Full transcript9 chapters · 9,817 words
00:00From a $100M exit to buying a one-plumber shop
Dustin Marx: We share 50% of our profits with the team every year. Our plumbers, they forecast the profitability of their own trucks every Friday. And the org chart at our company, it’s upside down. After building four different companies prior to this one, this is the first one I would want my kids to work in.
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. Dustin Marks went from building a $100 million company to buying a small plumbing shop doing about $15,000 a month. Today, that same company, Mother Modern Plumbing, is running around $10 million pace. And Dustin will be the first to tell you
Tyler Martin: it didn’t happen because he had all the answers. In this episode, Dustin talks about building a company he’d actually want his kids to work in, why the plumbers sit at the top of their org chart, how they share 50% of profits with the team,
Tyler Martin: and why every truck forecasts its own numbers every Friday. If you’re trying to grow without losing the culture, the cash, or the people who actually make the business work, this one is worth your time. Let’s get into it with Dustin now. Hey, Dustin, welcome to the Profit and Grit Show. How are you
Dustin Marx: doing today? I’m great, Tyler. Thanks for having me on. Yeah, thanks for being here. I’m so excited
Tyler Martin: to talk with you. I just want to first learn about you a little bit. Could you share what you do professionally and then maybe just a little tidbit about you personally? Yeah,
Dustin Marx: So I guess professionally, I am an apprentice plumber and also having to own a plumbing company. The name of the company is Mother. Our tagline is Modern Plumbing. So Mother Modern Plumbing based out of DFW in Texas. And, you know, more important than that, I’m a father.
Dustin Marx: I’ve got two young kids, a two-year-old and a four-year-old. And I’m very fortunate to have done really well and married an amazing woman as well.
Tyler Martin: That’s awesome. So I want to start with just learning. You had a company called Stellar. I believe you’ve had four or five ventures now. Stellar, I believe, was about $100 million in revenue when you exited. And then you went on to buy Mother, which was doing like $15,000 a month.
Tyler Martin: I think it was a solo plumber. Kind of take me through that. Like, how do you, you know, most people, when they exit a company that size, they’re like going on a beach and drinking drinks for the rest of their life. How do you go?
Tyler Martin: they’re pretty extreme to me, like kind of a chuck in the truck you bought from selling,
Dustin Marx: you know, $100 million business. Yeah, no, it definitely was a journey. And so my only experience really has ever been kind of like founding companies. And so I had founded Stellar and grew that. And, you know, that was an interesting experience for me because that was my first foray
Dustin Marx: into the trades. And what Stellar did is it connected, it’s kind of like a technology enabled general contractor. We connected property management companies and institutions that owned a lot of rental homes. So think, you know, people have a hundred homes, they have a hundred thousand
Dustin Marx: and they need maintenance. And so we helped fulfill the maintenance. And so that business learned a lot, raised some venture capital. I think it raised a little over $40 million. And so the entirety of it did about a hundred million or so as far as during that duration.
Dustin Marx: And, you know, at a certain point, it was it was very interesting for me in that we were did it. We were in a bunch of different markets and a bunch of different trades. And I never felt like we really became like exceptional in a single area.
Dustin Marx: And so, you know, at a certain point where the business is going and where I was going kind of diverged and, you know, fortunate, made some good money.
04:05Meeting Stephen at S&D and picking one trade only
Dustin Marx: But it was not I’m going to stay on the beach the rest of my life, unfortunately. Right. And so when I. kind of came to was, you know, I had at that point, you know, just a two very, very young children, you know, are really a newborn. And I thought more about where do I want to be long
Dustin Marx: term? And what kind of future do I want them to have long term? So that really kind of drove me into this kind of idea of I want my name to be attached to something that’s the best of the best. In addition to that, after my experience, you know, HVAC and electrical, like all these trades are so complex.
Dustin Marx: And so I was like, I just want to keep it as simple as possible. And so I just picked one trade, you know, and that’s really what kind of drove me. And I was fortunate in a similar thing. I listened to a podcast, somebody else, this guy, Roger Wakefield, listened to him as I was trying to get a little smarter in plumbing.
Dustin Marx: And he connected me with this other person and this other person connected me. And so since I’m not a plumber by trade, you know, I wanted to, you know, really find somebody who had a similar set of values. And so that kind of led me.
Dustin Marx: The initial company was called S&D Plumbing, and Stephen was the operator of it. And for him, I’m just a really exceptional human. And we sat down for like a half hour lunch, and it turned out to like four hours. And our values were very consistent and similar, how we wanted to treat customers, how we wanted to treat employees, and both of where we thought it could be.
Dustin Marx: And really, I was so excited about him that I wanted to be able to do business with him. And so that’s really what kind of the driver was, too. So that kind of led us to that relationship as well. And so for me, it was like, well, let’s get started and build something that we would feel great about having our names attached to.
Tyler Martin: What was it like from his standpoint? Was it that, hey, I’m not going to have to deal with back office stuff? Was it maybe having more investor money that he could see the company growing to something bigger than he was doing? How do you think he was looking at it?
Dustin Marx: I think there was a couple of things. And so one of those was he wanted to create a better experience for people he worked with. So he really cared deeply. And so like being able to offer health insurance, right? Benefits. That was something that was really compelling in a driver. And one of the experiences that I’ve had, and this is probably one of the biggest motivators for me is, you know, a lot of people go, hey, I’m going to be this great technician, whether it’s as a plumber or an HVAC technician, I’m going to go out on my own.
Dustin Marx: And so they have all this mastery of the technical aspects, but they have none of that of how I’m going to operate a business. And so they end up working more hours and making less money. You know, my father, he was an optometrist, a different skilled trade, but similar, right?
Dustin Marx: Was a great, you know, practical technician, but was not a good business entrepreneur. And so end up working more hours and making less money. And so as as for Stephen and myself, we started to talk through it. It was how do we really create a transformative experience?
Dustin Marx: And his care is so deeply embedded with people and in particular treating how we treat employees. And so I think those were some of the things, you know, that that compelled both of us to kind of join forces.
07:30What was missing in his first four companies
Tyler Martin: Very cool. And it sounds like a good, good connection of people with like interests, which is important. And you’ve said, I believe Mother is your fifth company. And you’ve said, hey, Mother is the first company that I’ve actually would wanted to have worked at.
Tyler Martin: What was missing in the first four? Like, what did you find and what have you done in Mother that wasn’t existing in the first four?
Dustin Marx: I’ve made a ton of mistakes. And so it’s, you know, going, hey, let’s try something. And those things not working. So in some cases, you know, how I operated as a leader, you know, I was pretty immature. And so maybe I’d be overly micromanaging or maybe kind of too much abdication and as opposed to like appropriate delegation.
Dustin Marx: But for me, a lot of it really stemmed from let me create an experience that really is kind of just the golden rule. And how would I want to be treated as an employee? And so that was kind of the start of it was coming at it from that centricity.
Dustin Marx: Right. So examples of this would be if I join a place, I’d love the opportunity to get promoted. And in a couple of my prior companies, I looked from without from without to bring in and it did not work as well, you know, as far as leadership.
Dustin Marx: Another thing is, hey, if the company becomes more valuable, if the company is more successful, I’d like to participate in the upside as an employee, you know. And so that was not something that existed in a lot of the other businesses. And so that was something I wanted people to be able to benefit, you know, and themselves and their communities and their families.
Dustin Marx: And so those were a couple of the motivators for me kind of going through this is how do we really think about creating an experience that I personally would thrive in and hopefully, you know, similar, you know, minded and valued people would want to be a part of this business.
Tyler Martin: Very cool. So most of my listeners are probably going to be somewhere like $3 to $15 million a year in business. And they might have been doing this for 5 to 25 years, a long time. A lot of them get kind of stuck at certain levels. You went from $15,000 a month to $8 million, I believe, in 14 months. And I’m just curious, like, what drove that? Was that just your own capital? You were able to invest really heavy in growth fast?
09:46$15k a month to a $10M run rate in 14 months
Tyler Martin: or was there a playbook that you used from your prior businesses? I know there’s people out in the audience when they hear that, they’re like, how did you do it so fast? And I’d love to know your position if there’s something unique to you
Tyler Martin: or it’s something maybe other business owners aren’t often following a certain process.
Dustin Marx: Yeah, this is probably going to be an underwhelming answer. And so apologies to the listeners. But yeah, so we went from 15 grand a month and now we’re about the $10 million run rate, So about 800,000 or so a month and a couple of things.
Dustin Marx: So the first one that I think served me really well is because I’m not a plumber. I couldn’t be the one who had all the answers. And I knew that if I had the answers, a lot of those answers would be wrong. And so from the outset, you know, just kind of thinking about being really open to it and soliciting input.
Dustin Marx: So I’ll give you an example of this. I thought for sure for us that we should run what I’ll refer to as just service. And so service being the person who shows up is the person who sells it, the person who sells it, the person who completes the job.
Dustin Marx: I’m like, that’s going to be a great customer experience. It’ll be best for the plumbers. And we even bought some fleet that was kind of designed for that. And a few months in, several of our plumbers go, hey, I think there’s a better way.
Dustin Marx: And I’m like, well, what is it? And they’re like, well, I think some of us really love customer relations and we’d love to do the diagnosis. and other plumbers like, I just want to plumb. I love plumbing. It’s like what I geek out on.
Dustin Marx: And I’m a little awkward and I feel uncomfortable talking with customers. Right. And I’m like, oh no, it’s going to be fine. And, you know, I’m like, all right, but I’m willing to listen. Let’s try. And literally it was like almost overnight, we doubled the business with like that one change,
Dustin Marx: you know? And so, so there’s like been a variety of those kind of steps along the way that have served us really well. So, you know, for me, being kind of more of a student as opposed to the expert, I think has served well.
Dustin Marx: I’ve gone to a variety of other shops. One of the things I love about this category, even Tyler, what you’re doing is, it’s everyone’s forthcoming, right? Here’s how everyone can win. And that’s something that I really appreciate. I want to pay forward because I’ve definitely done that.
Dustin Marx: So I’ve been big on different podcasts I’ve been listening to, you know, trying to like take all of their best practices. And then the other thing that I think has served me well has been just kind of a willingness to experiment with the different
Dustin Marx: marketing because almost every channel, someone is having success. And so then it’s more of like, well, what do I need to do to adjust in order for us to have that success as well? So that’s been a big part. And then a couple other things, I think being really clear about like, what is
Dustin Marx: our mission? You know, ours is helping others thrive and what are our values? So that way I hired people who have a similar set of values, and I didn’t hire people who had a dissimilar set of values. So we’ve been very fortunate. We made some mistakes. I think no one’s going to be perfect on
Dustin Marx: that, but we’ve gotten some really exceptional people. And so a lot of marketing, plus really exceptional people, plus implementing their ideas, and then having kind of shared incentives and aligned incentives, that has really been our recipe for success. It really has not been anything
Dustin Marx: that’s like that revolutionary, you know, water still goes, you know, gravity, right, still goes down. And so like, there isn’t anything that’s really that unique about what we’re doing. It’s more of just we’re doing a lot of those things and we’re willing to make mistakes. And, you know,
Dustin Marx: we don’t make mistakes that would take the business under, but we are very comfortable making a lot of mistakes along the way.
Tyler Martin: So would it be safe to say you’re aggressive in some of your decision-making knowing that you may have to recalibrate and it may not work? Is that a fair statement?
Dustin Marx: I think it’s a great statement. The thing that’s interesting for me is like, I’ve got the collective wisdom of people who’ve been out in the field for a hundred plus years. So I don’t think we’re that aggressive in our decision-making. They’ve already seen this movie multiple times.
Dustin Marx: They know here’s what works, here’s what doesn’t. You know, it’s just my ego not standing in the way. And in the past, you know, in a prior time, you know, I felt like my way had to be the right way and the only way.
Dustin Marx: And what I’ve learned over time is there’s a lot of different ways to be successful. And, you know, the more that you can involve your team, the higher the likelihood that you’ll be able to get there.
Tyler Martin: Yeah, I love that. Before I move on to the next thing that I want to talk to you about, I do have one question. You mentioned plumbing, one trade, something that you could get your head around.
14:24Why they won’t add HVAC or electrical yet
Tyler Martin: What’s your vision in terms of additional trades? Like, do you feel do you want to go deeper in plumbing first or do you feel like you’re leaving maybe fruit on the tree, so to speak, and some of these other trades?
Dustin Marx: There is definitely fruit on the tree. But the way we think about the world is we’re not even executing perfectly on plumbing. And so, you know, why should we feel deserved to be rewarded if we’re not even do exceptionally with plumbing? You know, there’s a lot of businesses that have really built really successful businesses by focusing on one thing, right?
Dustin Marx: Like Chicken Fingers, you know, and we can all think of like Raising Cane’s. They built a really good one on Chicken Fingers, right? And so for me, you know, we go, how can we just be the most exceptional plumbing company that we can be?
Dustin Marx: And until we figured that out, don’t want to, you know, undermine our team. But like, that’s already a really complex, comprehensive task before we go, hey, let’s add additional trades, you know, as well. And so for us, you know, I would much rather really figure it out, have a great experience every single time, have a great, you know, all of our employees being super happy and solve that before we look to expand additional trades.
Tyler Martin: I love that. I love that philosophy. A lot of times you hear, you know, my typical answer that I get from that question is, oh, yeah, let’s do another trade because, you know, there’s opportunity and it’s easy opportunity and we’ll grab that. I love that you’re thinking, go deeper, really hone my process, really get things solid,
Tyler Martin: and then we’ll think about other things.
Dustin Marx: Yeah, exactly.
Tyler Martin: I love that. Love it. Okay. So switching gears here now, generally when we think of like hierarchy, if you will, you kind of think, you know, your CEO at the top, you’ve got your middle management, and
16:11The upside-down org chart with plumbers on top
Tyler Martin: then everybody else kind of at the bottom. You guys have flipped that. So you put the plumbers at the top and then it’s inverted. Talk to me about that. Like, what does that mean exactly? Like, how did, when you introduced that, how was that perceived?
Tyler Martin: Love to just know, take me through that a little bit.
Dustin Marx: Yeah, I think the simplest way to think about it is like, who actually pays the bills at our company? And it’s the customer. And so the customer is the one who like, they’re paying for all of this. So how do we have a great customer experience?
Dustin Marx: Well, it actually is the people who are closest to the customer, which are our plumbers. And, you know, I, in a different business, I kind of said, hey, we’re customer first. And it’s not that you shouldn’t be very customer centric. But what I learned was that by being employed first, you end up creating a better customer experience because you make different decisions.
Dustin Marx: And we have happy employees. They operate differently. And so the idea is, I don’t think overly creative. of those, just like, if the person who’s paying us is our customer, and the person who’s interfacing with them, for us, our plumbers, you know, that is who everything should revolve around. And that
Dustin Marx: should be kind of like the guiding signal and guiding decision for all of our decisions, right? Is what is in the best interest for our plumbers, you know, as well. Now, we can’t have it just for the best interest of the plumbers, and then, you know, add a detriment to the customers or a
Dustin Marx: detriment to the company, but we should kind of operate that way, right? So, practically speaking, what does that mean? It means that we think about like, well, how can we have our plumbers making enough to take care of their families, right? I mean, that’s one of the primary reasons that
Dustin Marx: people have a job. And so, what does that need to look like in terms of the amount of jobs they run, the type of jobs that they run as well? And so, that guides a lot of our marketing decision-making, you know, as well. And obviously, we have to work within a certain budget on our marketing to
Dustin Marx: make sure we can still operate as a business. But that is how we think about what does marketing need to do? What does our call center need to do? It should be to support our plumbers. You know, similarly, when we first got started, you know, one of the things that we talked about
Dustin Marx: was creating this great plumber experience. And we heard a lot of them really dislike on-call. And so like philosophically, we want to be able to offer every single day that we can work with with customers, but we don’t want to burn our people out with on call on the weekends and stuff
Dustin Marx: like that. And so that guided us to making a decision over time to have different schedules, right? And some people work weekends and some people work the week, but everyone has kind of their normal week that they’re working as opposed to, Hey, you’re required or you’re required to do
Dustin Marx: the after hours and stuff like that. And so, so that’s been a big part for us, you know, and even just on compensation. You know, we have made a bunch of different mistakes, tried different compensation models. You know, the first one that I thought was the greatest thing ever, you know,
Dustin Marx: did not produce the right, you know, incentives for our employees. And it was asking our team, like, what would be the right kind of way for you to feel incentivized, you know, as well? And so that dictated a lot of it. And so the basic idea is the plumbers are at the top, then you’ve got
Dustin Marx: kind of the, you know, direct support for them, whether it’s marketing call center, operations, dispatch, et cetera, finance, recruiting, and then below that, you know, those leaders and then below that, you know, for me. And that is how we think about supporting the team and how we structure it.
Dustin Marx: And we tell everyone from day one, you know, if you don’t like it, get out in the truck and go be in the field as a plumber because it’s a better experience. And, you know, but if not, you know, shut your yapping and let’s take care of our plumbers.
Tyler Martin: What would that look like? Let’s say, you know, there’s someone in the audience and they’re like, hey, I want to, you know, flip, invert my hierarchy for lack of better words. What would that look like? I mean, what would someone do that might suddenly put their technicians first?
Dustin Marx: That’s a great question, Tyler. So when you got like, how is this received? How is this spread up? This has been how it has always been for us. So, so this was, there was no like changing. It was just, here’s who we are. Here’s what we believe. And, and I almost think of it like if
Dustin Marx: if there was a, you know, listener or an owner of their business and said, Hey, you know, I subscribe to this belief that, you know, if we take care of our employees, they’ll, they’ll take care of the business and the customers and it’ll kind of work itself out. I don’t think it’s that
Dustin Marx: big of a shift, you know, it’s, but it’s, it’s, it’s being consistent. So like an example of this is there are times where there might be a, I thought an employee, I thought we communicated something to an employee, thought we were really clear about it, and they misunderstood it.
Dustin Marx: And they’re like, boy, I’m really disappointed because this is going to impact my pay, or this is something that I’m unhappy about. In almost all of those scenarios, we will always go and do right by the employee and explain it. And then even at the detriment, we’ll go through
Dustin Marx: it. So that is an example where you have to be willing to… You can say it, but then you got to follow through with it. One of the things that I love doing is, you know, we’ve got, you know, our six core values and we’re very focused on it. And so, you know, anytime I catch people,
Dustin Marx: I want to recognize them. And then when I’m really impressed, I not only want to recognize it, but I’ll do like something really meaningful, right? Like we had one of our plumbers, you know, shows up on a Friday morning to do like a big whole house repipe.
Dustin Marx: There was miscommunication with the customer, the customer really misunderstood. and the plumber’s like, I’ll work this weekend. No manager asked them to do that, but they did this in order to get this job done. And I was just so taken by it. And I gave the plumber just, in that situation,
Dustin Marx: I think it was like an extra thousand dollar bonus. And it was just more, not because they’re getting it done that week, but it’s more one of our core values. For us, it’s getting it all. They were just honoring that. And so for me, I try to identify those times
Dustin Marx: that really align with our core values. And then if I’m really impressed by it, I put money behind it, you know, because it reinforces like, hey, if this is so meaningful, there should be some sort of benefit for the person if I really believe that.
Tyler Martin: Have you had anybody in your staff that’s not a technician that wasn’t really following through in that plan? Because sometimes where I’m going with this is sometimes let’s say you’re a finance or you’re someone in HR or something. It can be hard sometimes supporting technicians,
Tyler Martin: Maybe they don’t fill out estimates fully or maybe whatever they’re doing, there’s additional work that the support staff has to do. And I’ve seen sometimes morale by those operational support people can get a little negative where they it’s hard to support them and think of them as number one.
Tyler Martin: Does that happen? Have you had anybody where they’re not going along with the plan rowing in the same direction?
Dustin Marx: I don’t know if they have. It hasn’t come to me, perhaps.
23:19Open books and why employees overestimate owner profit
Dustin Marx: But I’m pretty explicit from the outset and even in onboarding, like everyone’s job and everyone’s responsibility is to take care of the plumbers. Like that, that is who we serve. And there’s a lot of other great companies out there that have different approaches.
Dustin Marx: We may not be right for everybody and that’s okay. But like no one for us is going to have a different mentality and be with us. And so I have not heard anybody saying anything about, you know, the plumbers and being of support for them.
Tyler Martin: Very cool. OK, I want to talk about just your model in terms of taking care of your team. You have, I believe, an open books policy where you share the numbers with your team, the way you compensate in the terms of their profit share.
Tyler Martin: It’s a 50-35-15 methodology. We’ll get into the numbers part in the next segment, but I just want to talk about the human side of this. A lot of times when you open books, if your culture isn’t ready for that, it can make it seem like the company’s making a ton of money because they might not, employees oftentimes
Tyler Martin: don’t understand that. And then with the profit sharing, that can kind of be interesting too, because sometimes it can make people feel like they’re a salesperson. Can you kind of walk me through when you introduced that and how has that been perceived? Is it for everyone?
Tyler Martin: do sometimes people, maybe with the profit sharing, it doesn’t come up, but when they see the open
Dustin Marx: books, it’s kind of hard for them to get their head around it? I think that’s a good question, Tyler. And here’s what’s interesting is, is I actually think it’s, it’s the opposite. I think that’s a big fear that people have. Oh my gosh, you know, Hey, the owner, look how much money
Dustin Marx: they’re making. What’s really fascinating. And you probably have seen this because of like how many financials of different companies and how people are. Most companies are not doing as very well. Right. Right. So it’s kind of like, wow, you know, I’m making 10%, you know, or something
Dustin Marx: like that. Like what ends up happening is a, an employee’s perception is, wow, well, we just charged, you know, $3,000 for that water heater. I got paid, you know, however much money to do all that work. You know, Dustin is just keeping the rest for himself as profit. And they don’t even
Dustin Marx: realize all the other expenses that go with it. And so what my experience has been has been that employees typically are surprised at how low the profit is in comparison to the revenue, because oftentimes they think, oh, the revenue, that’s how much the company makes,
Dustin Marx: you know, and they don’t go, oh, you have marketing or you have insurance or what you pay taxes on my salary as an employee. Like there’s all of these extra costs. Oh, this one financing plan costs this much. Like there’s just so many places where, you know, people spend a lot of money
Dustin Marx: that unless you do a lot of employee education, they actually really are unaware of it. And so my observation is that people typically think that owners are making a lot more than how much they are, you know, and, and your employees aren’t dumb, you know? And so I think
Dustin Marx: just kind of taking that approach of let me be open with them. So they’ve been really receptive to that. And for us, we’ve kind of shared our philosophy is that we want to overpay on our plumbers. We want to pay above market, really at the highest end of the market. And then everywhere
Dustin Marx: else we can, we want to be as ruthless and maniacal on keeping our costs low. And just the more that we can pay a premium to our employees and then everywhere else save money, that is really kind of the culture that we’ve been focused on and kind of what I’ll call our
Tyler Martin: flywheel for success. Have you seen that actually work? Like, do you see plumbers, for example, keeping inventory tighter on their truck? Or I mean, what are some behaviors that you’ve seen that kind of mirror this, what you hoped it would come out?
Dustin Marx: Yeah, I think people underestimate the power of incentives. And if you can only get a couple of things right, at least my approach has been, can I really nail how are people incentivized? So I’ll give you a couple of different examples of how this works out.
Dustin Marx: So one of those, we had one of our employees, so a lot of our vehicles use our diesels, right? And so they have gas or diesel fuel, but they also have DEF in order to make sure everything operates. So we had an employee on a random Saturday reach out to our operations leader.
Dustin Marx: He’s like, how much are we paying for death? And our operations leader, why don’t you go check it out? And he starts looking it up. We’re paying, you know, whatever the amount is. He’s like, I just found it at Sam’s Club. And, you know, it’s a lot less.
Dustin Marx: I think we should get it from there. You know, so we’re like, do it. You know, like, so like that is one of the places, you know, white balls, like little things, they are going, how do we save money? And then we promote this.
Dustin Marx: We talk about this. We reinforce these really successful behaviors, right? Google is like the biggest tax on all of us as far as advertising, right? So if you get more word of mouth, you know, that and, you know, great customer experience, they get that.
Dustin Marx: So those have been a couple of the places where we do a lot of education about it, you know, and them just kind of seeing the benefit of, hey, we saved a little bit here. We saved a little bit there because every extra dollar that we can save specifically on costs get sold, that can go straight to the bottom line.
Dustin Marx: The other thing that we do is part of the actual compensation for the job is they are getting paid less certain costs within materials. So the more that they can be efficient with their materials, the more that they actually will get paid. And so we have owners who will return stuff to the supply house as opposed to keeping a lot of inventory on.
Tyler Martin: Yeah, that’s cool. Now, you actually, correct me if I’m wrong, hopefully my research is right, each technician with their own truck is doing their own P&L, or they’re seeing their own P&L by their own truck. Is that correct? Yeah.
Dustin Marx: So we subscribe to this philosophy of the great game of business. So there’s this author, his name’s Jack Stack, and he built a really neat blue-collar business, I don’t know, like in the 80s, right?
29:26Every truck forecasts its own numbers on Friday
Dustin Marx: And it was manufacturing. And so a lot of those principles have kind of guided us. And so our plumbers, every single Friday, we have a meeting and our plumbers forecast what they’re going to do for the month. And so for us, we’ve broken down to like how much in drain revenue and how much in plumbing revenue.
Dustin Marx: And then there’s different costs of materials that go into it. There’s different subcontractor costs, finance fees, all sorts of those types of things go into the cost of goods sold. You know, how at least our accounting is for it, as long as well as producer labor, taxes, et cetera, et cetera, apprentices.
Dustin Marx: So they will go through and forecast for the month with where they’re at. And so one of the things that we always talk them about is being more of like a thermostat, not like a thermometer. And the thermometer is really great at telling you the temperature.
Dustin Marx: The thermostat, you can actually change it. And so what I’ve observed is a lot of companies, they’ll review their income statement after the month is already completed, and you don’t have any time to impact that period of time’s performance. And so instead, for us, they forecast, and then we kind of look at it and go, do we like it?
Dustin Marx: Don’t we like it? If we don’t like it, what are we going to change in order to have something that we’re more excited about? Or if we’re really liking it, what do we need to just reinforce and keep doing as well? too. So all of our plumbers will forecast out their trucks. I have other members,
Dustin Marx: like my personal marketing, they’re forecasting out their marketing. I’ve got some operations, they’re forecasting out different parts of overhead, some of our finance. So it’s really a game where everyone plays because it’s not just our plumbers who participate in the profit, it’s everybody. And then each truck, we kind of roll it up, right? Into what’s the total
Dustin Marx: success for the business going to be? What are we forecasting in totality, you know, in revenue? What’s our gross margin and gross profitable dollars? And what’s our overhead? Ultimately, where’s our net end going to be?
Tyler Martin: You’re speaking to my heart when you’re saying, hey, I’m trying to think of levers in advance that I can pull before waiting for a month or two old of financials. I love that you guys are trying to think proactively during the month in the term of forecasting
Tyler Martin: to how you want to manage the business. How does a technician do the forecasting part, though, mechanically? are they just looking at, oh, I’m going to work this number of hours and I think I’ll do this number of repairs or maintenance? Or how are they forecasting? Like, what are they driving that
Dustin Marx: around? Yeah. So some of it is off of like historical data and then some of it’s off of assumptions. And so, you know, it depends on the time of the month. Let’s say it’s, you know, halfway through the month, they are able to go, well, here’s how much I’ve already generated.
Dustin Marx: I’ve already produced for the month. Here’s how much time is remaining. You know, what are some of those assumptions that they’re going to put in, maybe historical performance, maybe they’re taking a vacation, like they’ll go through all that. And what we found over time is, you know,
Dustin Marx: some technicians might be high or low and we do a lot of education to say, Hey, this is, we’re trying to be more accurate with our prediction. We’re not setting this as a goal. So this is not like a goal setting exercise where it’s like, here’s what I can do.
Dustin Marx: This is with a 90% probability. This is what I will do. And we don’t want people to under forecast, Like that doesn’t serve us well, nor do we want people to have pie in the sky numbers. And so over time, some employees will be higher consistently, some will be lower consistently.
Dustin Marx: But we’ve found that we are able, even at the beginning of the month with our employees doing this, we’re able to get somewhere within 3% of where we’ll actually finish the month. And it’s really impressive as they’re going. And to your prior statement, Tyler, probably one of the best things is it’s not me with the ideas on how to impact it.
Dustin Marx: It’s actually our employees going, here’s what I can do to influence our success.
Tyler Martin: But it’s so smart because even though I really understand it’s not a goal, there’s a human nature part that if I say I’m going to do, I don’t know, $50,000 this month or whatever that number is, you’re thinking about that throughout the month.
Tyler Martin: You’re thinking about it does affect your behavior, I guess is what I’m trying to say. But it’s pretty genius, frankly, to get your team to think ahead like that, especially on the technician level.
Dustin Marx: None of this is my idea. So I would love to take credit for it, but have great mentors and advisors who kind of said, yeah, here’s what you do. And so that’s a great point.
Tyler Martin: Okay, Mr. Humble. Hey, so I want to get in this next, winding down here, just a couple more segments. This next one is my favorite one. It’s called The Number. and it’s one where we get a little bit deeper into the numbers of the business.
Tyler Martin: And I’d love to know, and maybe it’s the 50% profit share, but I’d love to just know, could we get into a couple numbers that are close to you that you manage the business around and just kind of dig a little deeper?
Dustin Marx: Yeah. So one of the things that we communicate, and it’s not exactly, but we say every truck should be, from our vantage point, should be producing at least $50,000 a month of revenue. As that is, you know, we’re, you know, depends on how many trucks and kind of,
Dustin Marx: you know, every time you have to add overhead, you know, there’s not like a half of a person you can hire for, right? And so kind of have these changes. But that typically is where we are profitable for that truck when they’re operating. And so that is one of the biggest
Dustin Marx: ones that we talk about. And in some months, a truck may be below 50. In some months, a truck may be above 50. But our goal is to get every truck to operate in the black. And so that’s
Tyler Martin: one of the bigger metrics that universally we discuss as a team. Very cool. What about, where does gross profit margin, some blended rate or just the overall company rate, How much of that is a focus? Are you open to sharing like what you guys are trying to target?
Dustin Marx: Yeah. So, and we are still early innings of figuring this out. This is why I’m like, there’s no way I can even put my head around, you know, more trades. So right now, one of those big things that we talk about is managing cost of goods sold
Dustin Marx: and for our plumbers going through that. And so, and I think this is just how everyone, you know, what I’ve observed is a lot of people, what they put into different parts of their income statement will dramatically influence what these percentages are. So for us, if I can get it into the mid-50s, how we’ve kind of set up our cost of goods
Dustin Marx: sold and what actually sits up revenue, I would be really thrilled about that. Right now, we’re running in the low 50s is where we’re consistently able to achieve. And that’s blended between both drains as well as kind of more traditional plumbing. A big part of that for us here in Texas is on some of our drain work.
Dustin Marx: We have subcontractors who go in and do all of the excavation. We have these big tunnel replacement jobs. And, you know, I’ve heard some people do that like as a contra against revenue. We keep that and our costs get sold. So it’s more difficult to achieve some of the higher numbers percentage-wise that I’ve seen other people do and still be priced effectively in the market.
Tyler Martin: I love that you bring that up, though, because I’ve had that happen to me where people say, oh, I’m doing 65% GP or something like that. And then what they consider part of their GP, because it is kind of an art, they’re leaving a lot of things in their bottom line and their overhead that probably more traditionally I would consider of cost of goods sold.
Tyler Martin: So it is kind of hard sometimes when people are throwing out those numbers to exactly know what they mean by them.
Dustin Marx: Yeah, I think everyone does. There is what I’ve observed, at least there is no universal. Here’s how the income statement should be. And here’s how everything, right? I mean, you have your gap, which we do gap accounting. But it still is there are a lot of variations in this category is what I’ve observed.
37:25The 50% profit share and the LSA traffic drop
Tyler Martin: So true. What about last thing I’d like to talk in this number area is just this whole 50% profit sharing. It’s a very generous number. Doesn’t that to some degree make it hard sometimes to cover everything that you want to cover? Like sometimes if there’s any loans for vehicles or maybe you have a credit line, sometimes you need that or pay taxes.
Tyler Martin: You need that cash flow to do some of these other things. Does that, and I know this comes from The Great Game of Business, the book, it’s a great book. But does that ever create some challenges in terms of just managing the business itself in terms of cash flow?
Dustin Marx: I think there definitely could be challenges that can emerge from this. And so, you know, when are you paying it out? What are those things? You know, for us, it’s not off of EBITDA or anything like that. You know, we’ve got that income.
Dustin Marx: And, you know, obviously, we will take into account taxes as well. Right. So it’s not just like one person is footing the bill for taxes, because that is something that like collectively we all experience too. So anyway, so those just, you know, I would hate for someone just to go, hey, I’m just doing this, you know, every single week or every single month.
Dustin Marx: I think there needs to be a lot of thought put into this. The one thing I would just challenge on is like, I don’t view this as generous. In fact, I view it almost kind of almost like the opposite. And that is this is something for our team where I want people to love entrepreneurship.
Dustin Marx: And I actually think we will be more profitable by me splitting this with our employees. And in fact, I think we’ll be more than two times as profitable. Right. If you kind of say I’m splitting half the bets that I’m making is that this business value,
Dustin Marx: as well as profitability will be even greater than if I just kept those, you know, all the profits to myself, right? And so for me, it simplifies a lot of how to manage the business. It takes a lot of stress off of me. Like our people know if we’re not doing well, right?
Dustin Marx: I’m not the one who’s holding all of that weight and burden upon me. We disclose where are we at with our cash position, what are our cash goals as well? You know, because as great as a paper can look, you know, it’s much more important
Dustin Marx: to have cash in the bank always. And so those are some of the things that are also communicated, are visible for everybody. And it also makes sure that, you know, people are being aware of how other people are behaving and also kind of managing themselves
Dustin Marx: a little bit differently. So I think that has been like, we’ve had a fair amount of success. Why have we had success? We’ve attracted really great people. And they’ve behaved in a manner that’s consistent with an owner would.
Tyler Martin: Yeah, very cool. Have you seen any data so far in terms of like lower attrition rates than maybe industry standard, if there is even industry standard? Or I mean, it’s kind of hard to gauge morale other than maybe attrition, I would say. Maybe I guess customer feedback would be a big one.
Tyler Martin: Have you seen any type of things that you say, hey, this is really working? It’s showing that getting everybody involved, having a piece of they own the results. You’re seeing that in the data.
Dustin Marx: So it’s hard because this is how we’ve done it from the outset of like, so like, how do you do a comparison? What I can tell you is, you know, on our customer ratings, we’ve got like a five star and we’re, you know, well over a thousand reviews.
Dustin Marx: We have lost a couple of plumbers. One of the things that’s really exciting for me is a couple of them are now running their own business. And one of them is like a responsible master plumber in another company. So, you know, there’s not a lot of attrition that’s happened. And in all those cases, I think it’s actually a better thing for their futures and their families. And I’m happy that we were able to kind of be along for part of their journey.
Dustin Marx: So it’s hard for me to really say this, you know, but I’m having fun. I think for the most part, people are having fun, you know? And I mean, if you kind of talk to the team, we’ve got ambitious goals of where we want
Dustin Marx: to take this, but it does feel like we’re making progress on the way. So, you know, unfortunately, I can’t give you a really clear cut. Yes, this is something, you know, I think it’s, you know, everyone can, the fun thing about running a business is you can choose how you want to play the game.
Dustin Marx: This is just the choice I’ve made.
Tyler Martin: I love it. I love your attitude about people, your employees starting their own business or maybe doing something that is better for them in their long-term career. I think with that open mindset, because I’ve seen this in other parts of my career, when
Tyler Martin: you have that open mindset, sometimes those people come back to you. Maybe they decide running a business isn’t for them and they roll their business into your business, but you just never know. I mean, when you keep that line of that train of communication open and just that thought
Tyler Martin: process, I think it leaves a lot of doors open.
Dustin Marx: Yeah, I mean, again, it’s not novel, right? It’s kind of back to the golden rule. I mean, how would I want to be treated if the roles were reversed?
Tyler Martin: Yeah, so cool. Okay, last thing I want to talk about just a few minutes here. I know you’ve talked about losing a couple plumbers here and there, normal. I know in March you had LSA, your traffic, your Google local service ads really changed.
Tyler Martin: I think it was like 50% drop. Kind of just wanted to talk about like, how do you handle when those types of things are hitting in the whole team as, you know, running their numbers and things maybe aren’t playing out? How do you keep that all together as a group?
Tyler Martin: And how do you deal with things like that?
Dustin Marx: So I wish I didn’t have adversity in my business, right? It’s kind of like, I wish my kids never experienced adversity, but I actually think adversity is really the foundation for real long-term success. And so for me, it’s about knowing where we want to go, communicating that, and also acknowledging the fact that sometimes, some weeks, some days, some months, things are going to go really well.
Dustin Marx: And sometimes they’re not. And these are our opportunities to get better, right? These are really wonderful times. And so for us, it was like, hey, we need to run more calls, fewer calls are coming in. And so during one of those great game businesses, like, how do we get the phone to ring more?
Dustin Marx: And it was a bunch of fantastic ideas, not only getting the phone to ring, but also people going, well, here’s where we can be more efficient. Here’s how we can improve in these other areas, you know, as well. Right. Some people are like, we should get yard signs going.
Dustin Marx: So some of our plumbers now are putting up yard signs. Some of them are doing door hangers. Some of the, you know, that’s kind of going. Some of them are knocking on the neighbors, you know, to kind of kind of do that. But it’s their idea.
Dustin Marx: And so, you know, people tend to, you know, follow through on their ideas much more than, you know, someone else’s ideas. So that played a role. And then a lot of follow-up to customers are creating a better experience. And so, you know, we kind of figured out a couple of things with LSA, those things.
Dustin Marx: And this, literally, this past week we had was our largest sales week we’ve ever had as a company. And it’s pretty cool. Like, this past week, we sold more than, you know, last year, this whole month. and just kind of seeing that type of success occurring, you know.
Dustin Marx: And so the thing that we’ll do is we will keep reminding people about these adversity times and these adverse times and how we, you know, we’re able to move past them. And so it’s always good. A little humility never hurts. And so it’s always good to remind people this is kind of the,
Dustin Marx: if you zoom way out, it kind of looks like everything’s just going up and to the right, but you look in there, it’s like a freaking, And, you know, how the heart rate beats, right? Up and down, up and down, up and down.
Tyler Martin: People forget that too when you’re growing a business because it’s the internet. Everybody expects everything to be linear and just go up. But the truth is there’s a lot of ups and downs in between to get to that trajectory.
Dustin Marx: Yeah, absolutely. And you just can’t, I think part of the responsibility as the owner is to kind of, where are we going? You know, it’s kind of like if you ever get seasick, right? The key is look to the horizon and you’ll level yourself out.
Dustin Marx: So I think the same thing applies for business.
Tyler Martin: Yeah. Sounds like you’re a good leader. Your answer really came to me is that just strong leadership is part of it. Sounds like you’re a really good leader. I’ll end on that note. You’re a great guest. Just so much stuff you shared today.
Tyler Martin: If people wanted to reach out to you, Dustin, is there anywhere in particular you’d like them to go? Is it okay if they reach out to you?
Dustin Marx: Oh, yeah. Look, I’m literally standing on the shoulders of others who’ve helped me. And so I’d love to help others along the way. And so LinkedIn, I’m on there. People can even just email me. It’s literally my name, Dustin at callmother.com, right? And happy to help in any way, but, you know, love giving back, love what you’re doing, Tyler,
Dustin Marx: and want to see us all be successful.
Tyler Martin: And then I’ll put in this in the show notes. You just mentioned it. Callmother.com is your main website. I’ll put your LinkedIn in my show notes and then also your LinkedIn business page. And then if people also, there’s a Facebook mother plumbing and I’ll add this Instagram
Tyler Martin: later. So once again, Ken, thank you enough for your time. Dustin, I’m excited to maybe talk to you next year when you’re probably going to be, who knows, 20, 25 million. And then we can talk about the new challenges with that.
Dustin Marx: Absolutely. Thank you again, Tyler.
Tyler Martin: Thank you. Take care. So Dustin said something during this conversation that I think a lot of owners miss. Most companies talk about putting the field first. But when you look closer, the office usually becomes the center of the business. Dustin built his company the opposite way.
Tyler Martin: The plumbers are the foundation of the business because they are the people closest to the customer. Everything else, dispatch, leadership, marketing, finance, operations, is there to support the field and help them perform at a high level. What I liked is how intentional they are about teaching the numbers.
Tyler Martin: The team understands revenue, gross profit, cash flow, and how their daily decisions affect the company. Every Friday, each truck forecasts its own performance, so they’re not waiting until the end of the month to figure out whether things went sideways. They’re looking ahead, making adjustments before problems grow.
Tyler Martin: I also thought the profit-sharing approach was smart. It’s really smart. Not because it sounds good culturally, but because it changes behavior. When people understand the business and share in the outcome, they start paying attention to the details that protect profit, materials, callbacks, efficiency, customer experience,
Tyler Martin: all the little things that matter over time. There’s a big lesson here for trade owners. Growth doesn’t always come from adding more trucks. another location, or another trade. Sometimes the real opportunity is building alignment inside the business so the whole team is pulling in the same direction. Now, hey, if you want help understanding
Tyler Martin: your numbers and building a business that scales without carrying everything yourself, go to cfointrocall.com and feel free to book a free intro call. Or you can check out my website at cfomadeeasy.com. That’s cfomadeeasy.com. And as always, I appreciate you listening. Can’t thank you enough.
Tyler Martin: See you in the next episode.
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Tyler Martin works with owners on the numbers behind these stories: HVAC business coach.
