How Tommy Mello Built a $400M Home Service Empire

If Pablo Escobar knew about this, he'd be in a whole different business. Like, this is the craziest thing. How's that legal?

You do it the right way, it's worth 12x. So, 40 times 12 is 480 million. So, you made 380 million off that. I want my technicians to make 250 grand a year. That's like a base. I want them to make a lot more than that, but if they can't get there within 2 years, we've got a problem.

Uh, 800.

I drove a really old truck, a 2012 Nissan Titan with a salvage title with 300,000 miles on it, till every single technician and installer had a new truck. I was not going to get a new truck till they had one.

I'm giving tens of millions of dollars away in the next year to nonprofits.

Uh, yeah, it's, you know, a lot of people talk about culture, but culture really is the lifeblood of the company. You could get to 10 million and have a horrible culture, but you're pulling your hair out. I mean, I was pulling my hair out far more earlier when people would walk in, they'd be hung over, they would do no-shows. And so, now it's, the culture used to be like a bad word to me. I'm like, people are smoking cigarettes outside. Like, what do you mean, culture? But now, it's like, if they're excited to come to work, they're excited about being part of the vision, they know they're included, they got a capacity to move up in the company, and they're home run hitters, man. I mean, if you get talent, I got a buddy of mine that's got a guy that does $22 million a year himself. One guy, and that's in the HVAC industry. So, if you become a magnet for talent, everything kind of works itself out.

Yeah, number one would be price it right. Uh, I've learned this lesson from some of the godfathers of the best home service companies on the planet. Uh, be the most expensive in your market.

Have the best quality. Be known for, like, by far the best you could be. Like, not cutting corners, not discount paint. Like, have things that differentiate you. Like, I've got my own product line, MaxLife. They're 100,000 cycles. Everyone in the industry thought I was crazy. They only use 10,000 cycles. So, how do you differentiate yourself? Be the most expensive, pay the most, and be the best at customer service. I think getting the job done on time, making sure you got somebody you could trust in their home, uh, playing with the dog, offering coffee on the way. These little things go a long way. So, that's where you start is differentiating yourself. And most companies are not priced right. They say, 'You don't know my market. You don't know how all the other guys are cheaper than me.' And that's just an excuse because I'm in 40 markets right now, and we're not the cheapest.

So, right now, I've got a lot of smart companies working with me, uh, that are doing deep analysis on the industry. And you'd rather take one market and build it into a massive market. If you're ever looking to sell, they don't want a bunch of popsicle stands. They want you to take market share and be the industry leader in that market. So, a lot of people try to scale, they get to a few million, then they'll go to the next one, go to the next one. Meanwhile, when you go to the next one, this one's falling apart. So, own the market you live in, where you went to school, where your parents probably raised you. Own the market where you go to church, own the market where you know everybody, and like take a bunch of market share in the tune of 20 to 25% of all market share.

No, 5 million is not enough. I mean, I think you could probably get to 50 million in a, depending on the city. I mean, look, if you're in a Podunk nowhere, yeah, it depends on population size, uh, average income, credit. There's a lot of different factors that go into picking the right market. Like if you wanted to be really good at software, you'd move to Silicon Valley. If you wanted to be in private equity, you'd probably move to Manhattan. If you want to be a big, big home service company in painting, you'd move to the right market, and that's where I would attack. Like, you can't make a bunch of money in Flagstaff. We're not far from Flagstaff, but the market size does not enable creating that.

Profit. It's all about EBITDA. You got to focus on profit. A big one that I don't think many people talk about is tax strategy. I mean, you got to get a great CFO. A lot of people are using their aunt who's a bookkeeper, and they don't really know what's happening in the business. So, I mean, my CFO, he works really, really hard to make sure we're buying right, make sure that we negotiate our contracts correctly, we get a better price on when we buy vehicles, how we pay our vendors. I mean, we got some of them out 6 months. Uh, CFO is probably the most important. If you're great at marketing and sales, like most entrepreneurs, you need that missing piece of the CFO. The other thing is just, I call it the conversion cycle. You got to fight for every lead. Every lead that comes in, you got to fight. You got to make sure you're booking it. You got to do whatever you can, and like I got to hear the CSRs fight for that call. Do whatever that's going to take to get it. So, you got to book every call. You got to work really hard to convert every call that you book to a client. And then you got to have add-ons. You got to sell things that nobody else is talking about. If I was in paint, I might talk about some stuff I could do to put on your roof. It's going to make your roof last longer. You see all those commercials now like rejuvenate your roof. I'd probably talk about any type of wood like you have on, like if you have a deck, I'd talk about this is going to add 20 years to your warranty on your deck. I'd talk about the window seals and say this is going to make your windows last longer. I'd talk about possibly even doing something to the windows to make the heat and air conditioning bill go down. Like, I would have all these extras. So they're already buying from me. If I could get an extra $2,000, and it makes sense that everything's going to last a lot longer. You know, you got aluminum siding. What could I do? Is there an extra coat I could do on there that's going to make that last an extra 10 years? So I say, 'Look, we do everything that's going to actually add $100,000 of value. You're only spending a few extra grand.' So we're protecting your current investment.

All the people that have gone to my events, hopefully they get motivated. I'm talking from true experience. I'm not a coach. I'm still in the game. I know about everything going on in the economy, good, bad, and indifferent. I will tell you I'm obsessed, the very most I'm obsessed with marketing. How do you make the phone ring off the hook? I've got, you know, we've got 34,000 leads coming in a month. We run about 25 to 30,000 homes. We're in their home a month. And then how do you match that up? That same fire for leads. How do you match that up with great talent? How do you become a melting pot of A players to come in? Because if you got great talent coming in and great clients coming in, it's a perfect storm. So those are the things I like to talk about. I also just talk about strategy. Build a company to sell. John Warrillow wrote a book, Built to Sell. And I'm a big fan of building a company that you could sell for a lot of money in the tune of, you know, tens if not hundreds of millions of dollars. Yeah, I'll just tell you a few tips as most people aren't using the right brand.

It was 30 million when I decided to change the brand. It was still A1. But I got the right vehicles. That, like, the driving billboards. The brand is everything. Most people are using the wrong brand. They got letter and we do painting, we do this, we do that, we do, you know, epoxy floors, whatever it might be. Get the brand right first. That's a huge one. And then obsess over just a few KPIs that I'm going to talk about. And if you obsess on them and you get them the best, your company will just continue to grow. One of the things that most people don't talk about is their internal net promoter score.

How happy are the people that work for you? Your internal clients. I call them my coworkers. And if they're extremely happy, they're going to make your clients happy. And what's nice is when you charge the right price, you can pay more. And people don't leave. And then the greatest people in the industry come work for you. And that's the greatest thing about being able to charge the right prices. And I know I've heard this so many times, you know, there's cheaper competition out there. We can't charge those prices. Sales is important, man. You got to sell yourself. You got to sell the company, and you got to believe in the clients. Become their best friends. And look out for them. I say, here's what you need to do. Here's what you should do. And if you were my mom, my mom worked three jobs when I was a kid. I love my mom more than anything on the planet. Here's what I'd be doing for mom. And you do that properly, it just works. But you can't fake that. You got to really care. You got to really look out for people. I mean, I took a day off back in the day when I was training a guy in 2011. And I sat down with this old World War II vet for... and I started crying with him on his porch. I didn't do that to make the sale. Did that because I was genuinely interested with him. And I started loving my clients. Give them a big hug afterwards. They'd have lunch for me. They'd invite me to church. They'd invite me to date their daughters at the time. You know, I was just a wholesome, nice person, and they're like, instead of giving them one or two cards back then, they used to ask me for a case of cards. And everywhere I went, I'd give them a case of cards. And that's how I blew up the company. I mean, I got really, really good at treating people like old... they said, no one's ever treated me this great. Especially somebody that come work on my home.

You got to inspect what you expect. I mean, you call customers, you do secret shoppers. You got to literally make sure, like right now we built this tool, it's technology that we know that we indeed offer coffee on the way. So now we could, that's on their scorecard. So we've got scorecards with every single KPI. I want my technicians to make 250 grand a year. That's like a base. I want them to make a lot more than that, but if they can't get there within 2 years, we've got a problem.

That's what I want my technicians to make.