I think it's hiring ahead of where you are. That's the first thing. The second thing is hiring people that have the mindset of growth. If John's mindset was already know everything about being a COO, I'm good. He would not have survived. So all of us have the mindset of, we need to get better. We need to develop ourselves every day. It's not just about preaching development. It's about developing yourself. And the third thing is not everyone is cut out to to keep up. And there have in the six years where the business has outgrown certain people. And that's okay. And I think the worst thing you can do is force it or what the big pet peeve of John is just making up a role for someone you've outgrown because they're too afraid to have that hard conversation. So you look up six years later and there's like people doing things that, you know, there's no box on the York chart. We just made up a role because we didn't want to tell them that the business had outgrown them. So I think that does happen. if you have run a business for five or six years and you haven't outgrown somebody, the problem might be with you.
Speaker 4Yeah, very good, Richard. Aaron, very good question. I like to think back to kind of the early days of Redwood, even though that was only, you know, five and a half, six years ago. And when I think back to that, You know, I came out a next-star, um, pretty confident in how to run a home services company. Um, and not qualified to be a COO of a $700 million company, and, and so one of the very first thing that I needed to do was recognize that in order for the business to grow, I have to grow. And I have to grow at a faster pace than my team is growing, because they're expecting me to develop and grow myself from a leadership standpoint. In the early days, one of the things that Mark and Adam hand over from our family office did, and the chairman of our board did, was, you know, we'd have like two or three partners and we would do road shows in New York. And we were really just learning all about the M&A side of the business, and, and, and so I would just say that Adam and Mark invested a lot in this management team, to the point that they helped us grow as well, and then we kind of all grew together, and so I can tell you from the day-to-day side of running a home services company like Scott Brinkley has gotten a lot better than me at that now, because that's what he does every day. that works for Scott has gotten a lot better. So my probably day-to-day, like jumping the call center and help get calls on the board, is probably a little rusty today, just compared to how I've moved away from the day-to-day side of the business, even though I make sure that I'm in a couple of businesses a month working on strategic things as well. So I would say, Aaron from my point, that I needed to grow as a leader in order to help the business grow. And I spent 45 minutes this morning with an executive coach that aligned up myself. So just as long as you can be humble enough to know, that there's better out there, there's other perspectives out there, and you can humble yourself in such a way that there is, you don't know what you don't know out there. And so as you said earlier, look, you know, I'm going to be COO in this thing through three to four billion. And so as I'm doing that, over the next few years, I just have to continue to grow and get better because my team's and I'm counting on them to do that.
Speaker 5And Aaron and Chad, like we don't have all the answers and you guys have both run super successful businesses. So I'm curious what your take on this topic is of building your own teams and what your role has evolved to over the last couple years.
Speaker 2I would say everything somewhere you guys are saying I think it always starts with me first if I'm not developing myself then this you're always the lid so I think that's important some of us spoke about it over the last week and just talking about that right like you're the lid and then you got to start to develop yourself so as you guys are talking about where do you have to have self awareness all the things you said so I don't have anything really new to add to it because I think it's important most of the time the business is start to hit this threshold you know where the business can't grow anymore because the So when I think about, you know, somebody joining your platform or looking to grow with you guys and your leadership growth and what you guys have, usually you see that between that 10 and 20 million dollar mark is where people just start to really fizzle out on their ability to take that past that part historically, right? And so like, I guess when you look for a platform business in that area, you're looking for a great leadership do stuff, but I guess somebody's saying I'm fizzling out, I don't have that, what a group like yours be ideal for that size business, There's a lot of business sizes. I know you guys would purchase and have the resources to do but this out where they really can develop and grow in and I guess that's you know That's kind of what I you know, I'm trying to work through that kind of question of that makes sense because that's where people start to stumble out They need a next-door group. They need coaching or is it better just sometimes join this platform and get what they need through that with you guys And it seems like you have those resources available through the coaching.
Speaker 5So I mean that's that's the whole design of Redwood. That's why we exist as to answer that question. The one semantic I would say is that we don't buy businesses. So we're not buying $20 million businesses. I mean, we're investing in them and then we're partnering and we don't need people to know how to go from 20 million to 120 million. What we need is someone that has the drive to do so. We know what it takes. We've hired 60 something people on the Redwood team that all they do is coach and support businesses to get there. But what you can't teach is the drive. So if someone called John or I and said, hey, I got a $20 million business, I'm done. I've been doing this for 45 years. It's time for someone else to take the keys. Like, I just, I want to make this someone else's problem. My team's okay, but honestly, you figured out, I would say, hey, there are 59 other groups that would love to write you a check and put you on a horse and send you out to the sunset. That's not what gets us excited. a 15, 25, 45 million dollar shop. This says, we have all the energy in the world. We have a full tank of gas. We have a kick-ass team, and we've just hit a ceiling. And we could chip away at this over the next decade and get to where we're going, but we wanna partner with someone and we wanna get that 10-year goal, we wanna do it in two years. And so we're willing to partner with you and let you just pour fuel on this fire and those are the stories we gravitate towards and those are the lives that we've been able to, I think, significantly impact almost overnight.
Speaker 3I think for me, for like the growth of leadership, I agree with everybody, it's you as the leader constantly evolving. I was put my kind of journey into like three different camps. There was the part where you're, you're just the doer, like it's, you know, I used to, I'd have a call with John John would tell me to do this this and this and I'd go do this this and this and tell everybody along the way we're only doing it because John said to do it. I have no idea why we're doing it. I don't even really understand if he said to do it. I'm going to do it. So there was like this doer phase and then you graduate to like. what I like to call like the empowerment phase. And so it's like you're bringing people on, you're trying to empower them to go do their own things and so on and so forth. And then I feel like I'm at this phase now that is really a struggle for me. And I'm really good at the empowerment phase. I can do that all day long. I can do the doer phase, the accountability phase, of where you have all these people, and you have people that are managing managers, and they're supposed to be growing them, and the managers are supposed to be developing the frontline people. and like developing the systems and kind of the regiment of making sure you're holding people accountable because as the organization gets so big, you can't know what somebody over here that you may be not interact with every single day. What are the systems and processes within your business that are going to hold people accountable? And I think if I look back, that's the one thing I wish I would have, I wish I would have put in place when I was in the empowerment phase is a higher level and it's tough when you're growing because you're like people are doing great things and they're running and they're going fast and everything's great. But I think it's to what Aaron's point said that self-awareness of like, hey, I've got to get better at this thing or else the company's not going to be able to grow. And it's not so much like I think. I think growth gets bucketed into like you need to be growing like reading books and podcasts and I think it's a lot of just like self development and reflection of understanding who you are and how you serve the business and so for me that and that's the tough stuff right it's like well shoot I built this thing like we're good right and I think that there's you know you get away from the hey I need to go make a correction in the call center to I need to figure out who I am and how I kind of how I come to the business to help serve because I can't do it on the, you know, the ground floor anymore, unfortunately.
Speaker 2And I'm staying a stopping and then we can change if you guys want to, but you know, I agree with with everybody saying, I think I'm more than that in this stage now to me is like enterprise, right? So how do I show up as more as the enterprise CEO operating this business? I don't think about a hundred million anymore. I think about what I need to look like an operate for 250 million. Right, and so how does that look like into your points like I can read books. I still read books I listen to podcasts to listen to you guys ask these questions to understand that because you know here You guys are doing these great things and you know chat and that's done all these great things It's like, but I need to reinvent myself at this next level And so it's thinking about, what does that look like? As somebody is like, are you even running products of stuff? Because what I've seen is people get to appoint you can muscle through to a certain other level. And then everything comes following down, right? And I think around that 50 million for me was kind of a break, a little bit of a break. But I muscled us probably to about 75, 80. I muscled through this old school, and then you start to feel that break. So, but yeah, no, appreciate the feedback on that.
Speaker 5is this is like a super relevant topic for probably a business of all size and you know to me sometimes it gets less fun like in Chad's three buckets like when you're doing the work and you're controlling your own destiny like it's it's fun and then when you get to empower others like that is fun when you start getting to the enterprise accountability standpoint it's more about making sure others are having fun and getting satisfaction and you And you know for us that that Mark was like 500 million were done and I realized like There's nothing that either one of us can do today that's going to drive the outcome of the entire business other than make sure the right people are in the right seats on the bus and I think that's kind of where I'm a majority of our time now is is just making sure we have the right people in the right seats because we're not in the weeds as much anymore and that's a hard that was a hard adjustment it's still a hard adjustment.
Speaker 3It's the worst. You have no, it's the ultimate, it's the ultimate, really, relinquish of control. And it's like, well, hold on a second. I don't have to fix that. Let me go over there and do that. It's like, well, I'm going to disrupt the whole thing if I stick my nose on this, but I really want you. the answer. And I think that's why I feel like in this industry especially where a lot of businesses are started by technicians. I always say I don't know how you feel about this Richard, but like I always say like my secret weapon in this whole thing has been that I was never a technician. I never worked in the field. I didn't know how to do anything. So like Immediately I had to trust people that knew these technical things to do that. So it just came like inherent into the business of like, well, I got to figure out how to trust all these people to do the right thing, because I sure as hell don't know how to do it. And so I think that's the, that's the key piece of where I feel like a lot of these businesses get stuck is because people are not willing to relinquish control. It is, I'm going to do it.
Speaker 5It's not just at the ownership level, it's also at management level, like you look at some of your key leaders and they were a technician and then became a field supervisor and then became a manager and now we're running a department and if they aren't developing themselves and you aren't developing them. You can't be running a department and not know how to read a P&L. But when in that journey, did someone actually take the time to teach you, like you just assume, hey, you've been in enough of these meetings, you should be able to navigate this financial statement. And I think one of the things we've seen people like to talk about the soft skill development, the leadership development. But there's a lot of tactical, practical development that we as leaders don't do a great job of a lot of times. You'd be shocked or maybe not to know how many people are responsible for large departments and really don't understand the different drivers of the P&L.
Speaker 2On that topic, and I know Chris, you got your two questions, Chris, like, man, I'm used to doing a say no. It's like, what's the only one here?
Speaker 6Oh, this is great.
Speaker 2Yeah. So we did something interesting on that for that, because I remember I used to, I want to join next door. There was these little video clips in there, like little videos on how to read a P&L. And I don't know, John, you might remember those back in the day. So we actually took all this information uploaded in notebook LM and built all these little training videos now through notebook LM and with testing them and then we set them off to the managers to test them and see what they knew through this and it was actually a kind of cool project and it was a easy way to get a little understanding and educate them too. So I agree that P&L gets really lost in all of this stuff. It's all these other things and then you get back and you're like, don't you understand what you're looking at and it's like, no, they haven't. I think there's a lot of opportunity to develop and there's so much technology now that can speed this up and make it easier for people to get those resources. And then one last thing I want to say on this too is that there's this really cool thing I think you guys do a record that I really enjoy is I get your magazine and it's really cool I go through I go to look to see what companies were up and revenue I'm knows you like that. So I go look and I flip through it, see the things. What brought that about and why do you mail that to people like me and is that a recruiting thing is that an education What do you guys hope to get out of that out of that magazine? It's really well done by the way. It's really really well. It's not even cheap paper. Like you guys spend some money on this thing.
Speaker 6It's a newsletter or is it like a actual legit magazine?
Speaker 5So it's a magazine. Yeah. John John's team spends a lot of time on the content, but just the vision of it is we feel like we're doing a lot of cool things around redwood nation. And we might send it to you, Aaron, and you, Chad, but you are not the intended audience. I think that was just an idea we had, you know, a couple of additions ago. The purpose is to share good news around redwood nation. And there's now three thousand of us. And so we send it to every manager, it's probably a couple hundred people. And at first, we did what probably any business would do is we said, hey, let's just do this digitally in an email and send it out and it'd be cheap and easy to do. But people don't read those, I mean, and we can be stubborn, and we can think that we're going to find a way for people to read it, but you send an email on it this loss. So we literally print out a magazine, have a professional company. We send it to people's home address, and people love it, and spouses read it, and children read it. And it's just a great way to feature some of the amazing things that are happening across our business, across the country every day, and I think I just got a draft of our fifth or sixth edition of it and it's really a powerful tool. John, I don't know if you give anything additional to add.
Speaker 4just getting it out to we know we started to recognize and you know probably a couple years ago that we we are really doing something special at Redwood and we're doing something different and we like to share it not only with our managers because they're you know definitely a big part of it but we also like to share it. with, you know, industry icons and experts like yourself and Chad. So people just kind of get to see, like, what are we doing and what are we up to and, you know, how how things are going and so, that's the, that's the branching out that you get to, you know, that you get to see and, and, you know, continue, you know, we think, again, then tenant audience is the managers and the frontline managers and they kind of get to know I mean, we're not, you know, at the partner locations, we're really not out in front of the management team that much or the managers themselves, meaning, you know, we don't want our teams to run around talking about Redwood. You know, that's just, you know, we want them talking about, you know, their business. And so, I mean, I'll show up in a parking lot in Tucson, Arizona with 120 chicken biscuits walking around, giving them the installers in the morning day. I have no idea who I am. I mean, I had an installer asked me a few weeks ago, did I work at Chick-fil-A, you know, and you're like, okay, yeah, that's it. And so it really is what you said to Chad. By the way, the lady at Chick-fil-A, I hadn't seen her in a couple of years in Miss Maria that cooks all the chicken biscuits. And when I picked up, when I literally picked up 150 chicken biscuits on a hundred breakfast burritos. And that was just for you. Yes, that's true. And she comes running out from behind the counter. Mr. John, Mr. John gives me a big hug and out and Tucson, you know. And so anyways, we like to share with our teammates what they're a part of. Um, but without doing it in a ballsy way for lack of a better term, I really enjoyed.
Speaker 2I just didn't know what the meaning of it was if it was or we couldn't think of it as a team or I like that it goes to the managers. Don't remove me from your mailing now that you know how to get it. Yeah.
Speaker 3Don't remove me either. Yeah.
Speaker 2This was Natalie. No, maybe I should have been quiet. So we had it.
Speaker 4No, you're out there, you're out there for a reason.
Speaker 2Oh, that's fair. Yep. But they're very well done. I just wanted to speak about it because I thought it was a thing. Really, you highlight your organization, your people. And I love your transparency. And you're very clear about who's doing well, what the average like things that are happening. And I think that's just refreshing. So congratulations. It's really cool.
Speaker 5Perfect.
Speaker 2That's what's.
Speaker 5And Aaron, you're touching on a dynamic that I think is one of the reasons that Redwood is special And because we're transparent with all this information, no one wants to be at the bottom of the list of anything. And so part of what we do is just get 21 amazing contractors in a room and put a slide up on the wall and it's sorted by organic EBITDA growth top to bottom. And you don't have to say anything else after that. Like, after that, everybody is looking to those at the top, like, what are you doing? People are looking at those on the bottom and saying, what can we do to support you? You know, where are you struggling and how can we help? And I think that competitive dynamic and the competitive juices that we have within our room of partner companies is part of our secret sauce.
Speaker 2Out of great. I like it.
Speaker 6You know what I think I learned on this episode most about myself, as I said here in self-reflect, listening to you guys talk, is I don't know if I'm happy or sad that I'm not, and I think it's more.
Speaker 2I thought you're going to get into your ego or something, but okay.
Speaker 6No, no, no, no. Actually, no, I'm not actually every time I thought he had got something to add, I was like, not done. I don't actually, and I'm okay with it. I'm still dealing with the right. Yes, I'm only, you know, five months removed from being in business. And I still love the position that I'm in today very much. So. Um, and it's just a different spot to be. And like you guys are still running the race, and I'm not, um, that seems a little bit weird. I'm just running a different race, and it's back down at the lower level. Like in like the biggest business we got going for is this Chad and I was roofing business. I'm not sure where we're at now, but we're pushing for six, seven million bucks this year. But it's still so small, but I will say this, um, there's, there's a couple things that you that you said, Richard, that I just wanted to, uh, to say, I don't want to open up a conversation because I have one question I want to get to both who do clothes to sing out, just for about 50 minutes into this thing. But there's been plenty of times at our peak where, you know, $92 million in revenue. A lot of people, and I learned real quick, what my role was and the stick to my role, and I did not even stick my nose and anything else that it was not good at. Um, I stuck to being go to market and I didn't deviate outside of it, whereas when the business was smaller, I had an opinion I could give towards operations or whatever, um, and I learned like, uh, it was incredibly complicated to get a plus players in this business to scale it in with. Out it, it was, it just took longer. There was more breakage that was happening in the business, which caused more problems, which caused leadership issues, which caused his turn, which got, like, turned out employee-term and client-term. There's so many important things that started at the top, that I learned on this thing got big. And that's when I was like, okay, I gotta continue to get better. The cool thing is now that I get to lead a small company, I think you guys know I last year I bought a company called prolific brand design and at the same time I bought an email a small email marketing company and I merged them together and it was a little baby business I've since split off from prolific. I had them buy my shares back out. It's off doing its own thing and then we started email marketing company I learned a valuable lesson there and that's it when I don't want to work with somebody I cut the ties and I move on So I might want to know the publicly. I cut the ties and move on from prolific and we started send it email marketing because that guy impressed me You know why is he was coachable is a very coachable leader in the business But both Aaron and Chad know him is named Zach Garcide and he's leading that company But it's so cool for me to be able to lead him or for Annabelle lead him because he's so coachable But he does the work. He's got like you said Richard his the gas tanks full. He's ready to go and he does a great, great job. So that's been fun. You know, Chad and I have a pretty good team mover, Reverend Roofing, that's, you know, gas is full of the tank and everybody's ready to go and we're seeing a lot of success with it. That's the fun phase I get to live in right now. I was I kind of get to add in my two cents and coaching and I get to step back and let everybody do their thing. I'm loving that, that's side of the business. But I can remember, there was plenty of times at Rhino when you don't create the position for the guy. We've told him we're guilty of that too. I was definitely laughing to that because I can relate that we did that. You don't want to move the person out of the business, but we couldn't pull him up the mountain with this. They weren't coming, right? So it was time to let the person go. But we definitely had times where we would hire people when we didn't have a position in form, but we knew we wanted the human being and they were really good at something. And I wanted them and the business I just didn't know where they landed. I don't know if that's a good or a bad thing, but man, once you get a plus talent, you don't exactly know where they landed or if it overlaps with other positions, I was a fan of picking that person up and they will end up settling in a role that worked out well, and it worked out well for us. But I want to finish with this question for both you, John, and you Richard. Um, and there's two of them. Someone to give you the easier of the two does, uh, um, I don't think we'll get through the other one. But, and I want you to try and give the, uh, most honest feedback, um, for the listeners, too. It's not about it's, it's really more just about what do you think. is the exact answer here without being so PC. And the question is for both you and I don't care which one you want to go first is, what part of the home service business? What part of the home service industry is broken? But nobody wants to admit it. What part of the home service industry is broken? But nobody wants to admit it. That was your extra gap to give you time to think about
Speaker 5I'm happy to take a stab at it. John, is that okay? Yep. Because if you go first, you'll take the good answer and then I'll have to come up with a second best answer.
Speaker 6That's exactly the way I would think about it, too.
Speaker 5Now, I think what's broken is employee retention or teammate retention. Yeah, saying your face, interface done. Now, the only thing I would caveat is I think we as an industry are doing a better job in meeting it now than maybe five, ten years ago. But the amount of turnover in this industry is hard to grow a business when you are turning over 50, 60% of your teammates on an annual basis. And I think we started to make excuses for ourselves as an industry like that's just the industry like this is just a how many times have you heard this is just a high turnover industry so yeah, no shit it's 40% my friends down the street are all at 50 or 60 so you're patting yourself on the back, but you think about it turning through 40% of their team every single year how, you know, all the coaching, all the development, all the process, having to constantly start over with new people. It's just it's draining and that pulls down the entire organization. So I think we as an industry have to find a way to cut through this and to find a way to And I don't think it's necessarily paying them more. You know, you've probably seen on LinkedIn a thousand studies of, you know, it's not, it's not the pays, not the most important thing. It's recognition, it's saying thank you. It's, you know, it's development. It's having hard conversations. I think if we, the people on this call and those that are listening to this podcast if we are going to do something special, It's got to start with empowering and enabling our frontline teammates and making sure we're not losing 50 to 60% of them every single year. So that would be my answer.
Speaker 4Just for clarity, when you I wrote the question down when you were saying it Chris, before Richard started talking, I wrote one word. people. But I'm going to pivot the answer because Richard did give the right answer by the way, it's he's 100% correct. And Chris, I think you're going to have an appreciation for my answer. Because I think the marketing side of this business is broken. And I think somehow we have as scale players, And in the home services industry, we have convinced ourself that it's marketing's job to make the phone ring. And it's marketing's job to get the calls on the board. And when you're in the home services industry, and you're an Indianapolis, and it's sunny in 72, it doesn't matter who's doing your digital marketing. The phone is not ringing. By the way, they're happy to take your money. But it's still not ringing. And so I think understanding in this industry Chris that marketing is a tool in the industry that's used, and by the way, you should create the percentage for your budget. But it's a tool that's used to drive the business. and but it's not the only tool and you rarely have us same companies who have spent more. and been able to win spending more. Like, I must spend 15%, I must spend 18%, I must spend 16%, they just do not win doing it. It's not been my experience. And typically when you start spending more than I'll call it, I mean, you get a big market, it's expensive. You're in DC, you're in Phoenix. I mean, it's expensive. But you start spending north of 10 to 12 percent on marketing. The only thing that's really showing up is operational inefficiencies. It's you've created a dependence on digital marketing or marketing as a whole in your business. And so I think that is kind of my second answer of one area of the business that's broken when we just think marketing fixes everything and I can just throw more money at it and quite frankly, it just doesn't.
Speaker 6Now, I think that was an adamant a lot more to me about six months ago. I didn't plan this clip over and over and over and over.
Speaker 2I think those were great answers and I aligned with both of those actually and I think they're smart. They're just really, they're really true for answers to what's going on in the industry right now. And I think one thing we did here from the marketing standpoint is we put a leakers chart together and then we put dollars to every leakage on the thing so it had real money connected to it so people could understand the operations was the thing and here's $2 million that we never need to spend marking on it was already here. And I do think people don't invest in CRM management marketing.
Speaker 5So yeah, that's a hot topic right now for us, Erin, like for every hundred phone calls that come in, how many actually turn into a sold job? And you've got to start breaking out all the steps in the funnel. And how much leakage there is from, even answering the call in the first place, booking it actually running the appointment, like there's so much fall off, And depending on how you calculate your KPIs, you might not even pick it up. So I think that whole topic of the leaky funnel, the leaky bucket is something we're spending a lot of time on internally.
Speaker 2We have, too. So I think that's a great topic. I guess I have to be for a follow-up at some point, right, to really understand the linkage and it takes a lot of work to do that and understand that flow and what the leakage is.
Speaker 5But yeah, I mean, just because one last thing on this John doesn't have all the answers. I definitely don't read wood. We don't the 65 of us the power like John likes to say is in the room. You know, we've partnered with people like Aaron and Chad that are doing so much good. And I think what makes Redwood special is getting all those people in the room. And we have people that have figured out tech generative leads. We have people that have figured out inventory management. We have people that have figured out call center and just getting them all in the room sharing. And you know, at any given time, there are people from different partner companies And so I think part of what John and I see our job as is just to connect really smart people together. And that's why our motto at Redwood is connection is everything. It's not about us preaching a best practice. It's about getting people like, frankly, the three of you in a room with our partners and saying, just have at it. So just to make it clear, like you've asked a lot of questions of us today, but we are not the smartest, brightest people within Redwood. It's just our job to connect those that are.
Speaker 6Well, it's working.
Speaker 5Yeah, I'm sorry. It's pretty smart.
UNKNOWNYeah.
Speaker 6It's pretty smart.
Speaker 4Yeah. I see him now. I same Chad twitching a little bit on my answer, because I knew he thought I was going to go after Gross margin. I sent a little peep the SD coming up. Yeah.
Speaker 6Yeah. I think that Chad shares passion for call center leakage. I think that's not an operation about that one.
Speaker 3That's where it's at. It's all center in the operations. I don't know all our branch managers sometimes. I couldn't spend enough money in marketing to get you to budget. It's all in your operational KPIs. Marketing loves to hear that too. Not your fault.
Speaker 6I'll tell you, Chris, you know you've put together a good podcast format when we just want to keep going and we're not watching the clock, so, you know, I'd like 10 more questions, but where's the list of this point and we're about to lose, I mean, if the content is good enough, this is my main thing I'm doing with the podcast now, scrolling and scaling and really paying attention to details of it, but really what I want to focus on is, When do people drop out on these podcasts episodes so I can figure out what they are and are interested in so we continue to focus more on topics of people actually give a share about and just like the banter and shit like that. So there's like 50% entertainment, 50% education. So I want to keep chasing this thing down. Obviously the marketing topic I love, which crazy is that you guys, you know, into a chat in there and you know this, I rarely ever even talked about marketing on this podcast. I mean, in comparison to everything else, And I'll tell you the the one the best times that I that I loved was right after we did our deal and they put me in the CMO role and that became a traditional CMO managing funnel across multiple agencies. I loved that. It was actually like gamifying it for me that I love chasing all the way through CAC or LTV over CAC. Early source channel. I love that game. I get the leverage a little bit today. But that was the most fun for me because it was just like you're moving to pieces, but the, but the, but the more you're measuring these, you know, the analytics of it all, you could start to be a little bit more strategic on knowing if I move this lever, it's going to provide X. It's just where does the breaking point on it? Like I loved that time in the business. I could see myself being a CMO for fun at some point that working for somebody might be a little bit complicated for me at this point. I don't know what we'll see. I mean, it's again, I'm having fun with the things I'm doing now, but listen, I appreciate you guys coming on here to John and Richard, just good to catch up with both you. I haven't talked to you either one of you in a little bit. So I'm appreciate it's coming on and John, listen, like even sharing simple things like percentage of marketing budget is it gives people some context on like what are they spending versus what you're talking about. That's important stuff that that people ask all the time and it seems like it's still continuously as a question people want to know. What should I be spending on marketing budget? I'm much of a allocating digital versus traditional or whatever. So I appreciate you guys jumping on here. Man, congrats on the success of Redwood. It's so cool. Like I said, a million times to your Richard and John, like it's so cool to have seen it with right way, who was my client at the time, who became your platform and like just seen the transition from all of it, coming out the Memphis early. I think you guys had two brands at the time when I first met with you guys. And maybe I should have pulled a trigger then and just became a CMO and said, sorry, I was sorry to there, but I appreciate you guys coming on. I appreciate your time in the AG and chatty P.O. is good to see you boys and listen to our listeners. Thanks for hanging on. Hopefully you got a lot of good out of this. Do you have least two guys who are doing big things? The industry actually we got four of them on here who are doing big things. The industry, not me. I'm just the connector of them up there for everybody for you to listen to. But I will say this. It's always fun. I think John kind of alluded to this. Or excuse me, Richard also alluded this early on. I'm like talking about it. You know, talking about the goals. You know, the easy part. You actually got to do something about it, which is why we can't just have no zero days of working towards things. And the new mantra for me is, don't talk about it. Be about it, right? Don't talk about it. Be about it because, you know, a goal without a plan is a what?
Speaker 3Wish.
Speaker 6fucking wish and it's a dream and so don't be that guy. I actually do something about it and you can be successful like every single person that's on this episode today So do our listeners, hopefully enjoyed your time here in the VIP room to our guests. Thank you, boys And until next week in the VIP room You never know who's gonna show up as a surprise guests mainly because I don't know who's gonna show up as a surprise guests I was waiting to see whom I popped in today. I was hoping maybe Indiana would have showed up today since she knows all of you guys, but she didn't respond to my text message. Apparently she wasn't actually joining this surprise guest today. Guys, we got a double. But hey, I appreciate all you guys for our listeners. Don't forget to leave us a review. Please leave us a review into all of our sponsors. Thank you so much. Gentlemen, until next time, we'll see you. What's the password?
Speaker 1Don't talk about it. Be about it.
