Full transcript10 chapters · 9,498 words
00:00Buying companies to sell them back to the employees
Ryan Williams: We projected $4.5 million in revenue for 2025 and finished at $4.36, and most of that gap came from three people decisions, not market problems.
Tyler Martin: Welcome to Profit and Grit with Tyler, where blue-collar owners and insiders spill the real story behind their hustle, building businesses that thrive through sweat and smarts. We’ll dig into their journeys from scaling chaos to growing the bottom line with lessons and grit that pay off big.
Tyler Martin: Here’s your host, the Blue Collar CFO, Tyler Martin. If you’ve ever looked at a home service business for sale and thought, this business looks solid, but something feels off, you’re going to get a lot out of this episode. Today, I’m joined by Ryan Williams.
Tyler Martin: He’s a longtime operator who recently acquired a plumbing company and is now living through what most buyers only learn the hard way. That’s the first year after the deal closes. Ryan pulls back the curtain on what actually happens after an acquisition in the trades.
Tyler Martin: Things like, why does EBITDA drop? Why people decisions hit faster than the market shifts? and how overpaying or moving too fast can quietly break a business. We talk about buying under pressure, slowing growth on purpose, and firing top producers for culture. And last but not least, why most home service acquisitions don’t fail loudly, they fail quietly.
Tyler Martin: Let’s get into it with Ryan now. Hey, Ryan, welcome to The Profit and Great Show. How are you doing today?
Ryan Williams: Yeah, I’m great, man. Thanks for having me. Yeah, thanks for taking the time to be on here. I learned about you from your LinkedIn post. I happened to come up on my feed and I just really, you know, it’s one of those things where you find one post that someone writes and then you go, wow, that guy has a really unique, fun take on it. And you just go down this rabbit hole of reading a whole bunch of your posts. So first, I just want to open up with commending you for you write some really cool content.
Ryan Williams: Yeah, I appreciate that. And happy to be, you know, cyber stock to whatever. I do that. I do that to folks as well. So happy to be on the receiving end of that.
Tyler Martin: That’s awesome. Well, with that, I’d love to learn a little bit about you. Can you share maybe on the business side, what you’re doing these days, and then maybe something personal
Ryan Williams: about yourself? Yeah, sure. You know, first off on the business side, we are, you know, a co-founder of DiviShares. I’ve got a partner, John, and we joined up a couple of years ago and really was the goal of buying businesses and with the end goal of selling them back to the employees.
Ryan Williams: So we’re kind of acting as a vessel for helping our employees, you know, build generational wealth. So that’s kind of what we’re doing on the business side of that. On the personal side, you know, I’m a husband, father of three. You know, my wife and I have been together.
Ryan Williams: We’re coming up on 30 years.
03:01Why phantom stock now and an ESOP later
Ryan Williams: And so, you know, just like I’m still learning in business, I’m still learning as a husband and as a father doing the best that I can. and a very proud father of three amazing kids. And so watching them grow, just like watching business grow.
Tyler Martin: That’s awesome. When you talk about wanting the employees ultimately to own the business, does that fall under like the big game of business? There was a book written, The Big Game of Business, where it was all about employee ownership. Is that more of like a phantom stock type situation
Tyler Martin: where they get kind of a pseudo type stock where they get a bonus at the end if it’s sold? What does that look like?
Ryan Williams: Yeah, so as we’re buying them right now, so this is evolving as we’re kind of now, you know, that we’ve got a couple of businesses in, the ones that we have currently in portfolio are like a phantom stock type arrangement. As we move forward and we kind of start
Ryan Williams: buying bigger businesses, the goal is to buy them as an ESOP. Okay. And then, you know, transfer ownership over time. Okay.
Tyler Martin: And I think the big, I hope I’m saying the title correctly because I tend to mess them up. The big game of business, I think, is more of like an ESOP type environment. Is that correct?
Ryan Williams: Yeah. Okay. Yeah. And the challenge there is ESOPs don’t work under a certain revenue amount. And well, they’re less attractive under, you know, about 2 million of EBITDA because just because of operational load and managing the ESOP and things like that. So our goal is really to kind of bring businesses into that world where it’s not accessible.
Ryan Williams: And so that’s what we’re trying to do.
Tyler Martin: But when you also say, and feel free to correct me if I’m wrong, if I’m not considering something here, when I think phantom stock, I really think it’s all about the event of selling, like when the employee gets to get their share. When I think of ESOP, that’s not necessarily true.
Tyler Martin: Like it could be a company will run forever, like and never be sold because it really does play a little bit more like, you know, you’re sharing in financial data, you’re sharing Typically, you really truly are a piece of an owner in an ESOP.
Tyler Martin: Is that fair to say?
Ryan Williams: Yeah, really, the goal of the businesses that we have right now is that at some point, there’s going to be a liquidity event where you either roll them into a larger company or roll them into a platform that’s then an ESOP, which that liquidity event will, you know, the employees that are there will be able to kind of capitalize through that phantom stock at that point.
Ryan Williams: And then it would kind of morph into whatever the structure of the ESOP is. So, yeah, the ESOP is, you know, I mean, it’s very similar to kind of owning stock in Apple or anything else where, you know, you could get dividends. You could, you know, you’re benefiting from the day to day profitability of the company where phantom stock is.
Ryan Williams: It doesn’t function that way. It’s more of a one time, you know, kind of thing, which isn’t ideal to be completely, you know, completely honest. It’s kind of what we had to do to kind of prove concept. and to kind of get things going to prove to investors that we were, you know,
Ryan Williams: we kind of knew what we were doing on some level. And so it was just kind of a step that we had to go through. And then, but yeah, the end goal is to take the companies that we have now and kind of roll them into an ESOP organization as part of a larger company.
Tyler Martin: Sure. But I applaud you for doing the Phantom Stock, because I think a lot of times as owners, we just bypass anything and then we wait until we sell and then we say, okay, well, we’ll set a little money aside and give it to our employees. So at least if there’s
Tyler Martin: one really cool thing about the Phantom program is like myreigns.com, for example, does one, and they have a whole board where, you know, the employee can go in there and they can see once a quarter, I don’t know, maybe it’s once a year, once a month, can see the valuation of the business and
Tyler Martin: what it means to them. And I think that’s pretty cool. Yeah, it’s pretty awesome. I mean, we’re,
Ryan Williams: you know, the plumbing company that we’ve got, it’s the biggest company that we’ve got, and we’re, you know, only seven months in now, going on eight months in. And so we haven’t quite gotten the dashboard and everything up and running, but we, you know, we’re very upfront with everybody
Ryan Williams: during, you know, all hands meetings and things like that with where we’re at as a company and kind of what we’re investing in, what the, you know, next steps are and kind of development of the company and things like that. So we try to be as upfront as we can with them,
Ryan Williams: even though they don’t have kind of daily visibility to what’s going on.
Tyler Martin: Sure. Yeah. So I kind of want, oh, yeah. So you do envision, well, I guess under the ESOP it would be, but you do kind of envision fully sharing all financial data at some point. Is that kind of how that would look?
Ryan Williams: Yeah, we’re going to, this year, one of the things on our list is open book management. And so, you know, kind of making sure that they can, you know, and it gives a lot of good context to decisions that we’re making or, you know,
Ryan Williams: why we’re not doing some things, why we are doing some things. And it allows a lot of just kind of upfront conversations with people about like, hey, we’re not doing this just because we’re greedy. Like we’re doing this because we have a plan and we want to see this thing grow and kind of make
Ryan Williams: some of those decisions a little bit more palatable, you know, at least it has to this point.
08:16How much financial data the plumbers actually see
Tyler Martin: Because this is always a sensitive topic, the sharing of financial information and what level do you do it to? What’s your opinion around that? Like, do you have to set up your culture to be able to handle that? Or is it just keeping it all
Tyler Martin: really clear, open, community? I mean, what’s your opinion and how do you handle that so the team can handle seeing that data?
Ryan Williams: Yeah, there’s a training element to it, right? Because, you know, a lot of these guys just don’t, they haven’t had exposure to that. And so there’s a training part. Right now, it’s pretty high level. You know, we kind of, you know, share with them all the metrics
Ryan Williams: they have direct control over. So everybody knows their conversion rates and they know their revenue per job and they know their efficiency and everything like that. But as far as a company goes, they know how much we’re spending on marketing. So that kind of gives context to like, oh, wow, I’ve only got, you know, I’ve got four slots today and only three of them are full.
Ryan Williams: You know, what’s going on? Like, well, you know, we’re kind of at the mercy of the schedule, right? We can only, you know, we got calls going in and out, but, you know, we can’t force the schedule to be full. So it kind of gives some context to those conversations.
Ryan Williams: But we try not to get too in the weeds because it gets, you know, as we’re kind of working through that training part, you know, there’s some detail they just don’t need. They don’t need to know exactly how some of the operating expenses.
Ryan Williams: They don’t need to know what, you know, everybody’s salaries are and things like that. So we just kind of let them know what we spend on payroll. So it’s kind of a little bit of a balance between detail and, you know, just for them to be able to have a grasp.
Ryan Williams: And really the goal is for them to just kind of have some context for decisions that we’re making and kind of why things are certain ways and stuff like that. So, you know, some guys are a lot more curious. They want to dig in and they want to know more detail.
Ryan Williams: And we do some of that stuff one on one to, you know, appease that and keep them satisfied. And some guys just honestly don’t care. They want to, you know, how quick can I get out of this meeting to go to my first job all this basically.
Ryan Williams: So, you know, we just kind of do it on an as needed basis. But just making sure everybody’s comfortable with what’s going on.
Tyler Martin: That’s cool. You kind of meet them where they’re at is what I think I’m hearing.
10:32Sixteen months and four LOIs to land Blue Planet
Tyler Martin: That’s pretty cool.
Ryan Williams: Yeah, for sure. Yeah. The TLDR version. Yeah, yeah.
Tyler Martin: I love that. Okay, so I want to set the table here a little bit and feel free to steer me if I don’t do a good job of it. So part of your guys’ vision was you were going to acquire companies and then at some point the owners would, the employees would take over ownership.
Tyler Martin: You landed on in 2025 Blue Planet Plumbing. Before we get into the actual acquisition, what did that look like in terms of number of deals that you evaluated? Why did you go in the space of plumbing? And I’m going to assume it’s residential, but correct me if I’m wrong.
Tyler Martin: Why do you go in the space of like home service type business? and then I’ll kind of build from that. I’d love to just know how you landed there.
Ryan Williams: Yeah, for sure. It’s 90% residential service and install. So very little commercial, very little, you know, we don’t do any like ground up new construction. We do some remodel work and stuff like that, but it’s 90%, you know, homeowner service and install. You know, Blue Planet,
Ryan Williams: going to your question about like, how many did we evaluate? wait, I couldn’t even tell you. It was a lot. It was, you know, probably in a hundred or more. And so I know at one point we had about 20 or so deals that were like at some degree of evaluation,
Ryan Williams: all simultaneously. So it was a lot. I will tell you that Blue Planet was one of the first ones that we looked at and didn’t actually become a signed deal until about our fourth LOI. Wow. With this particular seller, the initial asking price was, you know, once we got the numbers,
Ryan Williams: it just took a very high level look at it to say it’s overpriced and they weren’t willing to come down. But then they had a couple things fall through and they ended up coming back around about a year after our initial LOI and we ended up getting it closed.
Ryan Williams: So it was 16 months from first LOI until closing. Wow. So it took quite a long time. And what attracted us to Blue Planet, the reason that we kept in touch with, I mean, I was almost weekly contact with the brokers, seeing where they were at with their active
Ryan Williams: offer, you know, as they were going through different LOIs and as buyers were going through due diligence, I kept in constant contact. And the reason for that was the company had an amazing reputation. I think at the time it had 1,200 or so, five stars.
Ryan Williams: The website was great. Equipment looked great. Trucks looked great. We really liked the seller. He had gotten it to that point really just through sheer hustle and grit. He worked his tail off to get it to the point that it was at. It had a team in place.
Ryan Williams: So it had a general manager that was there that was separate from the owner. had an office manager. And so it had a lot of stuff going for it that a lot of companies in that, they did $5 million in revenue last year.
Ryan Williams: So a lot of companies in that range don’t have that stuff. They don’t, they’re severely lacking in one area or another. Either they have the reputation, but they don’t necessarily have the structure or they have the structure, but the reputation stinks and they don’t have profitability.
Ryan Williams: And this one kind of had a lot of that.
Tyler Martin: How much time did you spend, maybe because you had a general manager, not a lot, but how much time did you spend going, hey, this is how much the owner is in the business. And this is something we’re going to have to be aware of to find coverage for that.
14:12The owner touched everything, and that capped it at $5M
Tyler Martin: Or was there any discussion around that? Or did you get comfortable right away going, hey, I don’t, he’s not heavily in the business as opposed to working on the business?
Ryan Williams: Well, he was, he was very involved. But a lot of it was because he, you know, he was actually holding people back to a point. And not necessarily in a bad way. I don’t want it to sound like it was in a bad way.
Ryan Williams: But, I mean, he had his finger on the pulse of everything that happened in the company. And, you know, he was kind of the decision maker. You know, everything kind of ran through him for approvals and whatnot. And so when we closed on the company, we were comfortable with kind of what we knew about the company at that point.
Ryan Williams: We are comfortable. The general manager, we are super impressed with. We love the guy. He’s still there and does a great job. I mean, everybody that worked there, we are totally good with, you know. And so going into it, we knew for the most part what we were getting into. Obviously, you know, a lot of stuff comes out of the woodwork once you’re in it. But at that point, it’s just a matter of dealing with it.
Tyler Martin: Right. I love how you bring that up, though. And it’s definitely not a negative or a bad thing about the individual, but it is one of the things I’ll talk about a lot is when the owner, everything kind of runs through them. That’s what causes them not to get past that $5 million mark or whatever. It might be $4 million, it might be $3 million, but that’s the common thing. Do you agree with that?
Ryan Williams: Yeah, 100%. Like I said, he had gotten to that point through, I mean, just basically working his tail off. And I mean, nothing happened there without his stamp of approval. And so that’s fine up until about that. But, you know, once you get to that mark, you got to start letting the reins loose a little bit because you just can’t control everything that happens that closely when you’ve got, you know, that many jobs going on and you’ve got that many calls coming in and you’ve got, you know, everybody.
Ryan Williams: You got, you know, 12 guys running around in trucks and all this kind of stuff. I mean, it’s just too much to to really have like a micro control over. And so, yeah, he had definitely hit that ceiling and was feeling it. And so by the time that we bought, he will tell you that last year was the hardest because they were so busy.
Ryan Williams: And he was trying to navigate the sale and all that kind of stuff. And yeah, really kind of drove him to the edge, so to speak.
Tyler Martin: What did you guys, and if this is a confidential affair for you to tell me so, what multiple did you land on?
16:38Under 3x SDE and why the seller stayed on as sales manager
Tyler Martin: Was it an EBITDA multiple or was it an SDE multiple?
Ryan Williams: So it was an SDE multiple. I don’t know that I necessarily want to say it exactly, but it was under three. Okay. Oh, wow. And so, again, a lot of that was, we feel like we got a good deal, but also we feel like we gave the seller a very fair deal.
Ryan Williams: Like I said, he had due diligence. There was just stuff that came up that kind of pushed that down. Yeah. And our final purchase price was about half of their original asking price, and several other buyers had backed out. So, but again, we, you know, my experiences in home services, I was a general contractor for 20 years. I totally understand the stuff that we uncovered. Like it just, you know, when you’re a guy trying to get a business to that level, stuff just happens and gets swept under the rug and, you know, kind of is what it is. And I was also very prepared to tackle that stuff. So, yeah, it was, you know, nothing, it wasn’t nothing super surprising, but it definitely drove multiple down.
Tyler Martin: Well, that’s what I was going to ask you. Without, maybe you could talk generally as opposed to specifically with this deal, because I think it’s a good teaching moment if it’s possible. What are things as you’re going through due diligence that could impact valuation that others that might be considering selling their business are like, hey, I shouldn’t be waiting until I’m selling to address some of these things?
Ryan Williams: Yeah, the main thing was really control. I mean, you know, the initial, you know, as they were kind of presenting the business at the start, it was, yeah, he doesn’t do anything at the business. He is hands off. He doesn’t need to be there.
Ryan Williams: You know, all this kind of stuff. And then you start getting into it and asking questions. Like that was the main driver of dropping it. He wanted to still be involved. And so he’s my age, he’s, you know, 50. And so still had working life left.
Ryan Williams: He realized pretty quickly he’s not going to get enough money to retire. And so, you know, he was pretty adamant about, you know, working out a deal to stay. And so now he’s our sales manager. Wow. And so we accommodated that. That also kind of dropped the multiple a little bit because that’s got a little bit of risk
Ryan Williams: associated with it. And so it was a combination of those things for the most part. There were some issues with location. You know, they had outgrown the location and were stuck in a lease. So there’s no getting out of it without, you know, paying to get out of it.
Ryan Williams: There was, you know, just some other little stuff that just kind of raised some red flags. But that’s kind of the main stuff, location control and maintaining the seller maintaining a role.
Tyler Martin: So, yeah, that control one, that’s one that just, you know, seems to eat up deals at that 5 million and under mark. I just, I think a lot of owners like, oh, how do I get out of this control? But to your point, like, and I’m not saying this guy was that way necessarily, but I think
Tyler Martin: a lot of times people are tapped out. They’re like, they’ve gone as far as they can go and they can’t even to some degree get out of their own way. I don’t know. Do you have any thoughts on that as you evaluate deals?
Ryan Williams: Yes. A common thread that we’ve seen is it’s financial. Okay. Like the guys are used to paying themselves a certain at a certain level. And in order to give up control or to hire people, now that money has to come from somewhere. And so if they’re like, if the time comes for them to hire a general manager, they’re reluctant to do so because they have to take a pay cut.
Ryan Williams: And so they’re used to taking, you know, 200K or 250K as a business owner, plus, you know, all kinds of other little fringe benefits that we know happen. And now they need to pay somebody a hundred grand to run the business. And it’s like, oh, man, I, you know, I can’t take that.
Ryan Williams: My wife will not allow me to take that kind of payment. So, you know, so it gets to a point where it’s not, it’s a control thing. But some of it’s also, you know, they have to give up real tangible comfort to make it happen.
Ryan Williams: And there are some reluctance to do that sometimes.
Tyler Martin: Yeah, that’s a great point. It’s hard. One, it’s true that there’s a spouse issue there because if you stop bringing home X amount of money, that can create problems. You might not be able to pay all the bills. But I think there’s also a little bit of short-sightedness, too, because if you invest in the right person, there is a cost to that.
Tyler Martin: But if you invest in it, it’s going to reap way bigger results down the line. Maybe it’s two, three, four years, but the results will be astronomical, potentially.
Ryan Williams: Yeah, for sure. It multiplies capacity, right? So as you’re multiplying capacity now, all of a sudden you can make more money and you can concentrate on stuff that you’re actually good at, because a lot of these guys are are good at a very small fraction of the business trying to do, you know, the all encompassing everything at the at the business.
Ryan Williams: And so, but, you know, it’s hard, man. That’s why, you know, if you look at the stats for, you know, the number of businesses that make it to 5 million even is amazingly low. And then to get from that 5 to 10 or 5 to 15, man, is, I mean, it’s super hard.
Ryan Williams: And, you know, it’s such a slog to get it even to just 5 that a lot of guys are just unwilling at that point to do what’s necessary to get it to that next step.
Tyler Martin: Yeah. Okay. So I want to go into the next phase of this. You know, my research, I did a little research on this and I think it’s somewhere between like 70 to 90% of M&A deals either fail or underperform when they’re acquired.
22:20Missing $640K on purpose in year one
Tyler Martin: And I know I’d love to just talk through your almost not quite into your first year yet, but I know you had some projections, which was one of your great posts. You were hoping you guys would do about you missed your mark by about 640K in revenue.
Tyler Martin: And I kind of want to talk through that, like share with me. Was that just because your goals were very aggressive? Was there some stuff in there that you had to slow down so you weren’t moving too fast? And what are your thoughts around like, you know, the number 70, 90% of acquisitions failing?
Tyler Martin: I’d love to just get your wisdom on all these topics.
Ryan Williams: Yeah, wisdom’s a strong word. I have a lot to learn, but I appreciate the slight compliment there. But it doesn’t surprise me that that high of a number fail. You know, I know several guys that have bought businesses in the last couple of years that are, you know, painfully close to bankruptcy.
Ryan Williams: Yeah. And part of that is because they either got into an industry that they, you know, thought that they could navigate and just can’t figure out the nuance of it or that they way overpaid or things like that. So it doesn’t surprise me.
Ryan Williams: You know, like I said, we were our final purchase price was half of what the seller was originally asking. A big part of that is because, you know, I was very forced, we were very forthcoming and saying, like, this is our offer. This is where we know the business will succeed and be durable.
Ryan Williams: Like, we’ll be able to build and maintain a durable business at this number. And so we did, even with that, like, we were, you know, if we’re looking at cash flow wise for last year, we were, we knew we were going to be low, but we were still lower than we had hoped.
Ryan Williams: but a lot of that was like we were intentional about how we were handling the cash flow. And so some of that was pulling reins and saying, you know, we don’t have a great training program. And so even though we need a technician, it’s not the time to bring somebody in until we get this built out a little bit.
Ryan Williams: So it was running shorthanded for a few months. It was, you know, they had a salesman that was way overperforming everybody else and we let him go pretty quickly. after we took over because the culture fit. And we struggled to get anybody back up to near that, his level.
Ryan Williams: And so we took a technician out of the field and made him a supervisor. And so we, you know, took him out of, he was producing revenue, took him out of that position, put him in overhead. So there was a lot of stuff that was very intentional.
Ryan Williams: And so as we kind of progressed through the end of the year, we knew we were going to end up under projections, And we were okay with that because we were in it for the long haul. We’re not, you know, it’s not a quick flip, like a real estate thing where we’re, you know, trying to get it back on market as soon as possible.
Ryan Williams: Like we’re, we’re in it for the long haul. We’re trying to build a durable company and we knew we were laying a solid foundation. So we were just kind of rolling with it as the year progressed.
Tyler Martin: Do you think, so one of the things I see the most common is new owners will kind of tinker with the business probably a little too much in that first year. They’ll, you know, I had someone come to me not too long ago, they built a service department and they added a service manager.
Tyler Martin: Then they realized they didn’t have volume or they weren’t able to even get the service stuff to cover all the expense they took on. And they basically cut their EBITDA in half. And then the other half had to cover an SBA loan. So now they’re trying to pay their bills and they have no cash flow.
Tyler Martin: When I hear you say, hey, we cut my top sales producer, we moved a biller into an admin role, that to me are like a little bit of scary decisions, especially in your first year, because what gave you the confidence that these are the right moves to do that quickly,
26:13Firing the top salesman who sold like crazy
Tyler Martin: as opposed to maybe spending a little more time evaluating the landscape before you made changes? Like, help me to like, is it just your 20, 20 plus years doing this and back to that wisdom word? Or is there something else going on there?
Ryan Williams: Yeah, it was really kind of getting in and seeing the day to day to the company and really feeling out what was needed. OK. We pulled the trigger on the promotion for the supervisor because one of the issues was, you know, guys were saying jobs were complete and they weren’t complete.
Ryan Williams: or there was like little things that should have been rectified that weren’t. Or, you know, they would do a valuation, you know, they would forget to turn water back on after they complete a water heater install, just like little piddly stuff. And part of that was because there was almost no actual in-field supervision.
Ryan Williams: Jobs were coordinated from the office. The guys would go and do a job, say they’re done. And then it was, okay, great, come back, you know, go on to your next job. And so we needed field supervision. And so in order to kind of get some of the recalls and warranty work dialed in, we had to have field supervision.
Ryan Williams: We had to have jobs getting walked after they’re done, especially for the guys that were kind of like where that was habitual. Sure. And we just needed to have somebody in that spot to make sure that that stuff happened. And so it was really just seeing what the business needed.
Ryan Williams: You know, firing the sales guy was a super hard decision. I knew it needed to be done about five minutes into our introduction to the team. I knew at like the second that I stepped in there and everybody kind of gathered for us to meet everybody at the very first meeting.
Ryan Williams: Everybody is, you know, I’m kind of watching everybody mingle and kind of, you know, how you get a bunch of plumbers in a room that don’t see each other all that often. And all of a sudden, you know, there’s, you know, everybody’s laughing and, you know, having a good time and they’re jabbing each other and stuff like that.
Ryan Williams: And so the mood is great. And he’s slumped down in his chair, staring at his phone, not talking to anybody, you know, not engaging with the group at all. And so there’s just a I knew culturally it wasn’t a fit, but he sold his ass off and, you know, sold like crazy.
Ryan Williams: And but he was, you know, the guys hated working with him and stuff like that. So that was like a very hard trigger to pull. And, you know, we should have done it sooner, but it was just it took us about three months to get to that point where, you know, we realized it’s not going to improve.
Ryan Williams: We’re not going to be able to fix this through training or through discipline or anything else. And we just had to had to do it. So there was definitely some hard decisions, but it was, you know, we’re always trying to do what was best for the for the business and the guys that were that were all in and making sure that we’re taking care of them.
Tyler Martin: Yeah. Yeah. That’s tough. Those types of decisions are hard when you’re letting go someone that’s bringing in revenue and you’re trying to do the right thing. I mean, I definitely have struggled through those several times in my career. And honestly, I haven’t always done the right thing. I’ve had to, I’ve had to learn through hard knocks that, man, why didn’t I do this a year ago? Right. Because usually like a cloud just lifts when you do that. And it does suck potentially, depending on, you know, how it plays out replacing the person.
Tyler Martin: I mean, it takes a little time, but once the dust settles, it’s like it just feels really good.
Ryan Williams: Yeah, we had, you know, there’s a couple of guys. You always have a couple of guys on the team that are like the culture carriers. Yeah. And that really kind of like pretty accurately represent the mass of the team. And as soon as word got out that, you know, we had taken his keys and he was, you know, he was gone.
Ryan Williams: There was, you know, we got a ton of kudos and like, man, this is something that’s been needed for a long time. And so we knew we made the right decision, but man, it was the bottom line hurt.
30:15The $100K AI phone experiment that thick accents killed
Tyler Martin: Yeah, yeah. Hey, I want to shift gears a little bit. So, you know, the rage right now, obviously, is AI. Definitely in the space of CSR, we’re getting a lot of discussion there, whether it be after hours or even call overflow or even potentially full time.
Tyler Martin: I believe you went down that path. I think you may have even felt like you lost 100K in learning about this and what was right for your business. Can you kind of share, like, what did you find out about it? Where are you at with it today?
Tyler Martin: And, you know, what decisions did you make to get from point A to point B?
Ryan Williams: Yeah, for sure. And actually, I’m going to tie this in a little bit with one of your, an episode you had just a few weeks ago with Bernie. Oh, yeah. Service Titan Pro. Yeah. Yeah, on data clarity and stuff like that. So if we hadn’t had clarity on our data and our booking rate and conversion and stuff like that, we probably would have thought everything was fine.
Ryan Williams: And so we knew we needed to do something with how inbound calls were coming in. Like that was the first week we were there. We knew that was a severe pain point that was holding the company back. And so pretty quickly, we got AI kind of up to speed.
Ryan Williams: and I don’t want to name names on the service that we were using because we still use them and they do great for what we’re using them for now. And I also think that a lot of the problems that we had with it
Ryan Williams: were because of the demographic of our customer base. And I’ll talk to that in a second. But, you know, what we are trying to do is to increase our capacity for calls during the day. So taking some overflow calls and then giving us speed to lead was important.
Ryan Williams: So making sure that every call got answered on first ring and things like that. And when you’re a small company, that’s a super hard problem to fix through personnel. You know, when you’ve only got a couple of people in the office and we know that, you know, there’s busy times of the day where the phone’s just ringing off the hook.
Ryan Williams: And so we approached AI kind of with looking for a solution to that problem. and, you know, we, it was a reasonable investment, but at the time, you know, we were still working through data. So we were trying to, we’re kind of polishing up
Ryan Williams: how our booking rate was calculated and where the calls were coming from, you know, and things like that. And so what we found was that our booking rate for inbound calls that were answered by a person was high. I mean, it was like 85%.
Ryan Williams: And so it was great. that proved that our leads that were coming in were really good. The problem that we were having with the AI is that it was, we couldn’t really get it over 40. Wow. And so, you know, we had people hanging up on it.
Ryan Williams: We had, you know, people were just like getting irate and saying, I want to talk to a person, put me through to a person, you know, that kind of stuff. And part of the, a big part of the issue that we boiled down to,
Ryan Williams: We ran through this whole problem-solving thing. We actually found some issues with hardware, so we got the office rewired because there was a delay. So that was one of the things we worked through is that it wasn’t a conversational pace to the AI.
Ryan Williams: And so what we found out was that part of that was because of our hardware. The lines in the office were still like 50-year-old telephone lines. Our router hadn’t been changed in about 10 years and all that kind of stuff. We updated everything and got the speed where it needed to be.
Ryan Williams: But we are still having problems with people hanging out. And we’re working with the provider and trying to do all this stuff over the course of a few months. But what we’ve what we boiled it down to is that our customer base around there is a lot of retired folks, like people 50 and over, fairly wealthy and also accents.
Ryan Williams: So really thick accents. This is in North Carolina. And so the pace of conversations is a little bit different here. Very thick accents. People use a lot of kind of jargon, like people would, you know, AI didn’t know. If somebody called and said, hey, I got water leaking at my mama’s house, AI didn’t really know how to handle that, right?
Ryan Williams: And so it doesn’t know what a mama is. And so, you know, just stuff like that, it didn’t know how to handle it. And then you get into it’s trying to discern a really thick Southern accent that’s explaining Yahoo email address with numbers and initials and stuff like that.
Ryan Williams: And it just couldn’t work through it. And so, yeah, we we tried it for a few months going back and forth with the provider trying to get it tuned up, but we’re never able to get it over 40 percent. And so, yeah, I can very confidently say we lost $100,000 in that three months by not having calls answered by a person, which is a lot, man.
Ryan Williams: When you’re a small company, that kind of a hit, you equate that over the course of the year. It’s $400,000 over a 12-month period. So, yeah, we cut it off. We still use it for—it still does our—we still use the chatbot. We still use, it’s linked to Angie’s and some of the other aggregators.
Ryan Williams: So we can get our speed to lead is faster than anybody. We’re under five seconds for basically every aggregator. So it has its place for us. And I think that it could work well in some demographics that are a little bit more used to working with tech.
Ryan Williams: They’re a little bit more comfortable with dealing with AI. I, but for our specific demographic there, we couldn’t get it to work.
Tyler Martin: And the agents, if I understand it correctly, you are using, you kind of consider that to be a little bit of a game changer because I think you mentioned five seconds. It’s interesting how one part didn’t work. It’s how you use the tool.
Tyler Martin: The agents are phenomenal for you. Is that correct?
Ryan Williams: Yeah, absolutely. That’s been a huge game changer because with a lot of the Angie’s and those types of things, It’s how fast can you get on the horn with that customer? And I mean, we’re faster than anybody that I know of in our market.
Ryan Williams: You know, we get told all the time that we’re the first ones to call and, you know, people are happy to schedule. So when we get them on the phone, we, you know, our inside sales gal, she asked them, you know, are you working with anybody else to try and get this scheduled?
Ryan Williams: And they’ll always say, you know, you’re the first one that I’ve talked to. So that’s a good feeling. So it definitely has its place for us, just not in the person-to-person.
Tyler Martin: Cool. Okay, I’ve got two things I want to wrap up on. One is just in terms of this first acquisition, are you guys kind of married now to Home Services, would you say, in terms of future acquisitions? Because reading your webpage, it looked like you guys were pretty broad.
Tyler Martin: Does this change anything given that your first acquisition was in Home Services?
Ryan Williams: So we definitely, we’re looking to add on to that company. We’re actively looking at financials for a couple different home service companies to we really want to do kind of a regional platform type of deal. But we’re also, you know, actively engaged and probably getting an offer out this week on a roofing manufacturer.
Ryan Williams: Wow. So, yeah, we’re a bit agnostic to industry. But we do, you know, the way that our thesis works, once we get a company, you know, our goal is really to kind of roll up into that company with, you know, peripheral add-ons and things like that.
Ryan Williams: So, you know, to answer your question, yes, we’re actively kind of looking for home service businesses, but we’re also kind of open to other types as well.
38:08Truck cameras, 200 infractions in week one
Tyler Martin: And then the last thing I want to wrap up on, just because I just feel like there’s a real opportunity for owners out there that maybe aren’t using these tools. You introduced truck cameras that I believe reduced violations that your team was making, I think, by violations like reading their phone or whatever while they’re driving.
Tyler Martin: Just maybe in a few minutes, I’d love to know, like, what was your experience with that? How did you handle, there is a certain, I think some people might view that as a big brother thing. If it’s new, did that come into play or did that thought process?
Tyler Martin: How do you deal with that? If you could just talk about this a little bit, I’d love to you to share your experiences.
Ryan Williams: Yeah, there’s a few things that we’ve done over the course of the year that we kind of view as like pivotal. And like, this is the one that jumped up at us. Like we didn’t like we knew it was going to be a little bit of a game changer.
Ryan Williams: Like we were excited to get it implemented, but we didn’t realize how much it was going to affect the business. And it’s been amazing. So, yeah, it was spurred by. So we had truck cameras before, but they were they were external facing and they didn’t.
Ryan Williams: They were kind of constantly recording, but only record 10 minutes, basically. So if something happened, you had to like send it a message really quick, like, hey, take a snapshot of the past 10 minutes for this vehicle. And so what that meant was that stuff would happen and we wouldn’t have any footage of it because the guys wouldn’t tell us till the end of the day.
Ryan Williams: Oh, yeah. You know, I had a gal run into me at the, you know, at the stoplight or whatever. And so the way that we knew we needed a new system, the one that we settled on is constantly running, and it uses AI to take snapshots.
Ryan Williams: And we can kind of set how severe, you know, what exact, to what severity does something have to happen to where it’ll notify us? And it has a cab-facing camera, and it uses AI to discern what the person is doing. And so, again, we can set the parameters for how much we want to monitor.
Ryan Williams: And so it was an adjustment for the guys. I mean, we got a lot of pushback on it. But, you know, since May, we’ve had three trucks and accidents. Two of them were at fault. And the other one was no fault. And likely, if we had had proper camera footage, would have been, you know, at fault of the other person.
Ryan Williams: And so that’s what kind of prompted it. And so we wanted to see what was going on. And so, man, that first, the first day, so we had a mechanic come over the weekend and install all the units. And that Monday, holy crap, we were, it was like a nightmare of stuff.
Ryan Williams: I mean, guys, you know, driving with their phone like this, watching YouTube. And you can hear the you can hear the YouTube video on the audio guys, you know, driving with their knees, eating, you know, eating food, holding a bowl and eating food.
Ryan Williams: I mean, just stuff that you’re like, what in the and the heck is going on? You know, guys driving their trucks after hours when they’re not supposed to. They take them home, but they’re not supposed to be driving them after hours. Just, you know, you’re hearing, you know, guys are driving with their knees, looking at their phone.
Ryan Williams: And all of a sudden you hear rumble strips like they’re literally. running off the road, a guy like swerving because he almost hits a guardrail. This is like day one of, and I kid you not. It’s funny, but not funny. Yeah. All this stuff was day one.
Ryan Williams: And we were like, holy crap. You know, this is horrible. And so we, the first week we had like over 200 infractions. We had 200 things that popped up. And so what it showed us was that we had a lot more exposure there than we thought we did.
Ryan Williams: and also kind of showed us there was a total disrespect as far as several of the guys were really good. So I don’t want to put a blanket over everybody there. We had a, we had one guy had still hasn’t had an infraction and that’s worth three months in now. And so, you know,
Ryan Williams: but there’s definitely guys that were habitual. And so we, we realized how much exposure we had there. We also realized that guys were misusing the trucks and driving them after hours, driving on weekends and all this kind of stuff. And so, but what it, what it did was it, it provided us
Ryan Williams: a way for, to hold the guys accountable and to say like, you know, we’ve had two trucks get totaled, right? And the other one, the only reason it’s not totaled yet is because insurance is still evaluating it. Our insurance, like we could get kicked off of insurance. We just started this
Ryan Williams: insurance in May. Like there’s a real concern and like, we need this stuff tightened up, you know but now we’re we’re to less than 20 infractions a week and it’s gotten so much better and it’s like we don’t have to worry about it as much nearly as much as we want to do and the way
Ryan Williams: that we kind of sold the guys on it is you know obviously there was a lot of pushback we had guys like putting tape over the their cab facing camera and all this stuff but what we told them is is that look, this is to protect your ass.
Ryan Williams: Like we’re doing this because if something happens, there’s nothing I want more than to be able to pull that footage and show the cop, look, our guy was doing exactly what he’s supposed to do. 10 and two, watching the road, doing whatever he can to avoid anything.
Ryan Williams: Like there’s nothing more that I would take joy in in that moment than to be able to do that and say, we did absolutely nothing wrong. Yeah. And I want to be able to do that for the guys and telling them, look, it’s our truck,
Ryan Williams: but you’re driving it. If something happens, you are personally liable for that. Right. But we’re also liable as well. And so, you know, and again, this kind of ties into the employee ownership thing, saying, you know, this is in your interest. Like where you have a vested interest in this as well,
Ryan Williams: not just as the driver and the one we’re trying to protect, but just financially. Like you don’t want that to happen to the company. it affects your investment as well. And so it all kind of ties together.
Tyler Martin: Do you find now there’s been an amount of time? Is everybody used to it? Are you still getting pushback? Are the conversations when someone does have an infraction uncomfortable or what
Ryan Williams: does that all look like? Yeah, it’s kind of like a non-issue. Okay. Okay. You know, we’ve been able to kind of tune the system now that we kind of have a pretty good idea for who the problem children are. So now it just takes snapshots when there’s an
Ryan Williams: infraction. And so it’s not, there’s like, I can’t go in and watch somebody driving. I mean, I could probably, but, you know, it literally just captures snapshots of a guy using their phone or, you know, doing something. So it’s, you know, we’ve been able to tune it since then to where
Ryan Williams: it’s not nearly as intrusive. And the system that we’re using, you know, if they’re doing something provides training materials on that, which they can sign off on and go through a little slideshow course and sign off on it, we can say that, hey, they did this infraction,
Ryan Williams: but they’ve taken these steps to rectify it. So yeah, it’s been a non-issue for the most part.
Tyler Martin: Very cool. Awesome. Hey, Ryan, you are an amazing guest. I love that you’re so transparent, just like you are on LinkedIn in sharing your stories and experiences. If people wanted to reach out to you. I’ll put your LinkedIn link in the show notes. Is LinkedIn the best spot? And I
Tyler Martin: imagine if people want to reach out to you, like maybe they have a deal or what are things that you’d be open to people reaching out to you about? Yeah, absolutely. I’m very, you know, I love when
Ryan Williams: people reach out on LinkedIn. There’d be nothing I’d love more than for somebody to reach out and say they saw me on your show and, you know, wanted to connect. And so, yeah, super happy to do that. We are actively buying. So, you know, if somebody’s got deals
Ryan Williams: or they know of a deal that fell through or something like that, I’d love to look at those. If there’s any investors that want to start buying businesses, we’re always happy to take a check. So yeah, all that kind of stuff. Very happy to connect on LinkedIn.
Ryan Williams: It’s the best place to find me. So yeah, looking forward to meeting your audience a little bit.
Tyler Martin: Awesome. Thanks, Ryan. I appreciate you being on the show. Look forward to maybe talking to you in the future when you’ve got a whole bunch of businesses under your belt and you’ve grown them to a whole big, big portfolio.
Ryan Williams: Yeah, I appreciate your time and thank you.
Tyler Martin: So my biggest takeaway from Ryan is that acquisitions in the trades don’t usually fail because the phones stop ringing. They fail because owners underestimate how fragile that first year is. I mean, I’ve seen this a lot. People decisions, owner dependency, rush tires, and cash flow strain show up fast once the ink dries.
Tyler Martin: And Ryan’s story is a reminder that sometimes the right moves hurt revenue in the short term, but protect the business in the long term. So if you’re thinking about buying a trade business, selling one, or trying to get yours past that $5 million ceiling without breaking it, this is where having clear numbers, KPIs,
Tyler Martin: scorecards, and a real plan matters. If you want a second set of eyes on your financials, cash flow, or what would actually make your business more durable, whether you plan to sell it or not, you can book a no pressure intro call at cfointrocall.com. Once again, that’s cfointrocall.com.
Tyler Martin: As always, thanks so much for listening. I will see you on the next episode.
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Tyler Martin works with owners on the numbers behind these stories: Profit & Grit CFOs.
