Full transcript10 chapters · 9,103 words
00:00Buying a plumbing company out of the newspaper at 24
Mark Paup: I bought my first plumbing company out of a newspaper when I was 24 years old. Four trucks, five employees, no real plan. 27 years later, I’m still building because I figured out early that the only way to stay relevant in the trade is to never stop working on yourself first.
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 thought about adding another trade, opening a new location, or scaling your home service business faster, this episode is going to challenge how you think about growth. Welcome back to the show. Today’s guest is Mark Popp.
Tyler Martin: He built a $30 million plumbing, HVAC, and electrical company starting from a small shop he bought at 24 years old out of a newspaper ad. In this conversation, he breaks down what actually works when scaling multi-trade businesses, the costly mistakes most owners make too early, and how running your business by the numbers
Tyler Martin: changes everything. Grab your notes. There’s a ton of value packed in this one. You’re going to love it. Let’s dive in. Hey, Mark, welcome to the Profit and Grit Show. How are you doing today?
Mark Paup: I’m doing great. Happy to be here, and thanks for the invite.
Tyler Martin: Yeah, thanks. I’d love to start learning a little bit about you. Could you tell us what you do professionally, and then I’d love to know something a little bit about you personally.
Mark Paup: Yeah, absolutely. So I own and operate Golden Rule Plumbing, Heating, and Cooling, and Electrical in Des Moines, Iowa. We also have locations in Omaha, Nebraska, and Salt Lake City, Utah, as well as I’ve got a lot of other hobbies outside of the daily grind that I love to do.
Tyler Martin: What’s one of your hobbies? I’d love to know something personal.
Mark Paup: Yeah, I’m acquiring farm and hunting land. My son’s 31. And so we have a lot of fun going out and getting dirty. I grew up on the farm. So we have an acreage and deer hunting and turkey hunting stuff. And then we have a, for my wife and her enjoyment, we have a home up at Lake Okoboji. So
Tyler Martin: spend a lot of time up there in the summer. Very cool. So the spirit of this show is you’ve been in the multi-trades now for 25 plus years. And the spirit of where I really wanted to take this is just how do you stay relevant in 25 plus years of being in the trades? And I think in my research
Tyler Martin: about you is you’re like a great story for that. It just, everything you’ve done. Where I’d love to start as maybe just your starting point of all this. You were a 25-year-old guy. You were married, I believe at the time Miranda was your wife or right around there, you got married and you
Tyler Martin: decided to acquire a company. Can you kind of take me through that story a little bit of what, why plumbing? Why did you decide to buy a company? And that’s a pretty young age
Mark Paup: to be doing that. Yep. Yep. Seems like yesterday, but yeah, I went to, I went to call, I was always into athletics and, you know, not much of the school. I was always a troublemaker in the classroom, right? Now we define that as ADHD. So I went to college for a year and a half to play
Mark Paup: football, got done with my second year. And my wife and I had our first son and I grew up on a small conservative farm town. And my dad said, you need to get a job. So I started plumbing. I started working UPS actually at night, five to nine. And I found a job doing plumbing from
Mark Paup: 7 to 3.30. So I did both those jobs for five years and I got my plumbing license along the way. And then right after that, I always knew I wanted to go out on my own. The company I was working for was a commercial company actually, but there was nowhere to go. The guy that was there, he was 40,
Mark Paup: 50. That was my journeyman. There was three of them and they were just making a couple of dollars more an hour than I was. So I’m kind of like, okay, what do I do here? I know I want to go on my own. I had no idea what that looked like, but I wasn’t afraid to work. I would obviously work
Mark Paup: two jobs, seven in the morning till nine o’clock at night for the last five years. And got home from church and there was a plumbing company in the Des Moines Register for sale back when you found things in the classifieds, not on the internet, right? Small company up 20 minutes
Mark Paup: north of Des Moines that was for sale, called on it. I had, you know, I was 24 at the time.
04:28The seller competed against him three months later
Mark Paup: I did buy a house and a rental property. So I’d already bought my first house when I was 19. And then my wife and I moved in together. We weren’t married yet, but we bought a duplex in Grimes and lived in that. And I rented the house in Ames out to my college buddies
Mark Paup: that were going to college. So I couldn’t come up with the money for the company, but nobody, you couldn’t give these companies away in 1999. So the owner ended up putting the down payment for the business because he didn’t have any other options.
Mark Paup: So he sold it to this naive 24-year-old and he was 40 at the time and going to retire. and I’m like, of course you are, you’re old. So now that I’m 51, I realized how naive I was when I thought he was going to retire.
Mark Paup: And he didn’t. Three months later, he ended up competing against me and taking back all the new construction contractors that I paid Blue Sky for. But he did forgive the down payment of the business. So we just kind of split our own ways.
Mark Paup: I still had the bank debt on the company, but we just forgave that. I didn’t have the money to fight him, right? So didn’t bother with that. But yeah, early on acquisition entrepreneur, right, is what they call that today. Yeah. So it did help us get a leg on the ground. That company had been in business for 10 years and did a little bit of service, but mostly new construction.
Mark Paup: Hired my all the employees left. So I had all this blue sky. I hired my best friend from high school who was a farm kid and farming was tough back then. he came on board and we just started doing dig work. We got into a place where they were taking
Mark Paup: septic systems out and putting them on city sewer. And we just were able to go from house to house and do a really good job and clean it up better than anybody else. And that’s what allowed us to stay in business for the first year. Wow. And then fast forward, we grew that plumbing department to
Mark Paup: 25 plumbers doing new construction and dig work. By 2023, we built our first building because we were in the competitor’s building for three to four months. So we moved out of there, rented a place. Then we ended up building a shop in the city of Grimes
Mark Paup: and lived in the front of it for a couple of years so that we didn’t have a house and a business. We built equity and put it all in the business. So when I say we lived, eat, and breathed our business, we literally slept there, ate there, and worked there.
Mark Paup: So raised our first three kids there.
Tyler Martin: And just for contrast here, because I think it’s just so amazing. I believe you have over 7,500 reviews currently for your company.
Mark Paup: 9,000.
Tyler Martin: 9,000, sorry. I’ve got old data, sorry.
Mark Paup: 9,000 reviews. You’ve got over 150 employees and I believe you’re doing well over 30 million a year. Is that correct? All from a farm boy essentially buying a small business where your competitor screws you, you’ve built it, or I should say the seller screws you,
Mark Paup: all from that to where you’re at today. That’s a pretty crazy story.
Tyler Martin: Yeah, it’s been fun. And Des Moines is a small market. So we’ve bumped our head against market share now at the plus 30 million in that small market. And that’s why we took our processes and systems and expanded to Omaha and Salt Lake City.
Tyler Martin: Yeah.
Mark Paup: When you were going through that where the seller kind of burns you, was there any point, was there any quit in you? Was there any point where you said, oh, man, I’ll do something else? No, not even for a second?
Tyler Martin: No. Never was an option or a thought in my mind. It was just grind it out and work hard and figure it out, right? Pay the bills and start going out there and finding new contractors to do work for. Yeah, it just never crossed my mind.
Mark Paup: What gives you, like, is it just in your DNA, like buying homes at 19 and buying businesses at 24? Is that in your DNA? Do you get that from your family? Where do you get this? Like, it sounds like you’re very risk averse.
Mark Paup: Or not risk averse, you’re very risk. You’re willing, you tolerate risk at a high level.
Tyler Martin: Yeah. No, I would say in that sense, the black sheep of the family, like very conservative family. Don’t take on debt. Don’t take high risk. So I don’t know. I would say it probably comes from my sports background, being very competitive and always
Tyler Martin: playing, trying to compete at the highest level. And I did, you know, football, wrestling and track and football or wrestling and track are very individual sport. So it was always competing against myself. I remember when I was young, high jumping in my parents’ basement and videotaping it and
Tyler Martin: critiquing myself and just becoming better at basically self-trained in that because we didn’t have a school that was big enough to have coaches like they have now, right? Yeah. So yeah, it was just part of my DNA. It just came natural to me in the competitive edge that I have, I think, is what drives it.
Mark Paup: And it sounds like you also weren’t. The fact that you lived on your work premises, you weren’t afraid to put in some long hours and whatever sweat equity was required.
Tyler Martin: Yeah. And that comes from the farm background, right? Don’t take unnecessary debt on, you know, stay very liquid and have that so you can invest it into the actual business. Yeah, that just came, didn’t even think about that. It just kind of, it made the most sense
Mark Paup: logical to me. What a cool story. How do you, before I get on to the next thing I want to talk
09:41Why they skipped Omaha and opened Salt Lake City first
Mark Paup: with you about, having these multi-locations that seem, at least when I think of like Utah, they aren’t geographically necessarily very close to each other. How are you managing that? Or how
Tyler Martin: are you rolling that out that you’re still keeping control? Yeah. So we had a guy tell me, we’ve been trying to go to Omaha for a long time. Omaha’s got really restrictive licensing. Okay. So it took us, you know, I would say I’ve been trying to come here for 10, 12 years. And just
Tyler Martin: the timing never worked out for whatever reason. It’s a two-hour drive from Des Moines. So logistically, it makes a lot of sense. Okay. And we’re proving that it does make a lot of sense. we’re up, you know, two, 300% year over year since we’ve taken over, but the opportunity
Tyler Martin: never came. And so I just never pushed the opportunity that didn’t present itself. Right. And there’s two thoughts of that. Like you can push into it and struggle, or you can be patient and wait for the timing. And so somebody said to me, go where the leader is, not the location.
Tyler Martin: And that’s when we skipped over Omaha and went to Salt Lake City because we had Aaron, who’s our general manager out there, knew my COO from a past lifetime. They worked together in a similar situation. And he raised his hand. His company got bought out for private equity.
Tyler Martin: He went from an $11 million company to running a $90 million company. And they wanted to ran the same in Salt Lake City as they did in Las Vegas. Well, that’s two completely different cultures. So he was stressed out and raised his hand after I was on another podcast, actually.
Tyler Martin: And I flew out there on May 7th of 23 or 24, and we were running calls by July 1 of that year. Wow. And so that was a completely green field. So my saying out there is embrace the suck for two to five years.
Tyler Martin: Nobody knows who you are. So that’s a complete startup trying to get our branding out there. But we have the back office, what we classify as golden rule solutions that accounting, HR, hiring, recruiting, all those things are out of grimes. And then the general manager, all he has to take care of is the people and the training.
Mark Paup: Was the general manager someone you had already known that you put that? My CEO.
Tyler Martin: Yeah, Brian knew him from a past lifetime. They worked in the insulation world, but they had multiple locations. And Brian was over top of him in that world. Somehow they both ended up in the plumbing, heating, cooling world, mostly the heating, cooling world.
Tyler Martin: And then, yeah, they were communicating over the last couple of years anyway, since they both ended up in it. And then when this happened, he was looking for an opportunity.
Mark Paup: Do you find anything you could share or any words of wisdom around when you’re at that first additional location that you go into anything to be aware of? And does it get easier as you add more locations now that you have your back office tight?
Mark Paup: Or is it like same type of challenges that you have to be prepared for?
Tyler Martin: Yeah, I think the second one’s easier because everybody’s already done it. They’ve went through the processes and put the Gantt charts and all of that stuff together. Now we were able to take what we failed at on the first one and just fine tune the last 25% of it to make it even smoother.
Tyler Martin: I would say on a green field, like you got to make sure you have a couple million dollars in the bank to be able to support that. Sure. There are genies in a bottle. You know, you hear of people that have locations and they spark one and and it catches fire right away.
Tyler Martin: But that’s not the norm. Right. That’s the outlier. Most of the time, it’s a hard grind for the first two to four years, getting it up and running, getting the right employees staffed, getting the marketing out there. right? Salt Lake City had the most mild, last two summers were the mildest and the winters were the
Tyler Martin: warmest on record. Like, I don’t care what you do marketing in a heating cooling business, you’re going to struggle with your not getting demand calls, right? Like, you’re just trying to get members. And so you’re doing all the trade shows and all of the, we really, really get,
13:48When to add a second trade and the 10 to 12 tech rule
Tyler Martin: we got good at what something we’ve never done before, because Des Moines has been around for 27 years. Guerrilla marketing, those tactics, they all have to be put back in play. And so that’s been interesting to find out, you know, what are the stupid leads that we can go find.
Mark Paup: Yeah, that’s fascinating. Hey, I want to talk about the multi-trade. So you obviously started out as a plumbing business. When is the right time to introduce the new trade? Do you do anything in particular that, did you already have someone identified that helped you to get into that new
Mark Paup: trade? Is that an experience you had? Kind of take me through that because what I see, just to give you context, a lot of times when I’m talking with owners that are considering additional trades, you know, there’s always that fear of like, okay, do I hire someone?
Mark Paup: They’re oftentimes too small to already have that domain experience internally, just sitting around. How did you go through that? And any lessons in there that might be
Tyler Martin: helpful for others? Yeah. So multi-techs, we’ve done it, added HVAC and added electrical. HVAC, we actually added out of the demand of our new construction business. So we were doing plumbing, new construction. We started in 99. And then we added another company. We started
Tyler Martin: doing HVAC, small. We had three guys. And then another company went out of business and we inherited 25 guys. And that was from… We’d started working with Al Levy and Ellen Rohr in 2004. So then we went from 25, 30 people to 60 people immediately after. But the work and the processes
Tyler Martin: and systems that I’d put in place with Al, we were able to do that. So hired a guy. It always seems like that first one will get you to a certain point. And then you got to know that you got to be looking for the next one, right? So somebody’s great and it’s great to take them so
Tyler Martin: far, but you got to be aware of their capacity and be able to backfill that immediately to continue to take you up or you’re going to stagnate or they’re going to walk out the door and you’re going to be stuck. Fast forward, we didn’t start doing electrical heavy until I think we started
Tyler Martin: electrical in 18 or 19. I can’t remember for sure. And it was the same thing. Hired guys, got them to get us as far as they could. But you’re hiring usually technicians that think that they want to become, take that next leap in their career. And they’re not truly leaders to
Tyler Martin: bring people on. They’re just really good technicians that have never led. And then they get to the leadership position, even if it’s to one guy, right? My COO always says the hardest step in management is managing one person. The next 11 are easy, but that first one is a real
Tyler Martin: mountain climb. So you just got to do it though, right? You just got to go through those lumps and it’s going to take a year or two and you’re going to find the right guy because you’re constantly going to be looking and searching and focusing on that. And that person will come along and then
Tyler Martin: now you’re off to the races. But every day you wait, delays that year or two that it’s going to take to get going, right? But I would say if I was a company, I would make sure that I had at least six to 10 technicians in the one division first. You have to have the cash flow and the
Tyler Martin: stability to say, this is our bar as an organization. Anything less than six, you get one or two guys to quit, you lose half your, you know, you lose 25 to half your workforce and you don’t have a culture that’s running the field. You don’t have a service manager. And then you’re going to put a
Tyler Martin: service manager in a position where he’s a service manager over electrical plumbing or HVAC, right? Because you got three in each department and they’re really different businesses. And so you’re not servicing them employees and you’re going to have a lot of turnover from what I’ve seen
Tyler Martin: historically from the companies I talked to. So get that first division cranking like 10 to 20. I would even say 10 to 20 before you need to think about the next one, because otherwise there’ll be a distraction. And a rule of thumb on a service manager is 10 to 12 technicians
Tyler Martin: for one leader. So if you get to that 10 to 12 in your plumbing division or whichever one’s your main core competency, then that’s when you could start looking at the next one. And then you could be looking at him being your manager or hiring a manager after that. But to have three different
Tyler Martin: departments is just unfair, in my opinion. Just to spread out. Yeah, two subs. Yeah.
18:21Budgeting two years of guaranteed pay for a new trade
Mark Paup: You made a comment about when you start a new location, think about having $2 million set aside, depending on how fast the business, a greenfield business, depending on how fast it grows. Do you have some rule of thumb when you’re talking about a new trade? Because you talked
Mark Paup: about cash flow. Let’s say you have, you know, X number of technicians, a service manager running plumbing, it’s doing really great. Now you’re going to go into HVAC. What was your thought flow when it came around cash flow? Like, were you like, Hey man, I know this is going to take
Mark Paup: a year before it’s profitable and I’m going to have to front the salary or whatever. Did you have any type of diagnostics or anything you were looking at?
Tyler Martin: Yeah. So we built that into the budget because we did, especially on the green field, we did guaranteed pay for the first year. So whatever that is, you know, that’s six, you know, seven, you know, roughly is about six, $700,000 a year to plan for that lift,
Tyler Martin: you know, that you’re going to typically be floating out there to support that business.
Mark Paup: Okay. And so like when you brought in another trade, was there a certain, it was like in the budget, were you building, like, were you expecting a return in six months or was it a year? How long
Tyler Martin: does that take when you have a new trade? I would say probably two years. Two years. Okay. Same thing. Wow. Okay. Realistically. I mean, it’s not going to be like, if I bring something into Golden Rule Grimes, right? Like the electric department, we have enough cashflow, not too
Tyler Martin: worried about it, what it’s going to drag unless you’re looking to exit or do something and you don’t want it to mess with your completely different conversation. But in, let’s say, Omaha, where our HVAC business should probably do around two, two and a half million in a year one,
Tyler Martin: probably closer to three, the way we’re going. That I would definitely… So we’re going to add plumbing out here. We got all of our plumbing licenses, but that’s going to be starting… This is a company we bought was HVAC only. So that plumbing will be new to the system. So we have
Tyler Martin: members, right? We have 1,200 members. So I can extrapolate out how many system checks that I’m going to start with because my demand is going to be a lot lower until the marketplace realizes that I have plumbing. So I’m going to look at those numbers a little differently.
Mark Paup: Makes sense. You mentioned Al Levy and then Ellen Rohr. When you brought them in to help you, would you consider those foundational moves? Were they more like polishing what you already had or
Tyler Martin: did they set the course for where you’re at today? They set the course for where I’m at today.
Mark Paup: Yeah, that’s awesome. In the beginning of the business, it’s embarrassing to say now, but, you know, I was 24 going on 25. Debits and credits in the checking account, which one, you know, if we had credits, hey, we made money, we can continue to stay in business. We just,
21:01Why spending in December to dodge taxes wrecks you
Mark Paup: and it drove us crazy. My wife ran all the back end. So that’s when we hired Ellen to come in and clean up all of our chart of accounts and make sure that, you know, and she has this financial quick check. I still get it today. Every Tuesday by five o’clock,
Mark Paup: I get that financial quick check. So it was foundational to know when I can spend money and when I can’t. Because the biggest mistake we make is we all love shiny objects, whether it’s a new truck, a new outfit, or new marketing, whatever. But in my above one-to-one ratio
Mark Paup: on my debt to equity that I have that money to go spend. Or our tax is coming up, right? The biggest mistake all of us make is we think we made money. I think this is still about a million dollars in net profit. I think companies south of a million dollars in net profit get themselves
Mark Paup: in trouble by going out and spending money at the end of the year to avoid taxes. And then the tax bill comes in April and they don’t have any cash. You’re coming through a few slow months, typically January, February, March, the business isn’t rocking like you thought it was, you know,
Mark Paup: you’re all happy and you know where you’re at in December. But that business, in my opinion, and this is what I tell everybody, I started a business day one, January one, every year. It’s a new business. If you want me to spend money, I’ll spend it in December. You ask me
Mark Paup: for money in January, you’re probably getting told no, because I have no idea what this year is.
Tyler Martin: It’s just kind of my safety mechanism to do it. Right. Yeah. That one is a little pet peeve of mine too, is that, and I get it for tax purposes, go out and buy equipment, go about, you know, take your big tax deduction. But I see it so many times where that’s the advice for like six years
Tyler Martin: in a row. And you’ll see someone that’s heavily in debt. They basically have used many years of profits to be able to pay down past debt that they’ve taken deductions on. And they’re just straddled by this debt service. And, you know, they’re confused. They seek profit, but they don’t
Tyler Martin: see a lot of money in the bank. And then they’re paying tax on that profit. And it’s just a vicious
Mark Paup: a cycle. So it’s nice to hear you recognize that. Yeah. In our life, we worked so hard in those beginning years that we feel like we should treat ourselves in a lifestyle. Like we buy a new truck that’s extended, a crew cab and the whole thing, it’s the nicest platinum package.
Mark Paup: And it’s a business write-off, but is it? At the end of the day, if you don’t have the cash flow, So you’re just putting yourself in a hole. So we always kind of had a rule. We never took on much debt with vehicles and stuff.
Mark Paup: When we were adding them, the cash flow just has to be there. That has to be the number one rule before you spend money. Yeah, yeah.
Tyler Martin: Okay, I want to spend a little time. I have a segment that I call The Number, and I like to make it very numbers-focused.
23:51Gross profit targets by trade and the 52 percent goal
Tyler Martin: And where I’d love to take this next conversation is around just from the multi-trades, Do you have some diagnostics, whether it be GP, average service ticket, labor as a percentage of revenue? Anything you look at it in terms of your trades that are numbers that you really focus on?
Mark Paup: All of them. I’m a very, I love data. I love numbers. And I don’t make many decisions without them. Okay. I think that was the thing that I learned from just got ingrained in me in those early years of trying to figure it out and then hiring Ellen and not being able to make a decision until you know.
Mark Paup: So, yeah, we have average tickets, gross profits, close rates, turnover percentages, Gold Club, which is our membership conversions. All of those are tracked and we’re also on EOS. Yeah. So every department, the leadership team has it, the operations L10 has those numbers in the beginning, and then the marketing L10 has those numbers in the beginning.
Mark Paup: So every part of our business has a number attached to it. Every department employee has a number attached. So CSRs, phone rings, the number’s two. We don’t want it to ring more than twice before we answer the phone. Right. So we’re very, very numbers driven. And then every, you know, we talk about the daily
Mark Paup: huddle, right. For call counts, three-day call board. So everything is ran off of a KPI.
Tyler Martin: Got it. What, and you could answer this either as just like a benchmark that you guys, not necessarily do your business, but just a benchmark you’re focused around, or if you’re open to sharing it for your business, what are GPs that you tend to look for as it goes
Tyler Martin: from like plumbing, HVAC and electrical? Do you kind of have some standard benchmarks that you’re
Mark Paup: looking at? Yeah. You know, residential plumbing, we want to be around 58, 59%. HVAC service, we want to be around 50. Residential electrical one, that one’s like mid-60s, but, you know, we’re right around 58% still, but that department’s growing. That’s our newest department. So we’re
Mark Paup: always adding, we’re okay because we’re always adding new technicians and that kind of beats that up. And then we run about 50% on HVAC replacements. But as a company, my goal is 52%.
Tyler Martin: As they combined every blend. Okay. Yeah. Wow. That’s a really healthy. And that’s fully when you say, when you’re talking GP, you’re direct labor, cost of materials. Do you throw a commission up there on any commissions? Okay. Yeah. Wow. That’s really good. 52 is really healthy.
Mark Paup: The 52 includes system engineers, commissions, the, you know, the replacements, you know, that’s probably 56% and then gets beat up from there. But if you’re truly looking at it, but all across on the P&L, 52 is our goal, all burdened. That’s great.
Tyler Martin: Well, that’s really good. What would you tell for trades owners that are out there? I love how you talk about like, you know, you don’t make a decision without numbers. For someone that maybe is not as inclined to run their business by numbers as you are,
Tyler Martin: they should have never done it. A lot of times I’ll hear people say to me, hey, I’m not a finance person. What would you say, though, in terms of like, hey, guys, pay attention to this. I mean, you’re someone that’s done it. Your credibility is like off the hook, your authority.
Tyler Martin: Like, what would you say? These are some things, maybe it’s the quick check that you talked about.
27:16Nexstar’s big five and making adjustments at halftime
Tyler Martin: What are the same things? You got to be really looking at these every day. These are the numbers you should be running your business by. Are you comfortable kind of sharing something like that?
Mark Paup: Yeah. Give Nexstar the credit. They have the big five, which I think are really important. You got your marketing, your vehicle spend, your overhead salaries, your materials, all materials bought in the company and direct labor as a company percentage. So I always had those numbers, but putting those five in and they say 65% of your total expenses are in those five buckets.
Mark Paup: So you want to be 65 or less. Otherwise, you’re not leaving anything for profitability, right? So we look at that one. We look at the quick check. Every manager in my company gets a financial quick check every Tuesday that has their gross profit,
Mark Paup: that has the budget gross profit for the month, that has their actual gross profit for the month, and then year to date against year to date. And theirs just simply has the gross profit numbers. And then I get the big five, the gross profits, payroll as a percentage of sales,
Mark Paup: and cash flow. And every Tuesday by 5 o’clock, somebody is getting a phone call on vacation or otherwise, they better figure out how do I get to that report. I equate it to this. I’m coming from football sports. I love the analogy. And I tell this to my team, whether it’s their score
Mark Paup: cards, whether it’s technician score cards, or it’s our financial score card, it’s a football game. Could you imagine going in at first quarter or halftime and have absolutely no idea if you’re down 21 points or up 21 points? How would you make a business decision? I need to add everything
Mark Paup: that comes up. I need to add a truck. My supplier’s taken a price increase. We could, you know, by 12%, you know, they’ve got $100,000 worth of equipment that we could buy because we’re, it’s in late April and we’re going to go into summer. Like we could pick up 12% margin just on purchases,
Mark Paup: not now, but do I have the cash? If you don’t know those things, you can’t take advantage of
Tyler Martin: picking up those small margins, right? Right, right. That become big margins at the end of the
Mark Paup: year. So it runs every part of your business. So if you’re coaching and training people, week one, you start getting a baseline, how the month’s going. Week two, okay, do we make any tweaks? Are we just allowing our people to have overtime in our business? And we’re having a down
Mark Paup: month. It’s 50 and rainy in April, and we’re not able to do HVAC checks, which is not able to turn over at the percentage we want. So HVAC replacements is a large part of your revenue. if you keep spending the same way, now you get to the end of the month and you lose money and
Mark Paup: you’re like, oh, damn. And maybe you don’t figure that out till the 15th of May. Well, if you’re tracking those numbers, you can make an adjustment at halftime, which is week two. And you can say, okay, managers tighten up the overtime. Nobody gets over 40 hours
Mark Paup: until this weather corrects. And the goal of that is at the end of the month, that thing never goes red, ever. Like I can count on, started working with this in 2006 or something when we put this in place, started in 04. I can count on one hand the months that I’ve lost money.
Tyler Martin: Really? Wow.
Mark Paup: And that’s because you’re adjusting at halftime, second week of the month. You’re making your adjustments and we’re just not ending in the red. Where in a fairness, a lot of us as business owners, because we’re not keeping our eye on the ball, to use another sports phrase,
Mark Paup: We are kind of getting, we’re finding out 45 days later or two months later. And at that point, your cash is drained, you’re sweating, AR is maybe backlogged if you’re doing commercial stuff. And it’s just kind of getting late to figure that out.
Mark Paup: So that’s good stuff. That’s a lot of wisdom there.
Tyler Martin: Like what was, maybe it was Ellen, but at what point did you get so numbers driven? Like it sounds like you’ve, because you guys have introduced to you.
Mark Paup: It was after that, yeah. once I started understanding and learning, I’ve always been driven to listen. Back then it was read books. PM Magazine was the magazine that had all that information that I remember reading an article in early 2000s of a guy that went on a boat
Mark Paup: and he was gone from his business for a whole month. And he was like, what numbers would I get if I was on this boat that I wouldn’t have to get back to shore and go save my company? That’s when I started. that was before I hired Ellen. That’s when I started seeking. And so I’ve always been blessed
Mark Paup: with a curious mind and always trying to look around the corner. Like my COO says, my superpower is looking around the corner. Like right now we’re heavily into AI, but I go hire those professionals. I don’t try, you know, I figure it out and I become an expert at the level
Mark Paup: I can become an expert, but I hire the expert to come and accelerate it. That’s why I hired Allen Ellen in 2004 after I started the business in 1999, right? Like, you know, that was just a blessing looking back at it that I had the foresight to say, okay, these people know how
Mark Paup: to operate a business. How can I figure out how to run a business instead of working a business 14 hours a day and wonder if I’m ever making money and my marriage is, you know, not seeing my kids, my marriage is on the rocks, like all those things that come along with it. That can go on for,
Mark Paup: 30 years. And I was fortunate to correct that and start a different path in five, six years.
Tyler Martin: Very cool. Hey, so you mentioned EOS. You’ve mentioned Nexstar, you’ve mentioned Al, you mentioned Ellen. It’s clear you’re willing to either introduce professionals into your
32:58Building an AI thesis before touching dispatch or CSRs
Tyler Martin: business that know things really well or tools. Nexstar has some great tools and then EOS has great tools. I want to go into the area of technology. Where does AI fit in? I believe you’re maybe doing it for dispatching NCSRs. Where does this fit into your business model?
Mark Paup: Where do you see this going? Yeah. So I started working. We got introduced to Rocky Ozaki, now AI, from Nexstar. And so Rocky is all about putting a strategy and a vision and a thesis about how you’re going to roll out AI within your own business. He presented at Super
Mark Paup: meeting in 24, I signed up at that meeting to work with him. Because I had been dabbling with a couple AI companies and it was terrible. Just a terrible experience. And that was early on, to be fair to them. But what I realized is they’re building this brand, just like Service Titan did.
Mark Paup: They’re building this company on the backs of our knowledge. And we’re paying them to take our knowledge. And I’m like, I’m not going to do this again because I did that with Service Titan. And then they’ll get IPO and I don’t have anything to show for it. But I spend $400,000 a year
Mark Paup: to run their product. And we were part of giving them all of this information on how we operate our daily businesses. So I talked to Rocky and I said, okay, I want to start thinking about this from a venture capital standpoint. If I’m going to get into AI, I want to know how
Mark Paup: venture capital would look at investing in these third-party guys. And so he hooked me up with Gerage with Get Fresh Ventures. And Gerage and I started working together about a year or a year, over a year ago, I guess now. And Gerage come from the tech world of building and scaling
Mark Paup: billion-dollar companies and exiting in the tech world. And so we have partnered up together now to build this for the trades of all of our backend. There’s a difference between AI and automation, right? AI can automate, but automation has been around since the 70s. Like your accounts
Mark Paup: payable can be automated with connections. But what’s AI truly do for the business that helps us scale and create efficiencies and helps us elevate the people within our business to get to efficiency? So if I go and Omaha jumps to 10 million, where I don’t need to add people,
Mark Paup: I don’t need to replace people. I don’t want to replace people. I want to elevate people and, but keep the head count the same, just pay them more money. It’s still going to be lower overhead at the end of the day, but I’m going to have better people working for me that know how to
Mark Paup: really do a great job. So working with him on all that and making all the connections on the marketing, right? The marketing is where we’ve thrown millions of dollars against the wall and at best 50% of it sticks. Like how can we full show true attribution with a, with the help of AI
Mark Paup: to make those connections and the API connections into the Service Titan and the other softwares to show us exactly what’s going on. And that’s what we’re building today. Every part of our business, we have our executive team, we have a group of five
Mark Paup: that works within Claude and a co-work every single day. And we’re building these processes. I think it’s already out there, but I built an acquisition pipeline that goes all the way to an email, goes out and sources all the things I had to do manually in the past to find out about the
Mark Paup: business size, find out about the business owner, find out about his size of business, all those things that you can find out online. AI does that automatically for me, pulls it back in, creates letters that are personal, and then emails them. And I built that over a weekend. And I can’t even
Mark Paup: set up my own iPhone. So this should not be daunting for anybody because I’m no tech wizard, but you have to spend hours in it. But first I’m going to, I’m going to step back. You have to build your thesis and your strategy. This is being overlooked by everybody. I just had a phone
Mark Paup: conference yesterday and the, and I talked about this and large company. And he’s like, I would have never thought to do that. And it’s such a disruption because in your company, your employees are thinking this is the news is telling them it’s going to replace their jobs.
Mark Paup: Well, if you leave them to tell the story in their own heads, it’s going to be 10 times worse than the actual story coming from you at the front of the company meeting, right? Telling them exactly what your plan is with this and your hope to educate them and help them and create a better lifestyle for them through them being able to elevate their position as a CSR, whatever it is.
Mark Paup: They can handle the harder calls, right? Yeah.
Tyler Martin: So what does that look like? are all of your calls or some of your calls being handled by CSRs? How are you handling that? And then I think it’s, is it full dispatch is all AI automated now or how does that work within
Tyler Martin: your business? Dispatch is oversight. So our AI does the logistics. A human being cannot do, right? You got up to a hundred trucks on the road. You can’t logistically, are they in the
Mark Paup: right areas? That’s the right customer, right tech, right job based on their criteria. So So AI dispatch does that for us. Got it. And then we have oversight with the same, we have the same number of dispatchers. There’s no way when they first started coming out,
Mark Paup: they said one dispatcher per hundred technicians. Well, we really haven’t seen a decrease in headcount in our dispatch room, but we have seen a huge up crease in our average ticket and close rate.
Tyler Martin: Wow.
Mark Paup: Which I’ll take.
Tyler Martin: Yeah. Right? I don’t need a decrease in people. I need an increase in the return on investment.
Mark Paup: which has proven to be true. So just a caution out there. Some of them try to say you’re going to reduce your headcount. We haven’t seen it. I’m sure at some point that’ll happen, right?
38:51Avoca taking 40 percent of calls and speed to lead
Mark Paup: But there’s still a lot of happy, just a lot of communication that homeowners need or want or technicians need, really. That’s probably where the biggest lift is, is right parts and, you know, they’ve got to take a break or a lunch or they’ve gotten an accident, just all those things that
Mark Paup: come along with a dispatcher. CSRs, it handles 40% of our frontline calls. It handles all of our nights and weekends, and it books directly into service site. We were on Avoca. I think Avoca is probably the best one out there, but I do caution. All AI is not plug and play. It has to
Mark Paup: learn just like a brand new CSR. You have to have somebody dedicated to implement. You cannot have the owner as the implementer or your CSR manager as an implementer. You’re going to drive… One of them is going to go crazy. And then it’s going to be a product problem because you don’t actually
Mark Paup: understand the amount of time that you had to dedicate to get this employee onboarded. It’s the same process. It takes time, six months to a year. If you had a CSR, they’re not answering the phone like your pros in a month or six months or a year, right? A lot of
Mark Paup: it takes a year to two years before all the things that homeowners say to identify plumbing, heating, cooling, electrical problems. They have no idea what it is. They’re hummings and they’re whatever they make up. So those are the fast two rules on AI. Definitely be getting into it.
Mark Paup: Have a thesis, have a strategy. You can only work on what your strategy says you need to work on now. It’s just kind of like the old rule of your top five projects. You can’t have more than five projects and you can’t be working on any more than five at a time because otherwise your building
Mark Paup: will go like this. If you’re working on dispatch, AI, back-end office, phone answering, playing around on Claude to do processes and procedures, pretty soon you’re not driving forward. All your people are scattered. So make sure you stick to that strategy. And if you’re going to do CSR,
Tyler Martin: do that one alone. Yeah, very cool. Good stuff. It sounds like on the CSR, as you said, 40%, AI is handling, are you doing something to keep the personal touch? I know PowerSelling Pros, using that as an example, they’ll talk about doing a personal touch call right after AI has done…
Mark Paup: Happy calls.
Tyler Martin: Happy calls. Okay, yeah. So is that how you bridge that personal touch side of it?
Mark Paup: Yeah. And we have, at this point, we were an earlier adopter of Avoca and we’ve been a design partner with them. So we have Speed to Lead, right? Your Angie’s, your LSA’s, anything where that customer, we had an average of like five to eight minute response time. Speed to Lead
Mark Paup: through AI is seconds. Wow. Which is huge for those because it’s all about Speed to Lead in the name. After hours, memberships through texting and outbound calling through Avoca, and they can directly book the call based off our capacity management into Service Titan.
Mark Paup: But again, all these things are paid in stages. You got to start out with the VOCA call taker, get that up and running, get that to learn your systems and your scripts and all of that. Then you have a VOCA coach, what you can look in on the back end of that
Mark Paup: to see how your CSRs and the coach is doing. and then all these other things are kind of a la carte to add on in monthly expenses and what you need so i have a lot of you know have several conversations they want this they want that but
Mark Paup: you’re going to pay for it but you got to first start with the call taker and you got to get that tested and it takes calls to test you know do x percentage of make it you know whatever if you have three csrs or 11 make it the 12th or the fourth right uh in the in the cadence so it’s
Mark Paup: not taking on all the calls, and then you’ll get more uncomfortable. And pretty soon on a busy day where it’s 80 degrees out, that’s going to be your 12th through 30th CSR, right? In the circle of your phone system. After hours is great phones, but it’s got to have enough repetitiveness to learn
Tyler Martin: your system. Yeah. So it’s kind of back to what you said originally, it’s just like have a thesis, Just have a strategy, have a plan, and then roll that out. I think where we sometimes, we try to roll everything out, and then we say it doesn’t work, or it’s not effective, and we probably didn’t have a really good plan in the first place.
Mark Paup: Yeah. I mean, I went through it. I lived it. Now I have phone calls from other people, and they’re like, this doesn’t work. And I’m like, okay, walk me through it. And they told nobody in the company. They just started implementing. And then now, all of a sudden, all their employees are their biggest enemies, right?
Mark Paup: Because they’re pushing back. If it has one bad phone call where the customer said, oh, that stupid AI, I didn’t know you guys were doing that. I’m not going to use you since you’re doing AI. I want to talk to human beings. Okay. Now your employee says that’s 100% of our customers because we didn’t educate and we didn’t get them to get on the bus with us to show them what the vision is for them.
Mark Paup: Right.
Tyler Martin: That’s good stuff. Hey, Mark, this was an awesome conversation. I mean, your wisdom and the stuff you share is amazing. Do want to share a couple of your links. So you’ve got goldenrulephc.com is your main company site. I’ll share your LinkedIn in the show notes, as well as your Instagrams and your YouTubes
Tyler Martin: and things like that. If people wanted to reach out to you and just chat with you, is LinkedIn the best place to do it?
Mark Paup: Yep, that’s a great place to do it.
Tyler Martin: Okay, awesome. Well, hey, thanks for taking the time to talk with me today. Really appreciated the conversation.
Mark Paup: Yeah, this was fun. I had a blast.
Tyler Martin: So here’s my biggest takeaway from this conversation with Mark. Most trade owners don’t fail from a lack of opportunity. They fail from expanding on a weak foundation. I see it all the time. Owners adding new trades, hiring ahead of demand, or jumping into new markets without
Tyler Martin: the cash flow, the systems, or the leadership structure to support it. And what that creates is hidden inefficiencies, margin compression, and a business that feels bigger, but not better. What Mark made clear is real scale comes from sequencing, getting your core dialed in, building strong cash flow visibility, and using numbers to guide every
Tyler Martin: decision before you expand. Because when you grow from a position of strength, growth compounds. But when you grow from chaos, it multiplies your problems. And that’s exactly where a CFO like myself, my mindset comes in, giving you clarity, structure, and financial visibility to know when
Tyler Martin: to push and when to hold. Hey, if any of this conversation has hit home, go ahead and check out cfomadeeasy.com, that’s my website, to learn more about how I work with home service business owners, or book a free intro call at cfointrocall.com, and let’s talk through what’s going
Tyler Martin: on in your business. As always, I always appreciate you listening, and I’ll see you in the next episode. Take care.
Related Episodes
- The Shift That Took This HVAC Company From $5M to $11M – Darren Yarbrough
- What Numbers Drive HVAC Growth? – Lawrence Castillo
- Why This Plumbing Company Shares 50% of Profits – Dustin Marx
- The Weekly Numbers That Fix Cash Flow – Ellen Rohr
Tyler Martin works with owners on the numbers behind these stories: home services accounting help from a fractional CFO for plumbing contractors.
