Austin Gray: Real quick, I wanted to share with you two agency partners who have helped me grow Bearclaw Land Services. Striker Digital manages all of our SEO services, and they've got us to number one on Google for specific search terms within our local service business. Cedar Digital Consulting manages all of our social media and YouTube, and they make it very simple for OWNR OPS like myself.

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So, if you're looking for SEO services, check out Striker Digital at stryker-digital.com. For social media, check out Cedar Digital Consulting at cedardigitalconsulting.com.

Welcome back to the OWNR OPS podcast. I'm your host, Austin Gray. In this episode, we've got John Wilson from the Wilson Companies joining us. This is going to be a fun episode. I've been very interested in the different growth stages of small businesses, and John actually replied to one of my tweets a while back. He said, “Hey, here are the different growth phases, and here were the change points that we had to make.”

Now, why is John qualified to talk about this? John has taken a plumbing business from the $1 million mark to I think they're over $23 million right now. So, he has gone through the different growth phases and has had to take— in his words— the gut punches to push through each different growth phase.

Stick around for this whole episode, as John just gives a complete masterclass on the different inflection points at which changes need to take place in small service-based businesses.

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For the listeners, we've got John Wilson on. We'll have him do a brief introduction. I think most people who are listening to this know who you are, but for those who don't, we’ll have him introduce himself. We have John Wilson with the Wilson Companies here, and the other day, I’ve been really interested in this concept of: where are the change points in small business growth?

John Wilson: Yeah, so whatever you want to call them— change points, inflection points— at what revenue marks do things start having to change in order to hit another growth lever? So I tweeted about that the other day, and you chimed in, and I thought, "Oh shoot, that’d be a great topic to discuss."

That’s what I’d love to discuss tonight.

John Wilson: Yeah, no, that sounds great. I'm ready to dive in. I'll give my quick intro, and then we can get to the actual good part. I’m John, and I'm a third-generation plumber out of Northeast Ohio. My claim to fame is that seven years ago, I bought my second-generation family business from my dad. Since then, we've taken it from eight employees and about a million dollars of revenue to $26 million this year with 142 team members.

So we've done great work. I have an awesome team that I get to work with every single day, and they’re much smarter than me. They're basically the reason that we got there, and I just get to go into work and have a good time. That is the abbreviated version of what I’m all about.

Austin Gray: I also frequently hang out on Twitter. I think we all do.

John Wilson: Yeah, it's such a cool place, though. That's what it's there for!

Austin Gray: Yeah, no, it is awesome to be able to connect with other like-minded individuals. This is the reason why I wanted to have you on to talk about this topic. Thank you for covering that in your intro.

I have so many questions about that start phase— whenever you bought the company from your dad— and sort of just what you did to start growing it. But why don't we just start out with your high-level thoughts on the different growth phases?

John Wilson: Yeah, I think in my response to your tweet, I probably took it from like $15 million to $20 million, and then I tried to give only my own lived experience. I roughly think I know what's coming in the next two years, but we'll find out if I'm right.

I see it as every time we have an infrastructure change and every time you have an inflection point, what you're really dealing with is that you've ran out of capacity. Someone ran out of capacity, and you have to build new capacity inside the business. Almost always, that new capacity is people— almost always. So maybe that’s an accountant, or maybe that’s a recruiter, or maybe it’s managers— a president, you know, whatever it is. Each sort of inflection point has a different capability that you have to add to your business.

So, that's the best way to think about it. If your cup is full, where is it going to overflow to? And then how does that person’s cup fill, and where does it overflow from there? Ideally, the way to think about scaling a business is that you are turning generalists into specialists over and over and over until the day you die. As the business gets bigger, what used to be a specialist becomes a generalist.

Austin Gray: So right now, you know, when you bring on an HR person, somebody who’s your first HR person, that person feels like a specialist because they’re focused on HR. Well, HR is actually like eight different disciplines, so really, they’re a generalist inside HR. They’re just capable of touching each of those disciplines.

So, how you handle that at 100 people is different than how you handle it at 1,000, where each of those disciplines would have a different person.

John Wilson: Does that make sense?

Austin Gray: Okay, totally.

John Wilson: Yeah, okay, perfect. So, the smaller you go, obviously, more people wear more hats, and that’s where you get into these inflection points. What’s typically going to happen is someone’s going to get overwhelmed, and you have to shed some responsibility to the next person to pick up whatever you were overwhelmed with so that you can focus on the next thing or they can take on more things— whatever it is.

So, the first typical inflection point— you can look at this as revenue, or you can look at this as people, so I’ll try to give the answer in both ways. Because if somebody’s listening to this in like five years, the revenue metric might be different— it’s different than it was five years ago— so a lot of it’s on people.

The first million bucks is when the owner should stop producing, and that is a challenge because the owner is typically the producer when they start. Like, I think you’re driving the machinery right now.

Austin Gray: I was in the first 18 months, yeah. For this next year, I’m transitioning into sales and estimating, and we have a field crew in place.

John Wilson: Nice!

Austin Gray: Yeah, that’s awesome, man!

John Wilson: So, that first million, the big gap is: do I have the lead flow to support three or four people in the field, or whatever a million dollars of revenue is for your trade? Maybe it’s more, maybe it’s less.

So, do I have the lead flow to drive that? Do I have the right pricing? Can I step back and do exactly what you said: Can I do sales and estimating, or can I do project management and then bring on a salesperson?

Whatever it is, how do I offload what’s overflowing from my cup? For you, that’s driving the machine. Now, you get to go sell, and that’s sweet!

So then, what’s going to happen is that’s going to work, right? You’re going to be successful at that, and your guys are going to do good work. You’re going to bring on some more guys because now you’re selling projects, and you’re going to be good at it because you’re the owner and you need to eat, so that’s going to work.

Then the business is going to double or triple, and the next inflection point is around that $2.5 million to $3 million mark— maybe 10 people in the field. That’s when you have to bring on a field manager.

So again, the cup overflows again. It overflowed into, “Hey, I can't run this business from a plumbing truck, and I can't run this business if I'm the one selling and project managing. Because somebody has to keep the pipeline full.”

Because if I’m doing both, it’s going to be big peaks and valleys. So, I’m going to go sell a bunch, but then I have to manage a bunch, and then I have to scramble because now we don’t have any new projects, and I have to go sell a bunch. It’s this big up-and-down thing that you have to get consistent.

So around that $2.5 million to $3 million mark, when you have 10 people in the field, you start thinking about field management. Or maybe you hire a salesperson or maybe both. In plumbing and HVAC, that’s usually the first service manager— a key person in the field.

Does that make sense so far?

Austin Gray: Totally makes sense!

John Wilson: Okay, so this is still a mostly flat organization. You probably have a bookkeeper or a call taker, an office manager. At $2.5 million to $3 million of revenue, you’ve got a field manager, an office manager, maybe an admin assistant, yourself doing sales and estimating, and 10 guys in the field— so around 15 people total doing $3 million bucks, which is about $200,000 in revenue per employee. That’s a good number. I’d be proud of that.

So now it works again because you’ve got people aligned. The manager’s doing his thing, the salesperson’s doing his thing, and everyone’s sort of grooving.

The next milestone comes at $5 million. $5 million is a really interesting number in the trades because it’s just a lot of money. Most of the journey from $0 to $5 million is a very resource-constrained business.

It’s not that resource constraint goes away after $5 million. You still can’t drop a million bucks without thinking, but you just have more money to do something with.

So, like, “Hey, I have a new initiative that I want to go hire a salesperson and see if it works.” That’s something that you can do at $5 million, and it won’t bankrupt the business. You might not have been able to do it two million.

So, $5 million is a really cool number. You get to reinvest a lot more, which is cool. At $5 million, you now probably have 15 to 20 people in the field. So that’s double what it was at $3 million.

Okay, cool. So that probably means two salespeople, maybe three— each one doing a million and a half or two million a piece. And then you have all these field techs. You now need two managers. So you’ve got the owner in this GM president role, a few salespeople, and two team managers— each one managing 10 people, eight people—which is a good team size. It allows them to manage efficiently, and that’s a fully flushed-out organization at that point.

So, we’ve abbreviated millions and millions of dollars of revenue and years of growth and struggle, but $5 million is this big inflection point where owners find themselves as real presidents of a business. You’re dealing with— maybe the best way to think about it is if it’s a $2 million business and it’s very profitable, most owners are just going to take that money home. Like, they see that as their money.

At $5 million, if it’s very profitable, the owner should be able to take a lot of money out of the business while leaving way more to reinvest. So, it’s just an enterprise now that you have to be thinking about.

Do you have any questions so far before we get into sort of the next couple iterations?

Austin Gray: I have so many along the way, but what I’d like to do is just let you keep going because you’re on a great roll, and then we’ll just come back with questions.

John Wilson: Yeah, sounds good.

As you cross $5 million, there are a few really big things that need to be handled in between $5 million and $10 million of revenue.

So, to put this in perspective, we’re talking about 25 to 30 employees to 50, trying to keep it in those two numbers. So, between $5 million and $10 million of revenue, a lot happens at this size.

The business keeps growing. What you’re doing keeps working. The field team is working, but now you’ve got 30 mouths to feed, and that’s a lot, right? That’s a big weight of responsibility, and you’ve got to keep them moving.

You’ve got to keep them going. One of the biggest challenges that companies have after they cross $5 million is starting to professionalize their lead flow. That’s a big one. Like, how do we drive brand? How do we drive leads? How do we compete? How do we show up in the marketplace to keep these 30 people that rely on us every day busy and employed and continue moving the business along because we have to stay stable?

That’s going to start working, right? That’s going to continue working. I just assume everything works in this scenario.

So, that’s going to keep working, and then suddenly, you’re going to find yourself with so many leads that you don’t know what to do, and it’s going to be really hard to recruit.

So, the next big inflection point— you know, marketing was a huge one, and that’s one that goes on forever. Marketing never stops being one of the biggest concerns of your business.

Then you have to add the next biggest concern, which is recruitment. My argument for most businesses— if you have the cash and the stomach to do it— is as early as you possibly can, you bring on a recruiter.

Businesses only grow in one way. You get more leads and you get more people to fulfill those leads. That’s it. That’s the only way businesses grow.

So, if you don’t figure out how to standardize that process, you’re just going to fall behind. An awesome number to bring in a recruiter would be around $3 million. The realistic number is somewhere between $5 million and $7 million.

You bring that person on, and they start serving you up candidates. The reason that role is important is everyone’s cup is full of day-to-day stuff, right? Your managers are running full tilt at this point, and they’re trying to prevent callbacks. They’re pleasing customers. They’re keeping guys on jobs. They’re doing everything that you ask them to do—everything that you need them to do.

They’re protecting margin and all that stuff, and it is really hard to get them to take a step back and think about recruitment.

So, the manager in a small business is this— like, the way they get used is kind of funny because people don’t know that they do it. Then you grow up, and you’re like, “Wow, I can't believe my managers did all that.”

But it’s like, if you’ve got a manager, and they’ve got a plate of food, the way it should look is they should only have chicken and a potato or something like that and maybe some broccoli.

But then all these other things get thrown onto that plate, and their job is to shed it off as quick as possible so they can focus on their three things.

So, when I talk to other owners in this $5 million to $10 million range and above that— it goes all the way up to $15 million—is where we really see a big break here. These managers are doing everything.

Like, they’ll have field managers doing sales, doing HR, doing payroll, doing fleet management, warehouse management, and I’m sitting here like, "Dude, this guy's got 20 people that he has to keep busy and moving profitably on projects every day. How can you expect him to do that if you don’t give him the backend resources?”

That’s the danger in that $5 million to $10 million zone is these businesses start producing so much cash because it’s a big business, right?

And everyone’s like, “Hey, let’s not have overhead,” which sounds great, but all that not having overhead means is you’re dumping more onto your managers, and their cups are too full. They’re overflowing, and none of it’s getting done right.

And one of the first things that slips is recruitment. No one’s going to take the time to interview potential candidates when they’ve got 30 other hats up in the air. They’re just not going to do it.

So the phrase that we always use— and we still use depending on the thing— is if it’s everyone’s job, it’s no one’s job. If recruitment is everyone’s job, it’s no one’s job. If lead flow is everyone’s job, then it’s no one’s job. One person has to be accountable for that; otherwise, you’ll never see results.

That was a long tangent, but I know every owner that I talk to between the $5 million to $10 million revenue mark is guilty of the same thing, where they’re just like, “I don’t want to reinvest into any overhead. I just want the cash.”

I’m like, that’s great, but you’re going to burn your managers out because your managers are actually doing like seven people’s jobs right now. If you’re unhappy with the performance coming out of your field team, you only have yourself to blame because you refuse to hire the people you should have hired.

This is as much me talking to myself five years ago as it is like anyone currently.

Okay, so between $5 million and $10 million, you’re dealing with lead flow, and you’re dealing with recruitment—those are the two really big things that you need to knock down.

At this point, you’re going to be a three-tier organization. When you look at your org chart, the way that looks is you've got the guy on top, the owner, the front-line manager, and then the rest of the organization.

So that three-tier org chart will get you up to about $10 million bucks.

Austin Gray: Could we stop right there? Could you dive a little bit deeper on the org chart?

Just so, like, let’s say some people are at the million mark or they’re in between the $1 million and $3 million mark.

John Wilson: Yep.

Austin Gray: Like, can you paint the picture of what the org chart actually looks like?

How many managers and how many people are being managed by each manager? What are they responsible for or different managers; what are they responsible for?

So that maybe some of our listeners can have this picture of what to get to.

John Wilson: Yeah, for sure! So, like I said at the beginning, the process of scaling a business— all you’re really doing is turning generalists into specialists on repeat.

So your field technicians will no longer be field technicians. They’re going to be— “This is our grass guy,” or “This is the guy that uses that machine,” or “This is our water heater guy,” or “This is our panel guy.”

So, like, I have one guy that his entire job— 260 working days a year— is installing electrical panels. That’s all he does, but he’s a rock star at it.

He’s amazing, but that’s literally all that he does.

You sort of work that backwards when you’re going the other way: how do we get people who are capable of being switch hitters across the board?

Because we need good generalists when we’re starting off. We need people who are capable of handling sort of whatever gets thrown at them.

So at $1 million bucks, I would expect about five to six people on that team.

So that would be an owner; that owner is likely doing a mix of sales and project management at that size. They have maybe four people in the field, ideally producing $250,000 a piece, and then they have an office administrator.

That office administrator is going to be doing a bunch of different stuff.

There aren’t enough phone calls in a business that size to support like a full-time call taker, so you really don’t need that. You might only be getting two or three phone calls a day, which is fine; you’re producing a million bucks of revenue off that, so that’s cool.

The way that person is going to be looking at their day is, “Hey, I’m going to be helping customers. I’m going to be doing a little bit of accounting. I’m going to be doing some billing. I’m going to be counting technicians’ hours. I’m going to be opening the mail, maybe depositing some checks.”

Very generalist stuff. They’re the catchall at that size of the business.

Austin Gray: You’re smiling and laughing, so I assume that somebody in your life is in this role right now?

John Wilson: It’s so funny because you’re literally calling out our current business operation right now—talking exactly about this one million revenue. This is how they all look at that size!

Every business I've ever peeked under the hood at that size—it's all the same. Nothing’s a mystery here, and that’s sort of funny about it.

Austin Gray: Please keep going on that because I think even as some of our listeners are literally just starting out as solo operations, this can be very important for what to work towards.

John Wilson: Well, even below a million dollars, the way I would be thinking about this— as a service professional, if you’re on the machine right now and you’re starting off— is it’s all about capacity.

You should be thinking, “Hey, my cup is full. Who do I give the overage to?”

For the rest of your life, that’s what you need to be thinking about. So if you’re on the machine—moving land, getting rid of trees, I can’t really describe what you do, but I think that’s ballpark.

Austin Gray: I got a thumbs up. Sweet.

John Wilson: So, the big barrier to you producing more revenue if you’re the guy is just administrative.

Who's picking up the phone? Who's scheduling appointments? Maybe you have to do permits or something. I don’t know. Who’s going to deposit checks? Who's going to handle billing? Who's going to call people that owe you money?

So the biggest and best bang for your buck as soon as possible is to hire an admin— hire that person that’s going to catch everything.

What that’s going to allow you to do is double your capacity. If you’re the only earner, then your entire job is to maximize what you can earn and offload everything that does not directly tie into earning to somebody else when your cup overflows.

So if you’re starting off, I still think administrative is your best bang for your buck—first hire. It’s going to allow you to double revenue. Then you start hiring more people— start hiring more people to run calls because now that the administrative person is going to do a good job, they’re going to schedule you more calls.

It’s really hard to run quotes and more calls when you’re in the machine. So, you have to get out, and you have to go quote them, and you don’t want to feast or famine. You want it to be consistent and to be up and to the right.

So the next hire is getting you out of the machine—at least part-time, ideally full-time—so you can move into sales and feed the beast and put some marketing behind it.

So even below a million bucks, that’s kind of the playbook. You start your business, you’re doing your thing—land clearing, plumbing, whatever it is.

You might do $150,000 of revenue for your first year, which is good, and most people get stuck somewhere around there because they haven’t brought on the admin. Then they bring on the admin, and maybe they can do $300,000 to $500,000 alone, which is awesome!

With just that admin, then you bring in more people, and productivity goes down per person that you bring on, but it allows you to grow the business.

Austin Gray: Does that make sense on the road from $0 to $1?

John Wilson: Totally.

Austin Gray: And I can second a lot of the things that you’ve said. That was exactly the path that we followed too.

Yeah, first hire was the office admin, then bringing on someone to lead and operate in the machine, then general labor to help support them and then more general labor to help support them, and then—yeah. So I’m seconding all that.

So I think that’s very clear as to what needs to happen at that mark.

John Wilson: Yeah, so let’s move to the next one!

So from $1 million to $3 million, you’re starting off. You’ve got four guys on the field, you’ve got you, the owner, who’s project managing and selling, and you have the office administrator doing sort of everything.

The main thing— no matter what size you are, you always have to be focusing on how you’re going to get your next call, how you’re going to get your next job.

Marketing is always going to be a frequent conversation. You’ve got to keep the phone ringing; you’re going to be figuring out leads—whatever.

As the business starts growing, you’re going to be focusing on leads. I think it’s personality-dependent, but I think that usually the owner ends up staying in the sales seat for too long.

So what I tend to see happen is the owner is going to stay in the sales seat for a really long time, and they’re going to get stuck because they’re not running a professional sales process.

Most of the time, owners think they’re the best salesperson in their business when they’re realistically probably not. They’re not because of a few reasons.

One, they’re the owner, so their biggest concern is “I gotta get this; I gotta do payroll; I’ve got to do whatever,” so maybe they’re too busy. They’re going to cut corners more than a professional salesperson.

As early as you can— in that post-$1 million mark— you want to bring on a good salesperson and start focusing on the field management side of things.

It’s personality-dependent; maybe you’re the best at sales, but if you’re not, you should probably bring on a sales guy and standardize your sales practice. What that’s going to do is it’s going to teach you pricing early on.

It’s going to get you converting leads. The best way to grow a business from my lived experience is as early as you can pay other people to grow your business, the better.

The way you pay other people to grow your business is by giving them a fat commission check for the more stuff they sell. It’s not complicated. You’re aligning your incentives.

“Hey, I want you to grow the business. I want you to sell a bunch of stuff. Here’s a bunch of money to go do that! Go forth and prosper, my son.”

So that tends to work very well. Commissions and incentive pay are always going to drive results, so the earlier you can do that, the better because that will work.

Then you start focusing on leads in project management. You really want to divide up those project management roles and the sales roles as early as possible.

That’s why you’ve got to do one of those two roles, right? Like after breaking a million bucks— maybe like a million and a half. I like sales because I think you can go get a sales guy to do $2 million each— almost regardless of trade, which is sweet!

That makes it scalable, but you want to divide those up because you really don’t want the yo-yo of like, “Oh man, I went and sold five jobs— we’re busy for a month— and then because I was managing those jobs, now I didn’t sell anything new, and now I have to go sell five more jobs.”

I’m frantic and whatever. Like, you want somebody always feeding the system. This is a flywheel: you get a lead, somebody sells it, you fulfill it, you get a lead, somebody sells it, you fulfill it, on and on for the rest of your life.

Bring on a sales guy. That was a long spiel for that. Then the owner takes a role in project management. You bring on more guys to support the salesman’s effort because a salesman only gets paid when the job gets done.

Now, your job is to make sure that you have enough capacity in the field to handle what they are selling and enough leads.

But a good salesman in some type of construction should be able to self-generate too. You can put them in a networking group at that size. You only need a few leads a week to make it work.

Does this make sense so far?

Austin Gray: Yes, it totally makes sense. And my question for you is, is this the exact approach you took whenever you were growing the plumbing business you bought?

John Wilson: Much, much messier! This is the approach that I wish I would have taken.

Let’s see here. My industry is a little bit different. My industry is a little bit different. I was sort of basing off of yours. The earlier you can add commission to anybody, the better.

So my industry is different because we didn’t have like salespeople selling projects, whereas yours does— right? That’s a little bit of a different thing.

You’ve got like the construction guys moving earth, and you’ve got the guy selling projects. In my industry, it’s tech for tech performance. So everyone is a salesperson; everyone is a sales guy, right? They’re there to talk about options and toilets and whatever.

So then, we added commissions to our business when we were at a million in revenue, and what that allowed us to do is it allowed us to up compensation.

We became a much more attractive employer in the market. We were able to hire a lot more people and fuel the growth. Tickets went up, performance went up. Everything that you think would happen by aligning incentives happened.

Now, there were also some bad stuff— like you get bad actors— but you just fire them really quickly.

So, we didn’t have to hire the salespeople. If I was HVAC, like, I would have had to hire a salesperson, but in plumbing and electric, it’s a little different.

Restoration, you have to hire a salesperson, but then we did hire our first manager roughly around the $1.7 million mark.

Austin Gray: Makes sense.

John Wilson: Yes, sweet!

So your recommendation would be to— after that million mark— hire a salesperson?

John Wilson: Yeah, well, it’s a little bit more than just hiring a salesperson—it’s professionalizing the sales process.

So, like, how do you price and why do you price that way? What is included on every sale and what’s not included?

Like, for sewers, we had professionalized the sales process, so I used to be the guy that would sell the sewers. I would go out there and I’d have some rough price based on like man hours that I thought it would take and rough material I thought it would take, and man, it was terrible!

I didn’t do a great job of setting expectations with the customers because we didn’t have a professionalized sales process.

So we bring on a sewer sales guy; he does a great job. We’re excited about his work; he sells a couple million bucks a year worth of sewers!

But it’s now a much more deliberate professionalized process— which I would not have done as the owner. Like, I’m trying to keep guys busy. I’m going to break some eggs, I’m going to keep doing my thing. This guy’s going to follow the rules.

From there, it’s like price per foot. Great! Here’s what’s included, here’s what’s not included. We’re not going to reseed the lawn; we’re not going to come back and tamp it down. It’s going to take six months to settle—whatever.

So we had to set standards for that role and for the customer in addition to hiring the salesperson.

Just hiring the salesperson doesn’t solve the problem. It’s certainly a big step towards it, but you also have to create the “Why are you pricing this way?” and “What does your type of work look like?”

That’s how you scale a sales team because what happens when you hire the second guy? If you didn’t set up the rules with the first one, it’s a cluster!

They’re selling in two totally different ways, using two totally different pricing matrices and setting two completely different sets of expectations.

You’ll probably hire your second salesperson before you hit $3 million in revenue, assuming that each one does, you know, caps out at two million bucks a piece.

So you’ll be at $2 million, you’ll start selling again, and your cup’s going to overflow because you’ve got other stuff going on in your life. You’ve got to hire the next guy in order to get to $4 million.

So, is that something you worked on specifically— creating or standardizing the process?

John Wilson: No, I’m not very good at that!

So it was really messy. Then I brought on a great ops manager at about $4 million—like $3.8 million, I think—and he standardized the process.

Austin Gray: Do you wish you would have brought that person on sooner if the budget allows?

John Wilson: Yeah, for sure.

Austin Gray: So, are you saying the budget did not allow until $4 million to bring that person on?

John Wilson: I didn’t think the budget allowed.

Austin Gray: Okay, the budget probably did allow; I just didn’t think it did, and I could say that about most hires.

Most hires that have moved the business forward felt like a reach when we brought them on. I’ve gotten used to the feeling now. I used to just say no, but now we’re bringing on big hires that are— it’s an investment; it’s a very real amount of money that we’re bringing people in at.

It’s a gut check every time still, and like we have a big budget now, and it’s still a gut check every time, where I’m like, “Holy smokes, that’s a lot of money!”

But what they bring to the table is game changing. Saving money on a key hire isn’t like a win. You probably didn’t save money; you probably lost money, and it’s probably going to end up being a really big problem.

So that’s a different thing— pay up for key hires, I guess, and as early as you can. But I also understand like small business budget constraints are real. I get it; I remember it!

That was like three years ago, four years ago.

Austin Gray: It’s such a good word to hear that; it never goes away.

This morning, our office manager and I were on a call, and we were reviewing the financial projections for this year. We’re bringing on two new hires starting in May during our busy season, and one of them is going to be our highest-paid employee by a good amount.

We’re sitting here running the numbers on the projections, and I’m looking at the revenue numbers, thinking, “Okay, this is going to be a little bit of a stretch.”

Then you look at the net profit and you feel like you just got punched in the gut!

It’s good to know that it never goes away and that it’s normal. But anyways, let’s—

John Wilson: It never goes away, and it’s normal, but I also think you get a little bit better at like “Will this person move the business forward?”

Just because someone’s expensive doesn’t mean they’re going to move the business forward. So I don’t want people taking that lesson away, like “Ah, you said hire expensive people”—maybe.

But if you’re looking at a manager or a salesperson or an administrative person that’s really going to move the business forward, don’t shy away just because of price.

What you may find— and what we have consistently found— is that the money has been worth it in the right roles. Like we’ve paid up for some key roles that I was thinking to myself, exactly what you just said: “Man, that’s going to be a hit to budget,” and that hit to budget never actually materialized because they helped grow the business so much that the hit to budget was irrelevant.

Like, “Oh man, I’m going to lose eight grand a month! That’s a real hit.”

“Oh, they helped me grow the business $50 grand a month! That’s no longer a real hit.”

So when you’re looking at expensive hires, just make sure they’re actually going to move the business forward.  

Austin Gray: Totally.
We kind of jumped around. I shouldn’t say off topic because that was a very good word for people listening.

Let’s jump back in at the $3 million mark. Where were we? It was after the $1 million mark, hiring the sales, or standardizing the sales process, and then focusing on project management?

John Wilson: Yep!

Anything else you want to add?

John Wilson: Hire a project manager or a field manager— the front-line manager is the best way to think about it—who’s going to work directly with the technicians.

Your job— the way I phrase it is kind of dumb, but the working on versus working in the business— there’s no, like, a $100 million CEO of a service company is still working in the business.

He might tell you he’s not, but he is. It’s just what percentage of their time, right?

Austin Gray: Right!

John Wilson: So I’m still working in the business, and the way I think about my role is: what percentage of my time is leading people, building teams, and working through other people? And what percentage of my time is individual contributor work?

I’m probably 60/40 right now. I know people at $100 million plus, and their 20% of their time is still individual contributor work.

Like, they have to touch something; they have to do a task.

It’s not just, you know, running around, and that’s a big danger that people run into at $3 million—like that specific size.

There’s something about this size where if you’re running a 10% profit on a $3 million business, that’s $300 grand. That’s a lot of money.

If that was your take-home, that’s a lot of take-home! You can do some damage with $300 grand personally, right?

What seems to happen at this size is owners stall out, and they start running like remote lifestyles, and they start losing all of the focus because they don’t know what to do with all of their excess time.

You know people are in this stage when they start saying like, “Man, I only work 15 hours a week,” or “I’m going to go remote.”

Austin Gray: You’re laughing, and it’s true!

John Wilson: Because they don’t know what to do with their newfound time!

What they assume is they that they’ve hit the apex of business success and now it’s margaritas in Cabo for six months a year, but the reality is this is the moment that your business needs you the most.

This is a major inflection point where a lot of businesses just don’t make it past it because the owner is dumb. The owner should be dialing in on process.

The owner should be dialing in on figuring out recruitment. The owner should be figuring out marketing. Instead, he’s obsessed with how he only has to work 15 hours a week because he’s still thinking of his work as individual contributing work.

“Oh, I only have to sell projects for 10 to 15 hours a week? Great!”

“Does your team know what the next two years look like? Have you brought on awesome managers? Are you building comp systems? Are you building systems that are going to run this business the same at $10 million as it does at $3 million?”

So it changes the work stock, and the owner has to develop himself or herself and upgrade to be able to take on the new responsibilities of actually building an enterprise instead of getting sucked into the fact that you just started making $300 grand, and you only have to work 15 hours a week.

This is a big trap that people consistently find themselves in. The business needs you the most. It’s really time to double down and push through and build something real— in my perspective.

I mean, maybe people do just want to coast, and I just find that hard to relate to. Like, I want to build something big.

Austin Gray: Absolutely!

So crossing that $3 million mark, the big thing is you have to upgrade yourself as an owner and start to take a more manager-level view or an executive perspective.

“Okay, I’m starting to build a real business here. The cash flow is real; there’s a lot of money spitting off this thing. What do I do with it?”

Ideally, you’re in a business that you can reinvest that cash back into the business in order to scale it.

So back to the org chart— at that $3 million to $5 million mark, what you should be thinking about is more of—it’s a little bit more of the same, right?

So you’re bringing out more field people because that’s how we all make money. So you’re bringing out more field people, which means you’re going to bring out another manager, and that’s a big commitment— there’s no argument.

That’s a lot of salary, that's overhead coming straight off the bottom line as some people might see it.

You also start needing to think about a dedicated bookkeeper. You’ve got a lot going on, and Betty Sue or whoever used to pick up all the phones and schedule all the appointments and do all the billing and cash checks and open the mail is now overloaded.

Her cup is full, the same as your cup was full when you were on the machine or your cup was full when you brought on a salesperson. Her cup is now full; there’s too much going on in that role.

So you start bringing on other people to support that, and you start specializing support positions.

So maybe that looks like two people call taking or one person call taking and another person dispatching. That’s what it would look like in my industry— like one or two call takers and a dispatcher in that $3 million to $5 million range— and then a bookkeeper.

So that’s a lot of reinvestment, right? That’s a lot of reinvestment. That’s no joke!

But without that reinvested payroll, you’re not breaking $5 million. You’re just not going to do it. You’re going to crap out because everybody’s cup is too full; no one can take on new tasks.

So you add those roles; you specialize in the office, and then it’s a little bit more of the same— another manager and some more salespeople.

Does this make sense as a playbook? Do you feel like I missed anything in there?

Austin Gray: Nope, I’m following along!

John Wilson: Cool!

After $5 million, it’s a little bit more like you add another specialty— maybe another two specialties.

The big one that I’ve said is recruitment. You really can’t grow without more recruitment.

The bigger the business gets, the worse your turnover gets. You have more churn because you have more people.

It’s no longer going to be the same people you worked with for 20 years. You’re going to be constantly bringing on new people and offboarding people that this is no longer a fit for, which happens a lot between $1 million and $10 million— so forewarning!

The same people that were with you at a million very well might not be. Most likely, they will not be the same people that help you break $10 million because it's a different person.

Like, the person who wanted their hands in everything— who wanted to help with payroll, who wanted to do some HR stuff, who wanted to book appointments and talk to customers and do billing— that’s like a switch hitter, and that person is not going to thrive if their whole job is bookkeeper or if their whole job is call taker or dispatcher.

They're going to struggle because they're used to having their fingers in everything.

So they really tend to struggle, and you cycle a lot. You have to have a really steady flow of recruitment in order to keep up with the cycling.

So that’s a new specialization that you’re going to add. Then marketing is the next big specialization that you’re going to be adding because you have to now get enough leads to make this thing consistent.

You know, at a $5 million business, you’ve got to keep your sales guys fed.

So what inside the field looks like is kind of the same. The field doesn’t change a lot between $5 million and $15 million, which is kind of hard for people to believe, but it’s really just more of the same.

Okay, I’m going to bring out more texts, and maybe those texts get more specialized. So, you know, you’re just going to always continue specializing.

More people are going to keep doing fewer things. Like I’ve got a water heater person, we have a panel person, there’s a generator person, HVAC sales—people get niched down into whatever they’re world-class at.

You hire more salespeople; you bring out more men to keep the teams roughly around 10, and you just keep doing that over and over.

The biggest changes happen in the administrative side of the business. You start building fully new functions that have never existed before and that you may have never had to deal with before— building an accounting team, you know between $7 million and $12 million.

Accounting goes from like a one and a half to three-person department. You’ve got— at $5 million to $7 million, you just have a bookkeeper. At $12 million, you have accounts payable, accounts receivable, and a staff accountant or a controller.

Totally different, right?

So that’s just an example, but that’s most of the work that you put into your business.

You start building out infrastructure— the platform from which your company can grow. So, “Hey, I have an organized accounting department.”

So that means our money is going to be in order; our budgets are going to be good so we can always reinvest.

Austin Gray: Okay, awesome.

John Wilson: Alright, so now I’ve got a great marketing team. I had to build that, you know, starting around $5 million.

Maybe I brought on a part-time person to help just keep stuff up or an agency and I outsourced it—however you want to do that.

But that’s a capability you have to build so that way I can keep our salespeople busy. Then we’re going to professionalize sales.

So our salespeople build our fulfillment— like the install people— busy, busy, busy. And just on the cycle it goes.

So a lot of the hard work that you do is infrastructure and platform building: who’s on the support team and how much depth have we given them?

I don’t know if that was very tactical, but did it help at all?

Austin Gray: Of course! This is awesome. I’m just trying to stay on mute over here so I can just let you keep going.

John Wilson: Yeah, I can probably talk for too long, but I also want it to be relatable to the listener.

So like, if most of the listeners, I think, an aspirational thing is good— “Oh man, I can’t wait to have an accounting team.”

But is that a problem that they’re going to have to deal with for the next few years? Maybe not. Where do you think most people are at?

Austin Gray: Well, I can tell you where I’m at right now, and maybe that’s related.

Thank you for giving us the complete overview there, or a lot of the overview, up to $10 million.

It gets way more complicated at like $15 million, and I just don’t know that it’s relevant to the conversation.

But like in layers of the org chart, those are the big inflection points. Inflection points— and I know I’ve said this, and I’ve talked around it— but the inflection points are people’s cups getting full.

So then you have to bring on new support people, but it’s also what is the CEO doing, and can you upgrade yourself?

Because the person that is running a machine is not the same person that is going to be running a $3 million business.

Now, you might be in the same body, but you are a fundamentally different human. You would have learned more; you would have known more.

And that’s also a very different person that’s going to run a $10 million business, a $15 million, a $20 million, and so on.

You have to develop yourself so that each new stage of the business— if that’s what you want to do— if you want to be the one running it, then you have to invest and develop yourself so that you can be that person.

I’ve had to reinvent myself like six times because I was the guy in the truck. I was the plumber seven years ago—hands on the tools, installing boilers and water heaters and toilets, and that’s a different person at a million bucks to run that business.

It’s a totally different person at $3 million with two managers, 15-20 people in the field, and an accountant— completely different.

It’s a reinvention, which is, again, totally different from $5 million when you start to think about building infrastructure— and like, “Okay, what does an accounting team look like? How do I bring on marketing?”

Totally different from $10 million when now you’re several layers from most of the organization.

So the three big things to remember, like the takeaways are: capacity is cups overflowing, and where do they go next?

Scaling a business is turning generalists into specialists over and over again for the rest of your life.

And if you personally want to run the business— then how are you going to upgrade yourself so that you are capable of running the business at each new stage?

Because it does require a completely different version of yourself.

The me from today would not recognize the me from seven years ago.

Austin Gray: Well, this is incredible, John! Thanks for giving us the overview here. We are at the hour mark.

I think we could do a whole another hour on tactics.

Do you want to ask your top three?

John Wilson: Let’s do it!

If you’re down, let’s do a part two down the line for tactical questions. Sounds good for right now!

Austin Gray: I just told you, here’s where we’re at in our business. Like I said, for the last 18 months, I started as sort of like the owner-operator.

That’s kind of why— and I do have to mention, thanks for being cool about the name. That was something that was so deeply embedded because my dad has been an owner-operator his whole life.

When he started his concrete business, he still works in the business. When I came back into the trades, I’m like, “Dude, I know I can start a business by just getting out there and getting it done,” right?

But the goal was never to stay at that point. The whole premise of like the OWNR OPS and what it means to me is exactly what you said: being willing or humbling yourself enough to do the task that you think you should be hiring other people to do eventually, but then having a growth mindset and the wherewithal to know when you should step out of that role.

And to your point, upgrade yourself.

So, yeah, I have entrepreneurs and where to step next. That’s the first big step!

Like, owners have these big steps, so like the first big step is I’m not in the truck anymore! It’s a huge step.

The next big step is around $3 million— like, hey, I’m making a lot of money, and I’m not tactically doing very much every day.

But what should you be doing? Where should your time be going?

I guarantee you it’s not golfing!

Like, your time should be doing something else, and I guarantee you it’s not golfing!  

John Wilson: So, it’s knowing when to step back, but it’s also knowing where to step to.

Absolutely!

So just to sort of recap here, I would say my main question for you is: with where we’re at in our current business and what you know about it, do you feel that or do you think that—
I am taking the right step in delegating the fieldwork to the crew, focusing on sales and estimating for this summer, and then having a plan to standardize?

Starting to get some of how we price and why we price the way we do onto paper and then moving towards a plan of standardizing that for the next summer and focusing on project management for the year following?

John Wilson: Yeah, I mean, I think that makes sense.

I think one of the most challenging things that you didn’t talk about yet is like marketing is always a thing.

So if you bring out a sales guy, how are you going to keep him fed?

Sales guys will close stuff if you give them leads to close, so you’re going to standardize it— you’re going to bring out a sales guy.

How do we keep that train moving year-round?

Because a business— I don’t know what yours is like; I assume it’s tough in the winter.

I know mine is.

But you have to figure it out because it’s really hard to run a $10 million business eight months out of the year.

Maybe you can; there are very large landscaping companies that do it, but it is much easier if you figure out a way to work through the winter and do something else and have consistent lead flow that whole time.

So that would be probably one of the bigger things— is yes, standard in and yes hiring, but then how do you keep that guy busy?

Austin Gray: Yes, absolutely.

So our plan is to build snow plowing in as an additional wintertime service.

What we’re testing right now is marketing in certain areas of the state that don’t hold as much snow, and we’ve had a little bit of success with this so far.

We’re getting two or three leads a week right now from our marketing campaigns, but I don’t want to hang my hat on this as 100% the route that we need to go yet without seeing a whole winter through, testing this.

Fortunately, we had a good enough year in this first year with landing a couple of good projects, and so we have the buffer to be able to test this with our marketing budget— run a test this winter.

But always knowing that snow plowing is a much-needed service here in a mountain town in Colorado!

John Wilson: 100%!

Yeah, that’s a solid plan! I love it!

Sounds good to me.

That would be a good thing— like the snow plow guy could be selling commercial contracts, or they could be— which that would be huge!

I know that’s like a big thing— like the urgency of commercial snow plows— a lot of parking lots and hospitals and medical and even businesses have strict requirements on how fast it has to be plowed once the first flakes hit, so the contracts can be priced very well.

That’d be a solid way to, like, “Hey, during the summer you sell this, during the winter you sell this.”

That way you can keep your guys fed— that’d be sick!

Austin Gray: Yeah, absolutely! That's the plan right now.

I would love to do a part two with you at some point down the line.

I love what you're doing with your podcast and love following you and picking up little insights here and there, so I'm just thankful that you spent your evening with us here!

John Wilson: I had fun! Thanks for having me on; this was a good time!

So tell the listeners, where can people find you online?

John Wilson: Yeah, so I’m all over Twitter— for better or worse— at Wilson Companies. And then we’re doing some stuff; we have a podcast, we have a newsletter. Check out ownrops.com, where we talk about basically this nonstop.

That’s all I can think about.

Then the other thing I’ve seen recently is, tell us about this event!

John Wilson: Yeah, so we have— like I said earlier— breaking $5 million is a big event for businesses, and it is an inflection point for CEOs.

You have enough money to meaningfully reinvest into the business, but you also, for the first time, have to start building real teams— like accounting, HR, marketing— these different capabilities that you’ve never had to build.

At a $5 million business, it’s just like when the good starts. The business is more durable; it’s not just you driving the bus. There’s managers, there’s more going on.

So I’m a firm believer that getting to $5 million as fast as you possibly can is the best way for your business to thrive.

So we have a workshop in— we’re going to do this a couple of times, actually. The first one’s in March. I think we’re going to do another one in June.

We’re almost out of seats for the one in March, but it’s at my headquarters in Ohio. So that way, you can come in, and you can see what it looks like at closer to scale.

We’re going to have 140 people on the team, so you can see what a call center looks like, what a fully fledged marketing team looks like, or accounting or HR, or whatever.

Then we work backwards to, “Okay, you’re at a million or two million or three million. How do you get to five? What does the— exactly what we talked about here— what are the inflection points? What’s the org chart? How do we think about reinvesting? What does fleet look like? What are the big pivotal roles? How do you drive leads?”

So it’s two and a half days of that. The whole time, we’re just talking about scaling your business up past $5 million bucks.

Austin Gray: Should be great!

John Wilson: Specific to plumbing, HVAC, electrical, or industry agnostic, just home service- specific.

So we do a lot of— obviously, just because of the audience— a lot of people are plumbing, HVAC, and electric.

But we do have a couple of roofing guys. We’ve got some commercial services companies. We have fence installation. It’s all service-specific— a fair amount of it’s B2B because a lot of the stuff’s the same.

The office side changes a little bit, but at $50 million, you’re going to need an HR person regardless of if you’re serving homeowners or businesses, right?

You’re going to need a marketing person regardless. The marketing person is just going to be different— like B2B, that marketing person is going to be a door-to-door sales guy, and B2C that marketing person is going to be helping you optimize ads.

So, different responsibilities, but same roles!

We dive into both of those that way you can figure out whichever one you are—how to grow your business.

So yeah, pretty industry agnostic— just inside home services or commercial services.

Austin Gray: Sweet! And where can people find the details for that event?

John Wilson: That’s on ownrops.com and it’s March 19th through the 21st of this year.

And then again, you know, by the time this airs or whatever, it legitimately might sell out. We only wanted 30 people, and I think we’re at like 26 or something right now.

Two or three more joined today, so there will be another one probably in June or July. Sign up for the waitlist; it’ll be coming up there soon.

Austin Gray: I was just going to the website here, so what— there’s a workshop up at the top?

John Wilson: Yep!

Austin Gray: Sweet! And there’s a great picture of John right there on the landing page!

John Wilson: Yeah, that was a joke, and Kristen ended up putting that right up there.

Austin Gray: I love it, man. It’s great!

So that’s the HQ, huh?

John Wilson: That’s the HQ, man! We just moved in there five months ago.

We had six locations last year, and we moved down to one. So last year for us, this is a totally different episode, but when you break $15 million, the game really changes.

I could write a book about what you have to do to break $15-$20 million.

Austin Gray: Why don’t you write a book?

John Wilson: Probably one day. I think I’ll have to get big enough that people would care, but breaking $15-$20 million was wild.

So that was all of our work last year— each of those roles that you build at $5 million— like the HR, the recruitment, the accounting.

Breaking $15-$20 million is professionalizing the hell out of them and building depth into each one, so it’s no longer the one accountant— it’s like five people on your accounting team, each in very specific specializations.

And soon that won’t even be specific enough. Soon, AP is going to become like five different roles, right?

To become even more specialized because the whole journey is generalist into specialist until the end of time. Like, that’s not an exaggeration.

You think you’re specialized enough as an AR clerk until you find out that maybe one person’s entire job is depositing checks, and maybe this person’s entire job is managing accounts A through J and then K through O or whatever.

So it just continues to specialize, but the big thing that we had to do was we built out fully functioning teams, placed new leaders above each of them, and brought on a whole row of front-line leaders.

We became a four-tier org chart, which was a really big step up and another reinvention of myself where I had to now learn how to talk and filter my vision, my communication, my whatever— through multiple tiers of management in order to get to the vast majority of the people on the team.

So it was a really big reinvention of myself that I’m still in the middle of; I don’t think I’m very good at it yet.

And a massive— you know what’s a $200,000-a-year reinvestment into payroll at $5 million is a $2 million to $2.5 million reinvestment in payroll at $15 million.

It’s a gut punch; it’s crazy!

Austin Gray: Dude, it’s incredible what you’re building. It’s so fun to watch!

John Wilson: Yeah! It’s fun to build it. I mean, we’re aiming for $100 million by 2030, so that’s the track we’re on!

I have so many questions right now; we can make this like a three-hour episode.

Austin Gray: All right—we can tag in next week and do more!

John Wilson: Last question here: is that going to be specific in plumbing, HVAC, and electrical, or are you going to bring on additional services to get there?

John Wilson: We’ll probably bring on appliance repair and we’re seeing that as the last one, really—yes!

So at that point, you just have to expand geographically or get more leads in your current markets—both.

Our current market has capacity for a $100 million business, so we can—

Austin Gray: What do you define as your current market?

John Wilson: So there are 4.3 million people that live— that’s the population inside the area that we serve.

And 1.6 million are eligible customers, so that’s our TAM— our total addressable market. That’s people that we can well and truly serve.

So they live in our service area; they have income that will likely pay for our services, and they own a home.

So, we have 1.6 million people in our service area that fit our qualifications. So right now, we have a 6% market share.

So we have 100,000 people of those 1.6 million that we have served— those are our active customers.

A big part of our job over the next seven years is getting that to 400,000 people in the market. So we’re going to have 25% market share and—sorry, I lost my train of thought there—I was going to get 25% market share, and that will be around $100 million in revenue.

Austin Gray: There you have it! All we have to do now is go do it!

John Wilson: All you have to do is go do it!

Austin Gray: John Wilson on his path to $100 million. Thanks so much for being on, John!

John Wilson: Thanks for having me on; this was a good time!

Austin Gray: Well, thank you guys for listening to another episode of the OWNR OPS Podcast. If you liked this episode, please make sure to like, comment, and subscribe if you’re listening on YouTube.

And if you’re listening on Apple Podcasts or Spotify, please make sure to like, follow, and we would greatly appreciate a five-star review.

With that being said, we’ll see you in the next episode, and we’ll see Mr. Wilson back for part two at some point!