Episode 79: Putting People and Processes over Profits

John Conway has had an incredible career in the trades, and understanding how to put people and processes first has enabled him to find great success for both his own ventures and those whose lives and businesses he has been involved in. From joining and taking over his father’s HVAC company to joining Nexstar as a coach and now entering the world of M&A as COO of Redwood Services, John and our special guest co-host Chad Peterman talk about how to focus on what’s important, which will ultimately result in growing your bottom line.

Getting into the Trades…and Debt

In 1994, John first started working in the trades for his father. John’s dad had one truck and two employees, running Conway Services out of his sunroom on the side of their home. Before John joined Conway Services, the business was right around $250,000 in revenue. At this time, John was in his early 20’s and just coming out of the automotive industry where he had worked for some larger companies, mainly in parts management. While he didn’t have a good understanding for small business, he knew what it took for a large company to operate efficiently and grow.

By 1996, Conway Services was at 1.6MM in revenue, and by 1998, at 2.5MM. John bought his dad out of the company and kept growing it from there. In those early years, John knew how to grow the business, and did so quickly. However, he didn’t know what he didn’t know, and one of those things was how to be profitable while growing. Even though Conway Services was expanding, they were climbing deeper and deeper into debt. By 2004, they were in debt to the tune of $942,000 to Carrier. John jokes that he would ask Carrier to sell him $64,000 more so he could say he owed them a million dollars, but there wasn’t any real comedy here—he needed to figure things out fast.

Joining Nexstar and Climbing Out of the Hole

In May of 2004, John finally accepted that he didn’t have things figured out and joined Nexstar to improve. Paired with his business coach, Jim Hamilton, it didn’t take John long to realize what he wasn’t doing right. He may have known how to grow, but he didn’t have some of the simpler things fine-tuned such as pricing, billable hours, efficiency, and processes.

Even during this time, John had people telling him he should just declare bankruptcy, but he wasn’t raised that way. He had made a promissory note to Carrier, and he intended on fulfilling his end of the contract. He and his team put in the work, listening to the advice of Jim and his fellow Nexstar contractors. Before long, Carrier could tell he was serious about paying off his debt. John would provide Carrier with regular financial updates and payments, and after 5 years, Conway Services was debt free.

The “Going Rate” Myth

John’s story certainly isn’t unique. Many contractors struggle with the very same issue, and might currently be in the hole with a supplier or distributor. What John found after joining Nexstar was that he really didn’t have his pricing figured out. John’s takeaway from all of this?

The price you need to charge for your services is the price you need to charge for your company to be profitable.

That’s a powerful statement. When he joined Nexstar in 2004, Conway Services was charging $185 per billable hour. In June 2004, a month later, they went to $325 an hour. If you think that’s unreasonable, think again. There’s no such thing as a “going rate” in our industry, and it’s the biggest myth floating around. As John puts it, the going rate=going broke. If the rate you charge doesn’t equate to profit for your business, then you aren’t charging the right rate!

Coaching for Nexstar

John would eventually go on to sell Conway Services, and join Nexstar as a coach. He makes point to refer to this as an “honor” rather than an “opportunity”, a telling choice of words for how he feels about the organization. In his six years of service, John has coached 111 companies for Nexstar all over the country, and he has yet to find something that won’t work in any market. He remembers Jim Hamilton telling him early on that the advice he Jim was giving him was basically the same stuff he was giving everyone else, but some people execute and some people don’t.

The great news here is that the path to success is clearly defined and easily replicated. The work is the hard part. Nexstar coaches are in the business of helping people, and while each business is unique and may need coaching in different areas, a lot of the advice and stories are pretty similar from coach to coach. There’s a reason for that! At the end of the day, it has to do with what the person receiving the advice does with it. There will be change and discomfort during the process of change, but it’s in that discomfort that change happens. What holds many back is the inability to believe that things will work in their market, or for their team, or that they know better than the one giving the advice.

John recommends that contractors focus on the simple stuff. There are three main drivers in your business: call count, conversion rate, and average ticket. If you aren’t hitting your goals, it usually ropes back to one of those three things. While focusing on the bottom line is hard to avoid, getting to the top line at the wrong price is going to be more work and less money. Instead, price for success, put your people and process over the numbers on your spreadsheet, and you’ll find the rest tends to work itself out.

Joining Redwood Services

John had always assumed he would retire with Nexstar, but a year ago had the opportunity to join Redwood Services. After a lunch with Richard Lewis, founder and CEO of Redwood Services, John had a great feeling about their team. They had a great finance department, good backing, home services expertise, and a people-first focus that resonated with him. John joined as COO early in 2021, and has been enjoying his “second run” in a business.

Redwood Services is committed to finding partners to grow together, improving businesses and the lives of their employees. It’s an extremely people-focused organization, and John stresses that being people-focused isn’t about saying so, it’s about doing so. In the PE world, it’s hard to put people in front of profits, but that’s exactly what Redwood Services aims to do. That goal is echoed in how they choose their partners and help businesses grow, too. By keeping customer service and your people in front of revenue and profits, revenue and profits will follow.

People and Processes over Profit in Action

If you’re a business owner, you might be thinking “sure, but how can I ignore profit? Isn’t that why I’m here?” John isn’t just saying to ignore profit, but rather to focus on the things that actually result in profit. The trades is a process- and people-driven business. Oftentimes, we make goals based on the numbers and forget the most important things, which are making sure our people are treated right and our processes are designed for success.

For example, many contractors will have service goals for their technicians. Let’s say this is you, and you have that number at $1200/day. Now, let’s say one of your techs has run two calls today, and they were both maintenance calls. He or she is at $200 for the day, and they show up to the third call needing another $1000 or they’ll be worried about getting reprimanded for not hitting the goal. This is a bad place for your tech, and an even worse place for your customer.

What you really want your team to focus on is the process and the customer. By focusing on the processes they’ve been taught about how to execute great customer service and how to do the job, you’ll find that the revenue will be there. Maybe not every single day, as people aren’t perfect, but the best way to set you and your team up for success and hit your revenue goals consistently is to focus on the people and processes part of your business.

Better Your Business Today

John is excited to be able to put people first in his role at Redwood Services, continuing his Nexstar and home services industry legacy. He’s made plenty of mistakes along the way, and hopes that he can help others pave their way without hitting some of the same roadblocks he was faced with early in his career. If you’re interested in bettering your business, joining Nexstar is a great opportunity that many of our To The Point guests have provided testimonials for. If you’re also interested in a partnership or developing a succession plan for your business, you can reach out to John at [email protected].