How to Future-Proof Your Home Service Business in 2025

In this episode, John Wilson and co-host Jack Carr break down how home-service companies can actually future-proof in 2025: flattening org charts, using AI to nuke overhead, building adaptable teams, and keeping a balance sheet that can take a 30% punch. We get into real numbers (gross margin, overhead targets, EBITDA), how to think about “risk on” vs. “risk off,” and why the middle of the market gets squeezed when big operators cut costs with automation.

You’ll hear play-by-plays on automating call centers, choosing what to systematize vs. keep human, when to de-lever, and how to bob-and-weave against giants who pass cost savings straight into marketing.

What You’ll Learn

• People vs. Systems: The two ways to future-proof—and how to train for adaptability.
• Automation That Moves the P&L: Where AI actually drops overhead (call center, dispatch, admin).
• Healthy by Design: Gross margin, overhead, and cash targets that create real nimbleness.
• Debt & “Risk Off”: How interest rates change the game and when to prioritize de-levering.
• Competing with Giants: What to do when national players cut cost structures by ~8–10 pts.
• Numbers First: Why you can’t future-proof if you don’t know your break-even.

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• John Wilson 
• Jack Carr

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John Wilson, CEO of Wilson Companies
Jack Carr, CEO of Rapid HVAC

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Chapters

• 0:00 Challenges of Future Proofing a Business
• 3:14 Leveraging Technology and People
• 19:58 Balancing Risk in Business
• 27:33 The Impact of AI and Technology

Transcript

OAO 259 Transcript

John Wilson: [00:00:00] Today we're talking future proofing 

Jack Carr: a business when you're talking about future proofing, is to get so good at technology that you reduce your expenses to essentially a minimum viable rate. 

John Wilson: He who has the best tech wins, like, can you just grow without adding additional costs? So I think that's always the dream of technology is you can add less cost per marginal increase dollar.

Of revenue. So as I think about future proof, so much of it is, are we running a profitable business? Like, will technology help us run a healthier, more scalable business? Yes or no? 

Jack Carr: You're specifically worried about this x thing happening that would, uh, shock the industry. Um,

John Wilson: welcome back to Owned and Operated. I'm your host, John Wilson. Today I'm joined by my co-host, Jack Carr. We run plumbing, hvac, and electric companies somewhere between Cleveland and Nashville. So welcome to the show. This should be a good time. What's going on, John? Welcome. Today we're [00:01:00] talking future proofing a business, 

Jack Carr: which is not an easy topic in this day and age, unfortunately.

John Wilson: Yeah, you'd You'd almost think it's the opposite where there's so much technology that it's easier than ever, but I'm finding it's hard. Harder than ever because like technology shelf life is so much shorter. 

Jack Carr: Bingo. Technology shelf life is shorter. And the ability for somebody to get the new technology that is better allows them to actually own more market share in the long run.

And there's just like so many parts to, it's like it's a technology game now, which is crazy. Um, yeah. 

John Wilson: Yeah, I've said this a lot on this show. I feel like such an oldie in the industry, but yeah, grumpy, grumpy, grumpy. Uh, but this went from, this went from, from being this, like, I, I remember like on Twitter like five years ago, people were like, yeah, like plumbing, [00:02:00] hvac, like you're competing against people with fax machines in their office in 2020.

And it's like, nah, dude. Like today we are competing against sophisticated operators. That are well funded, like sophisticated operators. It's just not what it was five years ago are So technology is now a big deal. 

Jack Carr: Yeah. Well, not only are they well-funded now they're well-trained. Right. Like if you go to 2018 and you talk to someone about PPC, yeah, there might be somebody just PPC, but like, are they the best PPC for home services person that's been doing it for eight years?

No, and not only that, now you have the, the, this influx of AI that, I mean, there's a bunch of companies out there. What. Is a great one, is a good example. Like I don't even know what they do. They're more expensive than I could ever imagine even paying. And they're enterprise only. And so if you are one of these massive companies that's well funded, that is already has market share, that already has the people in place to know what they're doing mm-hmm.

And now can afford the [00:03:00] best of the best ai, which I'm assuming that is they're, they can afford them the best of the best ai. Like, how can you future proof your business? It's, it's a question. 

John Wilson: Tight deadlines, breakdowns, last minute jobs. That is just the life and the trades, and that's why we trust we supply trades.com.

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And real experts who actually know the field get 20% off your first order with the code owned 20. At the link below, we supply trades, finally a supplier who actually gets it. But yeah, I agree with you. It's definitely like he who has the best tech wins. Um, and I think it's getting harder and harder to distinguish the best tech from not the best tech, uh, for a while.

Like the best CRM was straightforward. [00:04:00] Um, call center, you know, all these different things were just, yes. More straightforward than they are today. It's definitely gray now, or at least I think so, 

Jack Carr: yeah. I think that what it comes down to though, when, when starting the conversation, what ha is what hasn't changed, right?

Like there's a lot that has changed, but what hasn't changed. Um, is still the need of the business and the, the simplicity of the business in whatever home service industry you're in is, there's really, again, we talked about this on a different episode recently. It's, there's two key focuses. There's marketing and recruiting.

Like, I think that we have to circle back and like really focus on the way to. To future proof your business. Yeah. It's like, hey, you need to make sure that you're getting into AI and that you're actually trying things and that you're being scrappy. Yeah. But all that ends up revolving around is the same two things.

It's like, Hey, how are you [00:05:00] getting scrappy in marketing? And how are you getting scrappy in recruiting, making sure you have the best people? Do you disagree? 

John Wilson: Mm-hmm. Um, I think, yeah, I probably disagree a little bit. The only thing that I, it's like, uh, removing friction. So I think one of the gaps that we have it, or this is what we look to technology for.

So how much, how much of our day-to-day tasks can we automate and our tasks worth automating? Like everything can probably be automated, but sometimes the cost for automation is more than just hiring somebody. Uh, so you know, you always have to weigh those two things. 'cause I think it's easy to get caught up in automation, but.

How much can be automated because what we're trying to do is, uh, there are some things that out of, are out of our control. Like for HVAC right now it's 65 degrees in November, [00:06:00] so yeah, we're not having the most amazing time selling stuff. And for most of the country, this was a really challenging year for hvac, so like well documented, right?

Like all, all of Carrier and Lennox and everyone said that they shipped like 30 to 40% less units to residential. So like, yeah, there's, there's probably some winners and some losers, but as an industry we installed 30 to 40% less boxes this year. That's crazy. Uh, so there's some things that are just outta your control and are macro.

So what we like to have in our control is how much of our cost structure is variable, how much of our cost structure is low. And I think one of the dreams with AI is this, like AI or technology arbitrage, where if, you know, if I am Wilson and my overhead is $500,000 a month, or $700,000 a month. Can I go just buy another business?

And because I've invested in technology, can all of their gross [00:07:00] profit just fall straight to net because their overhead becomes completely eradicated, like they don't need it. Maybe one manager or something like that. So I think that's a lot of how we're looking at it is an adaptable cost structure. 

Jack Carr: So when you're talking about future proofing, your answer is to get, and, and correct me if I'm mishearing this right, wrong, um.

But the answer to future proofing your business against changes to the market, like less, less people, you know, downshift in the market or issues with, you know, not being able to trade wars or whatever the case may be. Mm-hmm. Is to get so good at technology and automation that you reduce your expenses to essentially a minimum viable rate.

John Wilson: Yeah. So that's one of 'em. So like the way I see future proofing. You can future proof through people and you can future proof through systems. Okay. Uh, so through people is like culture. Are we training? Are we adaptable? [00:08:00] Are we nimble? Um, like how, how open to change is the team and how fast to execute on that change, are they?

And we can dive into that. And then the next one is automation. Like are we using. Like one of the downsides of any growing business is the, the bigger you get, the more complicated it is. So how do you make it simpler? And one of the ways to make it simpler is flattening an org chart, investing in automation.

So these tasks are just easier and ideally you outgrow your overhead. Like, can you just grow without adding additional costs? So I think that's always the dream of technology is you can add less cost per marginal, increased dollar of revenue. 

Jack Carr: This is an interesting take. I did not see your take going this way.

Yeah, I mean, that's cool. We're here to drive margin. I disagree with you. I mean, I'm just, I'm trying to wrap my head around it. 'cause I mean, for people who don't know, we don't actually like write all this out before we start digging in. Like, I, I thought John was gonna go more of the, [00:09:00] the path of like, hey, customer experience, like focusing on customer experience might be, I mean, I 

John Wilson: think that's a part of it.

Jack Carr: I definitely do. But you can't automate, right? You can automate portions of the customer experience, but you, yeah, I think you hit the nail on the head. Like the answer's not marketing. First recruitment and how to optimize both of those. Mm-hmm. Verticals, it's people and systems. How do you optimize both of those?

Because if you optimize your people to train better, do better act customer and to 

John Wilson: build those systems or to implement those systems. But also, so like the first part is like training the 

Jack Carr: team, right? Is gonna be people, whereas your automation is gonna be your system. So I don't disagree. I just came to the conclusion in a different route.

John Wilson: Well, on the people side, is it. The where we are is most of, like, most of our change day to day is driven by our team. So like, yeah, I might have an idea or something we wanna execute on, but for the most part, like I'm not executing on very much of it anymore. So the team is [00:10:00] like, implementing this software or this AI partner, or I saw that, or whatever, whatever it is.

Um, so I think training them to be able to do that is important. 'cause I, I think if the team is, you know, adaptable. Then the company can be adaptable. 

Jack Carr: Do you, do you find, or do you imagine that this changes at different levels of revenue? Right. So that's something that, that you're living through, so it makes sense at, at your level.

Um, but again, uh, some portion of our audience or smaller contractors. Yeah. Like what you're able to go in and say, Hey, I'm gonna sub out, not necessarily sub out, but like. My team will do the work to automate these systems out. Whereas on a even my size, right, it would mostly be me. Like that task is something that falls onto me or somebody I hired to do that, which I tried and failed miserably at.

So it's hard, it's a hard situation, especially if it's a catchall role. [00:11:00] Um, so for, I would say 

John Wilson: it's easier when you're smaller because you can directly impact it a little bit tighter. So like, if I am okay. The analogy that we used internally is, are you turning a, a cruise ship or a rowboat? Mm-hmm. Or like a jet ski.

Like it's obviously easier to turn a jet ski. So if it's you and one person, or you and two people driving a change into the business, it's easier. Yeah. Like, it just is like you can just go do it. Um, maybe there's less people involved. Maybe it's a smaller team. Maybe you own that project for whatever reason.

Uh, but it's easier. Um, but you're getting your hands dirty. We, I think it, it, as you grow, it gets harder because you have to get, suddenly you have to get buy-in and you have to get, you have to, you have to get things that you didn't have to get before because you would just go do it. But now you have to explain it fully.

You have to explain the why. You have to explain the outcomes. You have to explain how we're gonna measure success. Then you have to [00:12:00] explain what it is. Like, Hey, here's what we're doing and why. And why it's important to the business, why it's important to you, why it's helpful that you drive this change.

Um. And it's hard. It is hard to make change changes on a dime, and that's a weakness. Like it should be easy, right? Because some, you have to be adaptable and you have to be nimble. Because the slower you turn and the slower you adapt, the more likely you are to get punched in the face by some, you know, black swan event.

Jack Carr: Yeah. So, so you have 

John Wilson: to be adaptable, but it's, it's hard to stay nimble. 

Jack Carr: Yeah. So that adaptation at a smaller level, ispor a portion of the ability to change systems. Yeah. And people, um, early on. And that is what protects you from future change in the markets. I think 

John Wilson: a flattened org chart. Yeah. Yep. And then having a lot of technology because what we found, we have some teams that we've like automated a lot of the work they did or like brought in [00:13:00] AI or whatever, like call center's a really great example, like two years ago I think we had 18 call takers.

Yeah. And like I'm sure someone could reference back to show notes, but it was somewhere in that, in that range. We have five right now. And most of that is driven through technology. We automated a ton of it. We brought on ar, ai partners with Avoca. Like we just changed a lot and we went from 13 to five and that team obviously got a lot easier to manage and changes were faster to happen 'cause we didn't have to educate 18 people.

So to me that's an example of future proofing. We increased our margin and we made that department easier to scale. 

Jack Carr: Yeah, I think and 

John Wilson: like less friction to scale because now there's no more people really. Mm-hmm. Like we just automate more and more. 

Jack Carr: Yeah. Matzner put it really good. John Matzner, he said, uh, there's some, there's a few, I think he said there's four different types and he probably got it from somewhere, but there's four different types of leverage and I keep hearing you talk about.[00:14:00] 

Two of them, which are technology leverage and people leverage, right? It's like you're leveraging technology to be able to remove obstacles as well as, um, right. Code doesn't expire, code doesn't change, code doesn't, you know, go bad. So if you're able to do the work of four or five people at all simultaneously, like why wouldn't you leverage that technology?

And then the same with leveraging people is, um, we've talked about on the here before as well, is, uh, looking at overseas staffing for a lot of your positions, because I know that. That is what we both do to reduce head count. Um, but also, right. I mean, I think that we get some better service. Reduce head count.

John Wilson: Mm-hmm. What increases margin? 

Jack Carr: Increase margin? 

John Wilson: If, if I have to summarize like future proofing to me. 

Jack Carr: Yeah. 

John Wilson: Who has the margin? I, I remember as we were like, uh, growing through the teens. So much of the focus was revenue and we weren't running like a profitable business yet. Like it was kind of [00:15:00] profitable.

But like we're, we're putting pretty consistent, like 15 to 16 on the bottom now, which we still have a ways to go, but like we used to be three to five. 

Jack Carr: Yeah. 

John Wilson: And because we have margin, we ha we can be nimble. And that's something that we learned this year. Uh, we for X EBITDA this year over last year, and.

We're finding that we are in general making much better decisions because we can be nimble, but we can also like be strategic. Like we can look at more than just like today's cash or tomorrow's cash, and we could just make a good decision, which I don't think we used to be able to because we had less margin.

So as I think about future proof and like how nimble and how much can we invest, like so much of it is, are we running a profitable business? 

Jack Carr: I think the question becomes like, what happens if the market falls out and it doesn't become a profitable business? Not that it doesn't become profitable. Well, and that's why I like the technology too top.

Yeah. 

John Wilson: Yes. Like how can you take a 30% [00:16:00] punch to the face? There you go. Like, how nimble can you be? Yeah. And that's why I think so much of this is how can we automate, how can we make variable cost structure? How can we invest in people so that they can change fast when markets change? 

Jack Carr: And so with that, um, I mean I, I think a big portion of this, right, that doesn't seem to be able to be focused on, I mean, it does tie in, but doesn't it, it's not a direct line item for you, um, is like debt.

That's a great example. It's like that could be one of the main harbinger of death in case of, uh, you know, an issue with market or. Future proofing, how do you view debt from a market proofing standpoint? Right? Because debt is almost inverse. Yeah. I mean to like market proofing. Yes. You take on debt to leverage out cash to, that's the third leverage point is like money funds.

Yeah. How do you leverage funds to be able to focus on growth, but inherently like debt is the inverse of [00:17:00] net. 

John Wilson: Yeah. I've had 

Jack Carr: directly but something like that. 

John Wilson: My opinion on this has like obviously changed with time. 

Jack Carr: Yeah. 

John Wilson: You know, during like two, 3% interest rates dead all day. Yeah. Right. Like growth was easy.

Interest rates were low. It just wasn't that complicated. I mean we have some loans that adjusted to like 10% 'cause they were on like adjustable notes and like that's a lot of money. 

Jack Carr: Yeah. Loans. 

John Wilson: Yeah. Our stance now is, uh, like we're de-levering. 

Jack Carr: Yeah. So the, I, the idea now is you're at a point where de-Levering makes, I mean, but like, look at someone like me, right?

So we're at a point where, I mean, still tight. We are doing, you know, 10 double digits, bottom line. Mm-hmm. But there's still a decent, you know, balance sheet, uh, amount of debt on the books because obviously we bought a business, we [00:18:00] bought 14 trucks. Like there's a lot there. And so we focus on it too, but like, what is the importance of somebody in my position saying, Hey, I want to, you know, mitigate future.

Uh, downside. How much should I focus on debt or should I focus on putting money away for run rate? Like, well, how would you view that? 

John Wilson: You're great at fixing broken shit, so why not fix your lead flow? Well, modernize gives contractors predictable high intent leads without the big marketing gambles. Break out of the feast and famine cycle and expand into new markets with a steady stream of homeowners.

Ready to start jobs now modernize is trusted by founders like myself because it actually delivers over $4 billion in homeowner projects started here in the last 12 months. Visit the link below to get started. Yeah, so we've done both. Uh, we spent most of the year focusing on, on building cash, and in Q3 we started like.

Yeah, building a strong balance sheet. And I think your point, just to like summarize it, [00:19:00] is, aside from margin, you also need to have a healthy balance sheet in order to future proof, like you need to run a health healthy business. Which, which I agree, and on one hand that sounds obvious, and on the other hand, most people, including me for a lot of my career, did not run a healthy p and l and balance sheet at the same time.

Uh, so like, it's okay. It's just like, you know, time to get there probably. Um. So thanks for the advice, John. Yeah. Well, I feel like, do you have a weak balance sheet? I feel like people could be like, it's 

Jack Carr: time to get there. 

John Wilson: Yeah. I feel like people could be like, well, that's so obvious, and it's like, yes, it's obvious.

My guess is most of the listeners. Unhealthy and, and I like, there's parts of us that are unhealthy. Like yeah, we probably have, like our debt is healthy according to banks, but like, is it healthy? According to me, I'd love to have 2 million less debt. 

Jack Carr: Yeah. No, I'd love to have no debt. Like, that's the obvious answer.

Yeah. But I guess what I'm trying to get at though is right there, there's, there's an inverse relationship between growth and debt. Right. So I could take out, yeah, for example, if I, [00:20:00] if a bank would lend it to me $3 million tomorrow or mm-hmm. $5 million tomorrow and dump all of that into growth, and probably if I'm a half good operator, um, get.

Significant growth. Um, yeah, that being said, probably not healthy from a balance sheet perspective is like, hey, now you have a giant payoff. And even if you get that growth, the, the risk of a downturn, which is what we're talking about here, or changes in ai, that that makes certain things obsolete. Like whatever the case may be.

Um. Like, how do you view that? Like I, is there, is there a balance or do you view that as, hey, like that's the risk you have to take? I, I guess the answer that I'm trying to push through from you is not, you know, obviously no debt is better, but where, where's the, the healthy standard that you view for yourself and your business and from your risk profile?

'cause obviously too there's a risk factor, like how much risk are you willing to, to eat? [00:21:00] It sounds like less today than it was in 2021. 

John Wilson: Yeah, I, I was having this conversation with a couple people, um, yesterday, but, and the question was are you, are you currently risk on or risk off? Yeah. Like, is your mindset risk on or risk off?

Like, and like it's kind of a spectrum of like, yeah, I'll take a little bit here, a little bit there. Um, but yeah, right now I'm definitely leaning risk off. Whereas, you know, a lot of our career we were pretty risk on. So like risk on is like, yeah, let's go lever up and buy some stuff. And today that's, I'm less concerned and we're much more concerned about like healthy balance sheet, healthy p and l, good culture, like are we driving the things that we want and are we driving like 20% ebitda?

Jack Carr: Is that a based on like your growth and your size and like where you're at as a company? Or is that based on macro trends? 

John Wilson: I would say s. Size and where the company's at, like at a certain point it's just too much money. [00:22:00] Like it's, it's just too much. Like you cross into the 20 millions and you've got pgs.

Yeah. And you've got debt and like that makes sense. And the, the expectations from vendors or banks ratchet up, which they rightfully should, like we have credit lines. With some vendors that are like a million some dollars. Mm-hmm. Like, they should have expectations of like, am I running a healthy business?

Uh, so a couple years ago we started being required to submit quarterlies to our vendors like Ferguson. Like we have to give 'em financials. Uh, we have a big credit line with them. Uh, so we, you know, really as the expectations ratcheted up from the external stakeholders. We started focusing a lot more on, Hey, are we running like a healthy, scalable future-proof business?

Are we running a profitable business here? Um, but we got sort of pushed into that, which I think was good. Like it was a good pressure, but we got pushed into that from external vendors [00:23:00] and, and banks just like, Hey, you either didn't submit your quarterlies 'cause we weren't running an organized accounting department.

Or you did and like, here's where you're weak. What's your plan? So yeah, it was good. Healthy pressure. 

Jack Carr: Yeah. So. Risk off because of size, which I understand. Like, I remember the moment that we crossed like, Hey, I can't fund this anymore. If it were to go south from my own, you know, savings and what I could potentially get on the job.

Yeah, we're, that was my 

John Wilson: dad's. That was always my dad's. Uh, he's like, I never want to get so big that I can't save it personally. 

Jack Carr: Yeah. And that was, and like we're definitely well beyond that anxiety. That was, I remember, like, I remember the day and where I was at, where I realized it, looking at the book.

Like, if this goes south, I can't go get a job and like, cover the debt. Yeah. And like save my house. Like it's gone. Gone boy. Yeah. Yeah. Um, that's interesting though. Like I, I actually really, I'm taking a lot out of this conversation 'cause I didn't expect it to go here. Um. So it sounds like that we've kind of gone through a few areas here, but to, [00:24:00] to recap, just so I can align my mind, it was, there's, there's people in systems which when, if.

You're reducing risk. You need to focus on getting your people and your systems correct. Um, by being small. It's easier sometimes to write those people in systems and then build the systems correctly, build the people programs correctly as you continue. Mm-hmm. To move people, programs might look like, Hey, how do we do, um, these specific jobs?

How do we build the right leaders into the right places? And then the systems look like deleting as much overhead as possible in case of. Issues leveraging technology. Focusing on, 

John Wilson: yeah, 

Jack Carr: how to flatten the, um, org chart. And then on the backend trying to reduce debt, determining whether you're a risk on or risk off company, because I don't think there's a right answer in a hypothetical here, but knowing what you are and then how to eventually stake in turn at the opposite way.

Or turn it off for good. Like hey. And that's why I think some of the big businesses, they don't grow as fast, [00:25:00] right? They move from a risk on to a risk off perspective. A lot of their decisions are slower growth. You're no longer shooting for 6000% growth, you're going for 30 or 40. Mm-hmm. Um, so that makes sense.

Is there anything else I'm missing here that you think is a soapbox that I'm should get up on? No, 

John Wilson: I think, I mean. I, I, for us, it, it's sort of like the North Star is a healthy and profitable business. Like you need to have a healthy and profitable, which again, sounds obvious. Um, and any decision, anything else that you could use to future proof your business is really just, is this helping us towards our North Star?

Like, will technology help us run a healthier, uh, more scalable business? Yes or no? Uh, will our marketing help us do that? Will, you know, whatever this thing is that we're looking at, will it help us drive down cost or increase revenue or strengthen our balance sheet? 

Jack Carr: Yeah. Which, um, I mean, again, the obvious one, which comes to immediately to mind for me because it's so new, [00:26:00] is knowing numbers.

Like knowing your numbers. Yeah. And having those stats and data yes, is a headache and it is a nightmare. But that if you wanna talk about future proofing your business, you can't even get to your step of like, Hey, run a profitable and great business. 'cause you don't know if you're running a profitable and great business.

Yeah. Because you don't even have the numbers. 

John Wilson: I mean, there were, there was years we had no idea. Yeah. 

Jack Carr: Yeah. I mean, it's taken us a year since we started this. Yeah. And solely because of this podcast that we focused on getting our gross margin. Mm-hmm. 'cause I'm trying to think of like, hey, well what happens if X, Y, or Z happens?

Well. You know, you, even if you were to just like randomly fire half your staff and like cut all these truck expenses and let them get repoed, like all the, the intricacies and like the actual nuance of it doesn't actually matter. 'cause you don't know what you would do it to because you don't have your break even numbers, you don't have your financials.

Right. So like if there's a first step to me it sounds like, get your numbers right. 

John Wilson: I mean, it's hard to know 

Jack Carr: where you're going if you don't know where you're at. Yeah. I mean that, that makes total sense for me. Is there anything that you foresee on the [00:27:00] horizon? Just again, wild shot in the dark, like what are you worried about?

We have a buddy mutual friend, and the only thing like that he worries about in the HVAC industry and the reason he got out of the HVAC industry is because he was worried about. The Uberization of the trades. I don't worry about it as much now that I've been in the trades for a long time and realize like the difficulty that it would take, it would be a, you know, trillion dollar business, much like Uber or Lyft or whatever, but this, um, decentralization of talent, um, like that was his, do you have one that's like that, where you're specifically worried about this X thing happening or this y thing happening that would, uh, shock the industry?

John Wilson: Um, yeah, at one point it was the Amazon effect. I'm sure that some version of AI will, will do this. So if, if we think back to like the north star of like, Hey, let's, can we drive a [00:28:00] profitable business? What AI should ultimately do is it should disrupt your cost structure. So if I run a 50% gross margin business.

Then I have 50% of potential costs and potential profits. With the, some of the technology that's starting to come out now, the large portions of that are gonna shrink. So it's pretty common to see like 50% margin, 40% overhead, 10% net profit. Uh, we're usually like. 49, 50% gross profit and like 33 to 35%, sometimes 36 or seven in a week month overhead.

So the way we're looking at this is, can this investment push us to 25% overhead and can we have 25% sustainable ebitda or can it push us to 20% overhead? And like how far can we go if we need less [00:29:00] people? We need less square footage. If we need less square footage, we need less utilities. And it's sort of this like.

It can really ripple pretty far. And then if technology runs most of your day to day, how do you find ways to add incremental gross margin? So I think what I'm saying is less about the Amazon or, or I, I think like he who has the tax is gonna win. And like you've got a RS and you have Apex and you have all these guys with 10,000 techs.

And I think the bigger concern is that they radically change their cost structures and they gain another 10 points of EBITDA and they invest five points of those EBITDA into taking market share over the us. I think that's a much more likely problem. 

Jack Carr: Yeah. If you could see me right now, I'm shaking my head.

Yes, yes, yes. 'cause that, I mean, I think that's where the big worry is, is big tech. That's like the 

John Wilson: next 

Jack Carr: 12 months. Yeah. Like 

John Wilson: with a lot of the technology out there now. Um, like I, I'm gonna, I've said it from 

Jack Carr: the beginning point, it's gonna crush [00:30:00] the middle guy. Like we've, we've talked about this for like two years.

Yeah. Is the middle guy is getting crushed. Yeah. 'cause the truck and the truck can still slay a unit for 500. But the crazy, or, or they 

John Wilson: can be subcontracted by the big ones, you know, 

Jack Carr: or they can be subcontracted, but most likely if they're out on their own, it's just them. Like, they can install something for $400 zero overhead because it's their cell phone and it's their truck that they use for life.

And there's no overhead. Right? Yeah. So your cost is. The infrastructure and it just happens like it is the same cost as a multi, like a multinational conglomerate can get because they can push their purchasing power so low. And what's historically helped everyone else out is that with that historic or with that low.

Purchasing power. It also comes with a naturally, somewhat decently high margin or a Yeah, yeah. Expense, right? I have to have more people. I have to have a bigger shop. I have to have this and this and this to be able to manage everybody. But if AI comes in and smashes [00:31:00] 95% of that, 

John Wilson: yeah, 

Jack Carr: it pushes them down to the same price as the chuck and the truck.

But instead of making $500 in the unit, they're making 50% margins on the unit. Yep. They can do more of 'em. And everybody in the middle who is two, three, $4,000 higher. You know, as much as people love, like, hey, we love the family owned company. Nobody loves the family owned company for $4,000 more. Like, it's just, you know, it is what it is.

Small businesses, um, get pushed out. I mean, look at Walmart, like what they did. 

John Wilson: Yeah. It's the thing. 

Jack Carr: So yeah. 

John Wilson: So I think that's the bigger like challenge. Um. And I think what's shocking to me is, uh, we're closer than we probably think. So, uh, Avoca has got this thing called, um, I think it's called Onyx, and it literally automates your front office now.

So like you can call in it handles everything from the inbound call does outbound two [00:32:00] inbound SMS, to booking the call, to dispatching it. Like it covers that whole thing now and. I mean, you know, you add that to a giant or, or a small company, you add that to any company, I guess, I don't know how much it is, but like that disrupts the cost structure.

Okay. So as you save like eight points, 

Jack Carr: a this is, this is the, I guess that's the point of the episode. So as a small company, how do you fight Onyx, the big company who just right, cut eight points. Like what's the move. Um, go to Excel spreadsheets and automate as much as you can. Like all it, I guess. 

John Wilson: I mean, I would, I would try to find ways to invest in technology yourself.

Jack Carr: Yeah. 

John Wilson: Um, I mean, the problem is it depends on who they are. Like they're either gonna add that straight to EBITDA and do nothing else, or they're gonna market more. So like, who's the operator that you're competing against? Uh. But yeah, if they're marketing more like that is gonna be a tough gig. I think you're, it's the same thing as always.

If you're competing against somebody bigger, you have to be doing things they aren't doing. So what I, so if they're all on Google, [00:33:00] probably don't do Google find you got a bob and away weave 

Jack Carr: Bob where they're not. You gotta Bob and weave. Weave where they're not. If it means, hey, your entire team without, what comes to mind for me is like you.

You get these new automated platforms that are doing all the marketing and are coming up with the like, it's crazy now they're coming up with the images and the copy and they're just auto. Posting it and getting leads. Yeah. And it works or it doesn't, and it can cycle through hundreds of these, but like, you know what they can't do is they can't knock on your door.

So I know, yeah. Door knocking is some, you know, it can be a gray area for some, but my point is, is you know, Bob or, and weave where they can't. Um, yeah. But interesting. I mean, I don't, I don't know if there's an answer for this hypothetical, so. 

John Wilson: Well, I think if, if we're back to the north star of like, are we healthy, are we profitable, are we nimble?

Then like you can compete better than like if you're running a 3% shop. Yeah. Like you don't really have time to figure out how to bob and weave. 

Jack Carr: Yeah. I mean, like you said though, within [00:34:00] 12 months to go from like, Hey, I'm a six, eight, 10% shop to like, I need to be. This person just cut all their expenses, you know, 30%, 20%, some crazy number like we were already competing with, um, like for example, I, I, I'm gonna talk about it.

I don't think we have to beep this one out. Coolray Coolray sells stuff at Dirt Cheap. Um, they are an absolutely cheap competitor. Um, 

John Wilson: really? I don't think I knew that. Are they wrench 

Jack Carr: in Yeah. Wrench Group in our market. And they, it's because I've seen their purchasing power and it's. Ridiculous. Like they, they run a massive organization.

They get amazing carrier prices with amazing carrier rebates. Mm-hmm. Um, but the point is, is like they're already on par, like with the max purchasing power we can get versus them, like, if they were to say, Hey, we're going to an AI system that cuts 20% margin, and we're, yeah, we're passing that on to you.

Mm-hmm. Like a shitty infomercial like. We would get destroyed. There's no way that we could drop another 20% on the top line. Yeah, [00:35:00] I guess. I guess you're right. No, the answer would be, well, Jack, you need to figure out how to drop 20%. 

John Wilson: I mean that, that really is it. That's the answer. Okay. That is it. Because if companies my size are figuring out like, Hey, I can go from 35% overhead to 29, which that's our target.

That's six points. Yes. That's a lot of freaking money. 

Jack Carr: It's, but the crazy part though, there's a lot of money for you guys. It's like six points. A smaller industry, like a $2 million company is not that much. So like that's you changing. VoIP PS that's you changing from ServiceTitan saying, Hey, I can't afford ServiceTitan right now 'cause I'm just getting beat up by AA to Jobber or whoever.

Like, that's the answer unfortunately, is like, Hey, I need to cut 6% or 7% to be able to match so that this works. Um, and then it's the hope that, you know. They misallocate all that money to investors rather than pay their people more. Yeah. And recruit better. Yeah. So awesome. I mean, I think that this is, 

John Wilson: that's how to future [00:36:00] proof the business.

This is 

Jack Carr: how you future proof the business and I think that the other part, run a healthy, future nimble business. The, the big, I think the answer to this actually is right in front of us. John. The answer to this is you need to get in front of some other operators and freaking talk about it. Like, yeah, this exercise right here has been kind of bit, I mean, it's, it's made a difference for me and just this sitting.

So, I mean, that's probably answer. Well, it's, yeah. I mean, you talked to half the 

John Wilson: stuff that we've talked about. I've gotten from other people. Yeah. Like I found out that other companies were fully automating. Like I've talked to companies in the last couple months that are several hundred million dollar organizations.

Mm-hmm. That have two call takers. 

Jack Carr: Yeah. 

John Wilson: That's crazy. And this is something that we didn't even know was possible like a year or two ago. And it's not just one, it's like kind of a lot. So we're talking, we're just talking to more and more people and it's like, well, what are you gonna do with the $3 million that you just gained?

Like that's the real math that these Yeah. [00:37:00] Companies are looking at. And it's, it's, uh, yeah. Okay. Well, we're, I mean, a lot of it's gonna be ebitda. Maybe it's new locations, maybe it's whatever, but it, it's giving bigger companies more ammunition 

Jack Carr: for sure. It's a, you know, first to growth as well, right? It's that you put it back into growth into different locations, winner or take all, so, yep.

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Jack Carr: Awesome. Well, this is an awesome episode. 

John Wilson: Thanks everyone for tuning in. Make sure you give us five stars wherever it is that you listen. Five to podcast.

Five stars 

Jack Carr: people. 

John Wilson: Five stars. Five. We need 'em desperately. It's for our egos. 

Jack Carr: We're fighting ai.