All right, guys. It's a special day. It is Super Bowl. And I got my good buddy Ishmail here. Ishmail Valdez. He's an expert in business, air conditioning, heating, and plumbing. He's based out of Anaheim. Founder of New and founder of NextGen Air Conditioning, Heating, and Plumbing. Ishmail is the founder and CEO of... he was at NextGen and now he's 100% in on New.
Yes, sir. Been in the trades for almost 20 years. I just want to... that sounds old, man. Honestly, Tom, 20 years, bro. So, I started at 17. Yeah. So, I'm going on 21 years now. I feel like, dude, that's crazy. The overnight success everybody talks about. How long you been on it, Tom? 20.
Uh, yeah. No, I was painting garage doors for, I guess, 2005. Yeah. So, 21 years.
Yeah. Um, so if you were to go in a company, let's call it a $20 million company, what's the first thing you do? If you were, let's just say, call it, you're an investor, you're buying 20%. Yep. Where do you start?
The top five people in the company, the CMO, hopefully they have one. Um, the COO, the general manager for sure. Um, so probably if they have a C-suite or just a management system in there, that's the first people I want to talk to, without the owner being there though. My first move is I would walk in, you know, I would say hi to people and, you know, just see how the operation flows to me. Like energy inside the operation is super important. Like I've been to operations, like even yours, you walk in and everybody's just like, yeah, everybody has their roles in their operations. So, and then I would grab the C-suite or the upper management and I would probably take them out to dinner and I would want to dig into them because they're the ones running the business. You know this, right? And I would probably spend a really, really good amount of time before making the investment. Then after I talk to them and figure out that, you know, we're on the same page, then I would go in there. But I would start with those people. Then I would walk into the, you know, show me your financials and all that. That's the thing is I think the data, I want to know how well do they have, whether it's ServiceTitan or Housecall Pro... that would be my second thing. Dial in the CRM. I need to see the numbers, where can I make impact.
Do you think... would you want to talk to the people first or would you make your decision all based on data, meaning the P&Ls, the balance sheet, the ServiceTitan setup, all that?
I'd want to meet the people, but at 20 million of revenue, you're talking about probably that's a good operation.
At $20 million of revenue, there's something there. It's not like they're trying to figure it out. Right. No, no. I would just say like if I didn't feel good about the data in which they were managing, there's no point to talk to the people. But then I say, could I make a ton of impact in this business because these people are capable and they've got the data to know.
Well, they got it up to $20 million, right? So, there's something there. There's something to work there. Um, now you tell me to walk into a $4-5 million company, that's one man driving that whole business. It's not fun.
It's not fun. So, and there's more opportunities. You know, I'll say this about Ken Goodrich, because he'll say this to your face. He buys broken businesses and fixes them all the time. But I don't want that. I don't have time. It's a lot of headache. I think there's a lot of money there. Just like in real estate, you can go Section 8 housing. Exactly. It's exactly how I look at it. It's a lot of work. I'd rather go and look at a $10 million house that needs a little bit of work and, you know, put a little bit of investment behind it and make it be worth $15-20 million overnight than get a $1 million house and dump another million and still be at $3 million. It's like how much is your time worth? And, you know, but Ken's done some cool stuff.
Um, I think we all got our little things that makes us special, Tommy. I think what I love being around you and AG and all these guys is that everybody has their own little thing that we're all learning from. You know what I'm saying? I think you're good at... your number one thing is recruiting.
Yeah, bro. I'm relentless. I'm relentless.
And really when you thought about it, you built it, and you said this based on what Leland did, is you just take his top guys, you plucked them one by one.
And then you built a good business off of that. One thing you did do as well with Andrew is you spent money on leads. And so you were good at recruiting, but you had enough leads for them. You can't get great people. Victor Rancourt talks about this. He goes, 'I left Service Champions. I was promised equity. They gave me equity. They gave me way more money, better commission, but I didn't even know my stats. Like there was no team there. It was like I was the guy. There was like three other dudes, but like there was no infrastructure. Like there was no meetings. Yep. There was no rah-rah. There was no dealers coming and feeding you, getting you excited.' I can't... I don't care how profitable and how dope the operation is, Tommy. To me, there has to be some kind of competitiveness inside the operation. There has to be some, you know, hey, bonuses. And if you would see the way I drive these businesses from Home Comfort to now, I drive them exactly the same way, bro. We are a sales-driven organization. And I don't care if it's an air conditioning, a garage door, a thermostat, or a toilet. You know what I'm saying? We are a sales-driven organization. Obviously, I've said it before. You cannot move from the most important thing, which is marketing. After you master marketing, marketing is the first step in the operation. After you master marketing, and you could lead generate on a snap of a finger and you got your message out there of who you are. After you do that, then you move on to the second step, which is the sales process. And you don't move on from the sales process to the operation process until you master the sales. And this is where all the $5 million operations get it wrong. They think that they're working on something all the time. They're always working on something all the time, but they're not doing anything, though. They're busy, but they're not productive. They're busy, but they're not intentional. They're busy, but they're not moving the needle forward. And that's where I think they get it wrong. To me, it's hey, there's three different operations to growing any freaking business, I don't care what it is. There's three different departments. There's a marketing department, there's a sales department, and there's an operation department. The operation department is the customer fulfillment, what happens when the sale goes through to when we collect a check. That's what I call the operation, right? Anybody could... dude, you know what I found out? All these four, five, ten, fifteen, twenty million guys are exceptional operators. They freaking suck at marketing and sales, bro. They suck at marketing and sales.
That's all I live for. Marketing and sales. Make the phones ring.
Do you know what your superpower is?
I think you're probably one of the dopest marketers in the world.
It's marketing. Get the phone to ring off the hook. We generate 34,000 inbound calls a month.
Yeah. And I think I'm just getting started.
And 34,000 leads in a month. Let me tell you, let me put this into perspective for you guys. You guys are probably going to generate 34,000 leads in your whole lifetime. Tommy's doing that in a month. Just to give you guys the perspective of how his superpower... And correct me if I'm wrong. I know you're super operational. You're super methodical with numbers. You're very data-driven, but I think your superpower, and what most people underrate you for, is you're a marketing genius, bro. That's what you are. You're a marketing genius from the way you carry A1, from the way you lead generate A1, from the way you present A1, right? I think you do okay in sales and operation, and that's why you have amazing people like Luke and all these guys behind you. Yeah. But I think your superpower is you can...
Well, I understand the funnel here. Here's what I want people to think about, and this is where me and Luke, we got a healthy relationship that I could kind of combat with him a lot. Yep. And I said, 'Luke, let's just do some quick math here. We've worked really hard to get to 90% booking.' 90%. Now, we're in 40 markets.
True 90%, by the way. Not like you're...
Yeah. No, it's 90%. But here's the problem. 14% cancellations. And that's just because, you know, we had 62 guys training capacity planning. I think we could get that down to seven. But so I'm losing 10% out of the gate, right? Because I'm a 90. Then I'm losing 14. So, I got 10.
And those cancellations on the 14%, is it because you can't get there fast enough? Because...
Yeah. So, I've analyzed the hell out of it.
How booked out do you stay before you answer? How booked out do you stay all year round?
Oh, yeah. We don't have any seasons. So, that's in the colder climates, installs goes down quite a bit. But I don't have a month that's ever going to be less than the last month. Unless it's all we do is say, 'How many Monday through Fridays do we have?' The month that we kill it, we got 23. The month that we don't, we got 19. Even though we're open Saturday.
You know what? I would like to see you operate an air conditioning business.
I'm telling you right now, dude.
I would love to see because look at the one thing you mastered is marketing, operations, sales, all that, right? You're phenomenal at that. The seasonality. Tommy, let me give you the influx of seasonality. We have to sell service agreements. $15 million, this is at peak at Nation, right? We did $15.1 million in our top month. In our low month, we were like at 6.2. So that $9 million fluctuation is what drives people nuts. Why nobody can... and look, service agreements do help a lot.
It's tough. It is tough, the seasonality. So I asked Keegan, I said, 'You're the only guy I know that's run lots of millions of EBITDA through garage doors and lots of millions through an air conditioning company.' I said, 'Honest to God, I'm in his office. We're doing an interview. You were there.' And I said, 'HVAC or garage doors?'
He goes, 'Mean tough? What's tougher?' No. No. He goes, 'If I'm going to do something, my non-compete's over.' He goes, 'I'd rather do HVAC all day because it's such a big ticket.' Yeah. He goes, 'I can get 20, 25 grand from a home. Garage doors, I could get six or seven and that's a new sale.'
But look at, you're not used to seasonality and you're not... look at, you want me to tell you what you're not used to though? One thing that you're not used to that you probably never thought about.
Turnover. Your turnover rate on employees skyrocket in seasonality.
I'm at 35% turnover in your first year.
No, I was at 45%. You're way lower than that. But check this out. So you're losing 10%. So Luke, you're losing 10% in the call center.
14% cancellation rate. Study the cancellation rate. And all these cancellations are due to one thing. Customer resolved themselves. Customer found somebody quicker. Nobody resolved it themselves. They just called somebody quicker. So it's all about getting out there to these demand-driven.
So I go, wait a minute. 10% plus 14% and then conversion rate. That's when you're face to face.
We're at blended 74%. So that means we're losing 26%.
Let me ask you a question on that blended 74%. Do you include the $88 complimentary tune-ups or whatever you guys charge?
We don't consider a conversion unless it's 125 bucks.
I would consider in HVAC, plumbing, electrical, I would consider a true conversion 500 bucks and up. 500 bucks and up is a true conversion to me. Why? Because it already costed you two, three hundred bucks in there. It already cost you another two, three hundred bucks to get the lead, like the labor behind all that. So, if you are not producing 500 bucks inside that house, I believe you're losing money on every single one of these.
You do as a... we look at... my scorecards are really, really good. But, you know, a good guy will do about $1,500 average ticket. That's blended.
I got guys that are doing four grand, but if I'm losing 10% plus 14% plus 26%, that's 50%. That's half of my leads. I'm not earning their business.
I know. So, don't ever say it's a marketing problem. The operations wants to go and say it's a marketing problem and they're like, 'We need more leads.' I'm like, well, let's get rid of these cancellations. Let's get rid of these people not booking because the worst one on LACE that I see pop up is that the service times didn't work, like we didn't, you know, found somebody. Yeah. It's like... so you look at that. So I believe we could get to 94%... no, no, no, 94% booking on the contact center. Okay. I believe we could get the cancellation rate down from 14 to 7. And I believe we could get our conversion rate from 73% to 80%.
Do you think you're always going to... but you're always going to be at 14% because of, hey, I'm going to add more. I'm going to add more staff, but I'm going to increase marketing and then it's going to keep going. You're going to keep chasing your tail on that. Do you think you're going to...
So, here's what I'm trying to do. I'm trying to spend as much money as I possibly could and still have a staff to where I've got to do outbound that day. So 20% of my volume in that market will be on my list. So I can pick up the 20%. But here's the deal. Same day call out.
That's what I was going to say.
I'm okay. Now I'm down. I only need to fill 10% of the board. I got a guy that his daughter just got sick. She... he needs to go pick her up. Yeah, the stuff happens. Yeah. So it seems like something always happens. Guy got in a fender bender or something. So, I want to have all my inbound to where it's 80%, 70% certain markets, 90% certain markets depending. We're building out a whole tool. I've got a company building the most advanced capacity planning tool. Then you staff up and you overstaff and then you got to do outbound. Okay. And that's the way...
You do outbound right now?
We use a third party. We use Jack from Elite. Um, for the HVAC, electrical, plumbing side, we live on ABBA.
And this is where some of these air conditioning guys miss it, and plumbing and electric guys miss it. You guys, when it's shoulder season and there's not enough leads on the board, you're freaking hammering your customer base all day long. You're hitting them with direct mail. You're hitting them with email blast, ringless voicemail, text messages. You're hitting them with outbound.
This is one thing that Leland said that really stuck out. He goes, 'If I start over today, the only thing I'm doing... focusing on service agreements.' Yeah. He goes, 'Service agreements is the lifeblood when there's no weather.' Yep. That's his... like no one's really... I don't know a lot of companies and stuff like that. You pulled it off. Yeah. And Leland's just every single year 22%.
I think I pulled it off because of my growth. If I would have had a slower growth, I would have lost more people and I wouldn't have done what we did. We were just growing so freaking fast. Right.
But you invested in things that very few companies will invest in. Like you guys did the baseball stadium, the billboards, and you did a lot of billboards. And you kept it clean. Yep. And I remember showing up at your shop and you were laughing. You're like, you got like 18 guys doing the lettering on your trucks everywhere in your parking lot. You're like, 'I just added 20 trucks.' And then you got two Raptors sitting over there because I think you won some from ServiceTitan.
Yep. Yep. I gave them to my general manager and my office manager.
So what did you get? Because what was the contest? Whoever could get ServiceTitan the most clients.
I just kept giving them referrals. People kept coming up to me touring my shop and I would show them how ServiceTitan would benefit the business and they just kept... they gave me a Corvette. They gave me three Raptors. They gave me money. Like they just went above and beyond for me. But honestly, I grabbed all that and I gave it away. I never really stayed with it anyway. Let me ask you another question. Um, this is something I've been studying a lot of. So you just sold NextGen. Today's the day the wire hits.
Uh, I think this is important because a lot of people are probably going to exit in the next few years, which I hope you guys do. By the way, what's the best advice? I'll give you just a few things. Number one, buy a nice car. Yes. Buy your dream home. Go on a dream vacation. Yeah. But keep... I didn't do the dream vacation. I did the... keep the money though for a while because there's a lot of opportunities day one, but if you wait for a year, deals find you. Like so many good opportunities. So what else would you say? Because nobody's there for you when the money comes.
Um, look, when I had the wire come into me, um, I did something that most people wouldn't have done. I had, I think I have like seven commercial buildings anywhere from 10,000 to 54,000 feet that I leased out back to Wrench. Um, so I had seven buildings. I had like nine houses that I had. So, like when that money came in to me, I went and bought, you know, a watch and a car and like all the nonsense that I wanted to get off my chest, but then I paid down all my debt on my real estate, which looking back was pretty dumb because I could have grabbed that money and put it in stocks, bonds, and it would have created some pretty good return. Yeah. But I've sold, I think, two of my commercial real estate buildings and I made between just the two a little bit over 3.1 mil on them, and you know, and I only kept them a couple years. So I've done good in that and I shouldn't have paid down because now that I had, if I would have had that access to all that cash right now, then I could have bought a business here. I could have bought a business. I could have done the Tommy Mello just owns...
Well, the thing is with me is like you own half of the industry now. Tommy, I've burned a lot of... I've got all mine sitting in the market and it's killing it. It's doing very, very well. And you know, Joe... of course... Joe does good for me. Uh, he just got me the AX. He gave me the AX Black card. He just got it. He figured it out. And I'm like, do I want to pay for this? It's only five grand a year and you get all this access. Yep. Um, what else was I going to tell you? Well, what else would you... Okay, now that I answered that, I think I would have kept a little bit more cash to have a little bit more liquidity to be able to step on these huge opportunities because I bought into some dope ass businesses.
There's some deals and that's one thing is on this next deal, uh, you're on my list of just people I want to do business with because you're a hustler.
Thank you. And I probably got a list of like 25 people that like I've got a plan to like really, really...
Who, what business gets you excited besides AI? I know you're going to say that, but what business?
I like software a lot because it's revenue. It's annual recurring revenue. And I like home service and I'm starting to like home improvement, but the multiples aren't there because it's not demand driven. So the multiples are half of what they are in home service.
So I like roofing a lot. I like water restoration a lot, a lot because I think Edward did amazing stuff, dude. I mean, those guys did well in California.
Are you guys going to... they got the 10 million EBITDA. Are you guys going to turn this year?
Um, they're working on it. Um, it's not my place, but uh, Adigar and Edward did exceptionally well. Um, but here's one thing that I am working on on the next deal. Uh, the PE company doesn't care at all about the real estate. In fact, the bigger PE companies, I'm going to go tell them I'm going to buy a building in every market that has substantial EBITDA and it's got to be 20... 20 plus buildings. And I'm going to put 10-year leases minimum on them. That's fine. And then you sell this portfolio. It's worth 50% with the 10-year lease. Yeah. And it's on a triple net. And so let's say my average building I go out and buy 20 is $5 million. That's a hundred million. It's worth $150 million the day I put them all together. Then there's a PE company, not the PE companies we work with, their real estate. All they're shooting for is 10, 12% return on investment, IRR, internal rate of return. So they're happy. It's slow money, but you know, the rent goes up every year and we're happy because they're really good properties and we do tenant improvements and everything, but you make 50%. So just by doing that...
Just by stacking them up.
And I'm doing a favor for A1 because I'm getting the best locations.
So, and it's not like you're going to take advantage of on the lease. You're going to give it to them at whatever market cost and they got to sign off on this, but that's day one. And here's the cool thing. You might say, 'Hey, he made 50% on 100 million.' No, because there's hundreds of millions in the bank. I'm getting loaned 90 to 10. So I literally spent $10 million, paid a little bit of interest along the way the first year.
So on the 10 million, I made 50...
And you could grab that 90 back. Oh yeah. So the banks, because the banks, they look at this and they go, 'Well, you got hundreds and hundreds and hundreds over here. We're good. You're not going to default.' So they'll give me all the money I freaking want for that. So that's...
Where'd you learn this from? Cardone or that other Pace guy?
Yeah, I like Pace Morby a lot, but...
He's cool, man. But I don't know who told me and they're like, but it needs to be a portfolio. So CBRE... and then I started using CHBT and they're like, if you can get 20-year leases...
Yeah, 10 years are great.
I mean, it's very, very, very safe. That's what's so cool about real estate. Now Pace is a genius. Cardone is really good too. You know, I will say like you got to respect all these people.
I do. You know what? I seen the video when him and Cardone are talking about what... you seen that video? And Cardone just like, what the...
I said that to Matt and Jacob and Eric. Yeah. And then I text Pace in the text and I said, 'I need you to give us just a one-day class.'
He's like, 'Dude, that was probably one of the dopest videos I've seen them do.' Cardone's just like, 'What? I feel like I've been doing this wrong my whole life.'
Well, Hannah told me that.
That's a smart girl too, bro. She's like, there's some laws passing that make it harder to do the creative financing.
So that... but he's a very creative guy.
And me, I'm like, wait a minute, like what if we went to like the Brian Collins of the world, like all those bankers we know, Eric and Rob... I say bring us deal flow. Like there's a lot of deals that they're like, they're not even big enough yet.
You're about to open up the floodgates for you. Huh?
Well, look, you got to have a system. It's got to be... here's one thing that you should think about. Like is it Linux? Is it Goodman? And I know you might change depending on who it is. Who's the finance company, ServiceTitan, the exact same playbook, the data, the exact same APIs. Are you going to use Tripp, are you going to use Lace, are you going to use Avoca, like whatever you're using, bam. Because all the companies you negotiate, that's the thing is you pay less. Yeah.
And that's one thing, Ken Haynes, you know, I know this. I mean, these guys said we're going to start buying together. So Parker is going to buy what they buy in Atlanta. And by buying together, they're going to save like $40 million of EBITDA. Bro, trust me. I was the number one person knocking on Ken Haynes' door telling him, 'Bro, we're not taking advantage of our size. You can go to Daikin, you could go to Linux, you could go to all these finance companies and leverage our size and put so much money on the bottom line just by leveraging it so much.' And then the way you buy insurance, the way you buy your trucks.
I know that's the way you do it, right?
Yeah. I buy the same trucks in every market, the same exact tool set.
Uh, everything is the same throughout the whole company. I only need one CFO too. That's one thing. Like I think Wrench is a genius company and they've done extremely, extremely well. And their answer was, 'Well, we buy great companies and leave them like they are.' And I'm like, 'But then you got a CFO in every market.'
...and then all those CFOs, there's friction between them and...
Like you get one CFO, one COO...
...and one COO could run 100 markets.
So I think Frank's doing a killer job, bro. I think they're about to...
I've heard some rumblings. Hopefully there's a press release any day now. By the time this comes out, might have already been announced. Hopefully because we need these portfolios to start turning. Um, you know what I do want to talk to you about though, Tommy, that I don't think a lot of people notice this and because, you know, their EQ is a little low or they're just, you know, living. Look what happened at NextGen, bro, was the perfect timing to what's happening right now. Look, so in 2016, 17, 18, when we were barely starting NextGen, um, the blue dots and all those guys and the ARS's were coming into our industry and they were trying to, you know, do what they're doing right now and they pissed off a lot of managers, bro. They pissed off a lot of C-suite and high-level managers, high-level sales guys and everything. So I came in as a fresh face into the industry with this, you know, NextGen 494, 4,995 does it all and everybody was talking crap on me. How could you be selling systems for 5,000? You're crazy. You're going to go out of business. All I was doing was stacking labor, bro. Because labor, you can't do nothing without labor, right? So that happened in 2016, 17 around there where every dude, I had access to people because I was the fresh face and I was advertising. I was being aggressive with my recruitment. I had access to people that I would never have access to ever in my life. Some of the, you know, $5 million guys and $3 million technicians and all these guys because PE was pissing them off. Well, the same thing's going on right now. And this is why I tell all my $5 million companies, you guys are in the best place of your life right now. You guys are in the best. You guys are going to have access to NextGen people, which look, you know, unfortunately NextGen went backwards, right? And they let go of like six or seven of the highest drivers in there. Now they're starting...
No. So now they're starting their own little companies and they're starting like they're doing their own little... look. So what I'm getting to you, if you're a $5 million company or you're a $10 million company, you want to get to 25, 30, 40, 50 people. The people that need that are going to take you to those milestones, you have access to them right now. I promise you guys, if I was at NextGen right now, you guys would have zero access to my people. They would laugh at you guys when you guys would try to give them more money or equity in your company or whatever it is. So take advantage of what it is. This is the greatest opportunity in home service industry. Not just because look at, and I call this the perfect timing. Private equity making mistakes. You have, you know, the industry being discombobulated like this is the perfect freaking time to grab those people, put them in a team and let them cruise into 25.
There's a lot of other things going on. People don't know this, a lot of people, but PE borrows money and is the coolest thing in the world. Ishmail, what I really...
That is what I need to learn from you, by the way. So I hope to have a good conversation with you later on.
This is crazy. Listen, the PE company borrows money...
Yes. They put in some hard money too. But they borrow the money, then I'm responsible for the payments. Every time they fly out, who do you think's paying for their flights? What about their hotels? What about dinner? So although they're amazing and I made all the right moves, I remember when Ken Goodrich called me about... he goes, 'Tommy, you're probably one of the better guys I've ever seen at this trade. It's just home service.' He goes, 'But you don't know what they know.' He goes, 'You learn how they raise capital. You learn about their LPs. You start going to their meetings. You understand exactly how the formulas work.' And now I understand all this stuff. And I'm going, 'Wait a minute. There's a great big company that went out of business. It was Renovo. And Renovo had all these home improvement, kitchen remodel, bathroom remodels. They were making a ton of money. But guess what? Their debt payments were too high because they took six times leverage. So let's say you're a $30 million company...
Yep. I could take on that 30 million. The bank will give me 6x. So I could borrow 180.
But now that company that I bought into is responsible for the payments on $180 million of debt...
Well, the interest is what kills you, right? So, dude, I'm like, that's what happened is BlackRock was their lender and they're like, they just shut down. So, when you sell your business, be careful.
Now, debt is a great thing because debt... because I rolled 50%. So, the debt actually makes the numbers way better if it's done right. But you got to be able to grow too. Those first couple years are critical to get the massive growth. So, this is the hardest thing about private equity is they're going to put debt on your business. So, if me and you went to go buy businesses, I'll give you an example. We were at the suite yesterday, and it might have been Friday. Yeah, Friday. And I look over and my buddy Tony's at the booth next to us. And he goes, 'Yeah, I'm the president of this bank now.' And Eric walks up and he goes, 'Dude, you know that guy?' I'm like, 'Yeah, I've known him for 15 years.' He goes, 'He'll loan us all day long at 2x.' So you go into a business that's doing 5 million of...
They'll give you 10 out of the gate. But now this company, call it ABC HVAC company, is responsible for that debt. So that's how these multiples come up because they take on more debt.
Is it always good to take on that much debt? Let...
I don't think so. I think...
What's a healthy debt that you want to be when you're acquiring these businesses? Let's say they're doing $5 million of EBITDA.
Well, the more EBITDA they're doing, the more debt you want to take because at a certain point it's more expected. Like if you looked at our financials, you'd understand that we've never had a down month or a down quarter. And what that tells you is we don't really have a lot of... we don't have Home Depot...
Because if we lost Home Depot, let's say that was 20%...
Yeah, that's a big area of concern. Let's say we had a huge contract with Costco.
Now, those are great contracts to have, but let's say Costco says, 'Hey, we're taking you out. We got a better one all of a sudden.'
I know. So, that's why having a lot of different clients and a massive database and a lot of different markets. Let's say there's, right now in Florida, there's a massive crisis going on there. Real estate's going backwards. And one of the biggest reasons too is that the houses are uninsurable. Hurricane comes, like the insurance companies are charging so much freaking money. And Keegan lives there. He's like, 'Dude, this market's upside down right now.' Well, I'm in Florida, but that's only one market and we don't really feel it. You know, we're also in Detroit. We're also in Reno. We're all over the...
Is there a number that you look at, Tommy, when you open up like a Florida location, right? And let's say you're going to be... you have a three-year plan and you want to be at X amount on top and bottom. And this is good for your listeners because this is one big huge mistake that I believe a lot of contractors do is that they start their business, they get four or five employees, they grow it, but they're not making money. And they keep holding on for dear life. Is there a certain amount of threshold time that you go like, 'Okay, cool. If in three years we're not at X on top and bottom,' how long do you hold it before you go like, okay, we got to shut that market down?
Well, my biggest thing is finding the right leader, but now we're a lot more analytical when we go into a market. But it takes... bigger companies with bigger average tickets could turn a greenfield around in six months to where it's profitable. Takes us 18 months.
But I don't want to have a popsicle stand. So, I'm putting in a lot of money into TV, radio, billboards, which you don't see a return on that...
I mean, Aaron's going through the same thing when he went into like Cleveland.
He's like, or Cincinnati, 'I'm going to spend a fortune and I'm not going to see an ROI for a long time,' but then all of a sudden it seems like you were there for 10 years. You're buying credibility. So, what's the threshold that you're looking for? Is it like a year? If you're not training, if you didn't hit your goal...
I need to be able to hit a three to four million EBITDA company within three years.
And if you don't, how long do you hold it for?
Well, I guess the question is, did you go into the right markets? Because let me give you a good example. Um, I'm never going to be able to get that much money out of Tucson.
But it's so close to Phoenix and just like Northern Arizona. So if I go into an Atlanta, it's a lot different than me going into Savannah, Georgia.
Like Atlanta, Georgia is way bigger opportunity than Savannah. But Savannah's not that far away. So I go to Savannah if I could get... So you got to look at the demographic. And Valpak, believe it or not, has some of the best data. No, Valpak's still doing good.
The head guy there of all the data was just in my office last week. The stuff that they are able to do.
Um, I got to show you because you can take your whole database and upload it into their thing. It'll tell you exactly who your ideal client is and how often to hit them.
Do you prefer Valpak over direct mail or do you think both of them?
