On this episode we are joined by Lawrence Castillo from Brody Pennell.
This is Lawrence’s second appearance on The Smart HVAC Marketing Podcast. We had him on the show as guest in 2021, his episode was the most listened to episode–so we knew we had to have him back!
Lawrence is the President of Brody Pennell Heating & Air Conditioning, the legendary 77 year old leading HVAC company in Los Angeles.
In this episode, Lawrence reviews the checklist for strategically planning for a successful 2022 if you are a residential contractor. Plenty of takeaways for contractors of all sizes in my discussion with one of the most respected operators in the industry.
Being 2 months into 2022, we want to give you the tools you need to succeed this year.
Lawrence emphasizes the important of writing this plan down on paper–this makes it official and gives it a better chance of being completed and followed.
We discuss the ongoing hiccup of COVID and that you should have COVID built into your business plan.
Brody Pennell was voted best company in the LA area, so you know they’re doing something right!
The Smart HVAC Marketing podcast was created by Rival Digital to help residential HVAC contractors and is now streaming on all major platforms. Follow along for ways to improve your marketing and grow your business as we continue interviewing more industry experts.
We do not own the rights to the songs in this episode. Should we need to remove it from the audio, contact us directly at firstname.lastname@example.org.
In case you prefer reading, these are mostly correct. Scroll in the box to see more.
Eric Thomas: Good evening everyone. Welcome back to the Smart HVAC Marketing Podcast. My name is Eric Thomas. I’m the host of the show also the president of Rival Digital Full Service Digital Marketing Agency that exclusively services the HVAC industry. In 2021 I had a very special guest join me on the show after the show it was place at number one on the charts, it was one of the most downloaded episode we had for the entire year. After reviewing the reactions of the viewers it was a good indicator that the value of the content was good, the advice was sound, and the guest knew what they were talking about, so I figured why not bring them back on. So, today we are joined by Lawrence Castillo from Brody Pennell. Lawrence, how are you doing?
Lawrence Castillo: I’m good, I’m happy to be back and good to know that a lot of persons were interested in our last podcast to downloaded and listen to it for more information, so it’s great to hear.
Eric Thomas: Yeah, absolutely. Well, we are constantly trying to grow the show and with that comes new listeners So Lawrence, go ahead and reintroduce yourself for our listeners out there.
Lawrence Castillo: I am the president of Brody Pennell Heating and Air Conditioning in Los Angeles. We are a 77 year old company that services most of the west side of Los Angeles and the outskirts and beyond and prior to that, I have served as the general manager for a number of companies on the west coast. I was trained in Los Angeles and British Columbia; that is where I’ve done all of my work. I’ve been fortunate to be able to work with a lot of really smart people during my career, I learned a lot of great things and had important people in this industry as friends and mentors and I think all of that have contributed to the success that I’ve had in running companies and so a long history of running heating and air conditioning companies starting with a very small operation and working on up to very large operations.
Eric Thomas: The last time we had spoken you were in the process of taking Brody Pennell Industry and trying to grow the company. So let’s talk about 2021 a while and about some of the growth that you all experienced during that year.
Lawrence Castillo: We are celebrating a banner year of success at this industry, a 77 year old company and a name that’s really part of the fabric of west Los Angeles. We worked really hard and just completed what was the best year in the history of this company. We grew top line and bottom line by just an incredible amount and I’m really proud of our team. we were also fortunate enough to have been voted the best heating and air conditioning company in Los Angeles by the readers of the Los Angeles times and that is no small feat this is a population base there’s so many people that live in Los Angeles and there are tens of thousands of contractors from trucking a truck to $60 million operations, and to be the one who is chosen as the best by the readers is quite significant.
We are waving that flag of success all over town and making sure that our customers know that they’re dealing with the best company and you have to live up to that expectation of the customers, the bar is set very high. when you’re advertising that on your website it’s important that your customers get the services that was advertise, when they call to book a call and it’s on your trucks, there’s a level of expectation and we do our best to live up to that every day. something like that comes as a result of the hard work of many, we try to give people an amazing customer service experience with every call and it’s everything from when that first call comes in and is booked, it’s the experience they have with the customer service – everything through dispatch and the technician and the follow up.
So we’re not perfect, we try to live up to the company’s expectation to satisfy our customers, we work on that daily we’re proud of that achievement, toward the end of last year we really made a concerted effort to put together a good growth plan for 2022, and that’s part of what we discussed on the last episode was good companies have a written growth plan. I have a director of recruiting and I hired her last year because the effort that it takes to grow this business, the way that we want to grow it, it’s more than just I can handle I needed somebody full time to be able to dedicate themselves to that.
So they started in November, and I’m happy to say that our training class of nine is well underway our first training class which is nine people well underway here for the first part of 2022. And this individual has us filled up with interviews, just on a consistent basis so we talked about that a lot on the last episode, but practicing what we preach over here and making sure that we’re just seeing new talent walk in the door every day and we narrow it down and choose the ones that most suitable for our business and for our customers.
Eric Thomas: So in growing the top and bottom line numbers, obviously something had to change with the company being 77 years old and this in particular year being the one where it seem to really grow, what changed it from an operational standpoint or from a customer service standpoint that helped you get there?
Lawrence Castillo: Good question, I think that the way that we are doing things now are quite different than the last group of management. And as I alluded to earlier, I’ve had exposure to a lot of really great stuff over my career. And as the years have gone on, I’ve put all that stuff in my back pocket. And when you arrive at a place where they might not have had exposure to some of that great process and procedure and the ideas that were successful at other places it’s change and you do your best to implement that as responsibly as possible. But honestly, that’s really what it came down to we put together a great year with largely the same amount of people.
And we did that because we were doing things better, there was low hanging fruit. There was just proper management of your schedule, and as an experience manager who’s been in side of a lot of heating and air conditioning shops, not just of the ones that I’ve run, but of my friends and people I get phone calls, and they ask for advice. And I always start with dispatch and the call center because it’s booking the call It’s assigning the right number of calls. Sometimes they’ll get a call from somebody and they’ve got five or six calls on a technician. And there are simple lessons and there’s low hanging fruit so there are things that we did here to make sure that we were squeezing every drop out of every day. And so it made a huge difference am just really proud of the team.
Eric Thomas: Yeah, absolutely. Well, you know another thing that was remarkable to me, and this is something that I see a lot on different Facebook groups, different forums or different groups that I’m in where I hear people talking about marketing budget and they’re talking about what percentage to properly allocate to it you don’t do the full 10% You do less than that, correct?
Lawrence Castillo: We’re about 5%, yeah. And this was something that we talk on the last time, but it’s worth repeating, we create our own leads from our service schedule, right. I market for growth I don’t market for replacements and because we create those leads ourselves, and if your team is out there working hard on getting reviews it reduces your marketing spend. If your team is out there giving great growth which turn into technician leads, it reduces your marketing spend. there are a number of ways to do it, but we spend 5% maybe six and not anything more than that. I think, this year we might ramp it up a little bit because we have a really big growth plan this year. And if you are controlling what you can control inside the business that can help to offset that marketing cost it’s a great thing at the end of the month to be able to look at your profit and loss and see, that the revenue has grown but the marketing budget hasn’t.
Eric Thomas: Yeah, Oh absolutely. So when we’re talking about 2022 and the incredible growth plan that you have written down, I’d like to talk on the pricing for that because there’s price increases across the board for a lot of things, in almost everything. so how does pricing play into your growth plan?
Lawrence Castillo: It’s quite important January one, the first week of January, we changed all of our pricing. And during the calendar year, we were handed three or four price increases by all of our manufacturers, distributors, everybody got into it. And it’s understandable we are not going to absorb that as a company we have to adjust our pricing and we can’t wait, it’s January 19th today, and you haven’t changed your pricing this year then that’s 19 days’ worth of installations, 19 days’ worth of service, where you are paying for that increase and your customers aren’t sharing in it So you have to be priced appropriately. I’m not afraid to be the most expensive company in our part of town. And we make no apologies for it we deliver a great product, so I think for your listeners it doesn’t matter what size small or large companies being priced appropriately is just, that’s at the top of the list of what you have to do this month.
Eric Thomas: Yeah, So what’s a good strategy? Say someone’s never done a price increase they’ve always been honest, if you’re a new business owner a new operator of a business, it can be a little intimidating to call a customer or send out a mail to your customers and say our prices are going up very fast. What’s a good way to communicate that to the homeowner in a way that they understand and don’t get upset with you?
Lawrence Castillo: Well, we did it last year here. and I can tell you that we change the price of regular service, we change the price of maintenance agreements, we change the price of equipment and it’s just a lot of training, our customer service representatives need to understand that, you need to prepare them for the objections from customers People aren’t going to understand customer for 20 years, I’ve always been paying, whatever for you guys to come out I don’t understand why it’s more now and there’s a lot of ammunition for that right now. Everything is more now, meat and gas and just everything has increase, and the reality of it is that the manufacturers, they’re sending you four letters a year saying, we apologize but due to prevailing market conditions we have to increase prices. And so, you just have to delicately explain that to your customers and they get it, if you explain it thoughtfully they understand, and many of them are business folks themselves. They run a business or managers in a business where they have the same thing going on. So, it’s not a foreign idea or concept to most it’s just happening everywhere. And it’s just the way that you deliver the message.
Eric Thomas: Yeah, in my opinion I think it says more about the quality of the company if they actually increase their prices because maybe I have a different perspective than the average homeowner because I run a business, so I understand overhead costs and costs of maintenance of vehicles and salaries and benefits and all that stuff. I think it says more to me about the quality of the company if they have to raise their prices versus the person who doesn’t because the person who doesn’t is probably just himself or herself. And they’re just trying to increase their sale versus the company who has the best warranties in town and who has the best customer service in town and the best tools and equipment and products to offer.
Lawrence Castillo: It’s for the one man truck or the three or five man operation those operator they may not be paying workers compensation, insurance they only have a few trucks on the road. They’re not pulling permits, everything is done by cutting corners, and if they’re cutting corners now then there’s no additional cost to them for all these items. So they’re just going to continue to operate on a low income, and for operators like that, and they’re going to be out of business in a couple of years anyway, if we inevitably talk to enough people about this and we talked to so many people last year about this, you’re going to have some people that just don’t understand it all you can do is do your best, explain to them and just give them the option. If you want us to stay in business and to be here to service, continue to service your system like we have for 77 prior years, it’s just going to cost a little more.
Eric Thomas: Yeah, absolutely. And you may mentioned something about, and the way your technicians communicate that, and you said it comes down to training them to be able to communicate. And that’s another point that, we had talked about prior to this in regards to your plan for 2022 was training and continuing to train your technicians, So what does that look like?
Lawrence Castillo: It needs to be going on inside of all of our businesses every day, and I know that, right now with gathering people you are acquainted with, it may be a bit problematic with the virus and such, but there are ways around that, I think a responsible business owners sits back in January or hopefully sits back in December and decides what they’re going to do differently in the next year. But here we are in the middle of the month and some things need to changed, right? You’re trying to do things better this year than you did last year. I know one thing that we identified here was that our training on the CRM that we use which I’ve mentioned in the past service Titan it needs to be better.
Everybody has to have a better grasp of the software and how to use it. I think there’s a lot of opportunity there and service Titan offers a lot of videos. And there’s plenty of out outside parties in a lot of ways to train your people. So that was something that we identified as important going into this year, but the training is it’s not just the staff inside of your building, but it’s your outside staff as well. You just need good companies they’re training every week, and that’s what we do here. So, the training plan is just as incredible as the growth plan this year. We’ve just been heating and air conditioning here for a long time, and so we added installation, we added water heaters and tankless water heaters, and all of this requires training. It’s training on how to book the call and take the call what you’re going to communicate to the client it’s sales training, it’s installation training, so it’s a lot of training going on over here.
Eric Thomas: Oh yeah, like you were saying with sales, because now you’re offering a different service that you can cross, promote and cross sell to the homeowner.
Lawrence Castillo: And we’ve already had just a great response on the water heaters. you we just flipped the switch on that at the beginning of the year and we did so thoughtfully. Everybody has been trained on every aspect of it and so you know, we’re well prepared.
Eric Thomas: Yeah, I think water heaters are one of those low hanging fruits for contractors. I think that because they’re not too expensive for you or for the homeowner. And it’s something that they’re easy to sell from what I can tell, at least from what I’m seeing on my end, which is obviously the marketing side of things; marketing for water heater replacements is so much easier than HVAC system replacement just due to the cost.
Lawrence Thomas: Well, you have two opportunities a tank water heater it’s demand service when your water heater goes out, you’re typically not shopping. And so it’s a quick Google search and you’re having somebody come out because you’ve either got water everywhere and your property is damaged or something really bad is about to happen So it’s about acting quickly. the other part of it though like tankless that’s an opportunity that every one of our comfort advisors that’s in a house talking to people about heating and air conditioning equipment, they should be talking to them about that as well that’s a scope of work that we can take care of at the same time there are rebates there’s energy savings there’s just so much benefit to the homeowner, and I think that probably many or most companies don’t do a good job in relaying that. I’ve thought for a number of years that the tankless market is just really underserved here in Southern California. so it’s, something we’ve added and I look forward to having success with that this year.
Eric Thomas: Yeah, so have you all recruited plumbers to go in along with that, to open up maybe a plumbing division eventually?
Lawrence Castillo: Yeah, So we trained everybody, in our installation department somebody is here that has much experience with those and then it becomes shuffling the other staff members through so that they can participate in installations and see exactly what’s required it’s easier than you would imagine.
Eric Thomas: Great.
Lawrence Castillo: And once again, the benefit to the homeowner it’s great.
Eric Thomas: Yeah, and so another topic that’s been hot on top like pricing and price increases and all that stuff is recruitment. it was an issue last year and a lot of folks are still anticipating that it’ll continue to be an issue this year I’m seeing on my end of the world as well, trying to even recruit people for digital marketing and so that’s part of your plan for the year, is to really ramp up the recruitment efforts right?
Lawrence Castillo: Yeah, You know, all of us are competing for such a small pool of talents out there right, and so that’s why we hired a director of recruiting and she’s been here for a few months and she’s fantastic She’s focus got her eye on the ball. And in order to we just put together a training class of nine in order to filter through many more candidates than that and get those nine on board, it was a huge effort. So we’ll continue to do that as the year goes on and that’s the key to the manpower is just the key to growing this company. so they’re already out there in the field and it’s exciting so yeah, the recruiting is for us the key to having a really successful year this year.
Eric Thomas: What are some of the things that you guys have done in recruitment to find quality candidates?
Lawrence Castillo: So the young lady that I’ve hired, she used to work for the gas company here and her job was to recruit engineers which are the folks that go out and survey and identify issues. It wasn’t all that different than what we do here, as we recruit for technicians and installers. So she’s made great relationships with the trade schools of course she runs ads on actually her second day, she was at a trade school at an event, the biggest company in Southern California in heating and air conditioning, they are doing zoom interviews with trade school candidates and I don’t know how many folks they’re getting or how people are responding to that, but we’re not doing any zoom interviews.
We’re bringing people in, we want them to see our operation we want to meet them and talk with them and just identify their strength and weakness, I think that’s really the way to hire people they have to be in front of you, you have to be able to get the feeling, whether they’re somebody that our customers want in their homes or not. So we’re not doing large scale zoom interviews, but we’re recruiting them. There’s a lot of managers and some small companies, they may not be in a position to train people, let alone nine people that could be hard, but you got to start somewhere. Bring a couple of professionals who are experience it’s going to be overwhelming and is going to change a little bit, but in the future when you’re three, six months down the road and they can drive their own truck and take care of calls that’s a game changer for your business.
Eric Thomas: Yes it is.
Lawrence Castillo: So it’s got to start somewhere.
Eric Thomas: Yeah, and that seems like a solid differentiator for your company versus other companies, because like you mention it’s a small pool. They’re probably getting offers solicited to them from other companies as well and in that regard I think that’s a solid differentiator between you and some of your competition and as you alluded earlier, LA is a very saturated market with pre HVAC lot of competition. So what else do you do when it comes to competition to stand out?
Lawrence Castillo: What we use is the of best of Los Angeles as designation, and we make sure that everybody knows it’s in every ad that we run it’s just all over the place, we do that and I think this is something that we might have touched upon last time, but the staff that work for you, your technicians your installer and your CSRs, some of them have worked for other heating and air conditioning companies, or they have worked somewhere else where they have friends that are bright young individuals that would make sense for your business. So one of the first things that we did was to incentivize our existing employees, do you have friends that might fit in here? And we had them turn those names over and went through an interview process that way too. So sometimes you’ll find some of your best folks that way by using your existing employee base as your recruiters.
Eric Thomas: And so when it comes to the overall operation with the competition, because LA is from what I’ve heard it seemed like there are companies running everywhere for heating and air conditioning. So there’s a lot of competition out there and as you were saying, there’s the ones that continue to grow and get it. And then there’s the ones that kind of fall behind. So, what do you do to approach that when it comes to competition, entering the market and then existing competition in the market?
Lawrence Castillo: To me there is no competition, and I truly believe that 100% we compete against ourselves and if you’re worried about what goes on elsewhere inside of other people’s buildings then you’re not taking care of your own house and what counts to us is what our customers think about us. So I can’t concern myself with other companies, what they’re doing, what they’re selling, what they’re pricing is, I have experience about the marketplace having been here for so long I know where companies are, I know what they charge, I know who’s running them, I know who’s working there, I know probably far too much but I don’t spend no amount of my time dealing with that.
The only time that I run into anything having to do with another company is when we’re booking calls and somebody else installed it within the last year and something’s wrong and they’re not going back out there so they want us to come out and fix the problem, that’s one instance where I hear about other companies. The other instance is when one of my comfort advisors, comes up the stairs and say I went out and ran a call and they’re at $13,000 and we’re at $19,000,so these are the only two times that I really hear anything about other companies. I don’t spend any of my time worrying about it, we take care of what we have to take care of inside of these four walls. And we did that last year and we did it and it was a great success so I’m not really concerned. And I see billboards for other companies and I see television commercials and that’s all great. They can, if that’s where they’re going to spend their marketing money, and generate calls for them, then that’s what they choose to do I’m not doing that.
Eric Thomas: So when it comes to tire kickers and price shoppers out there, how do you go about that? Because that’s something that a lot of contractors run into like price shoppers.
Lawrence Castillo: It’s going to happen if you are a homeowner and you want an estimate on replacement, we are going to come out there for free and we’re going to give you our best effort and we are going to price it all of our jobs. Then at that point, it becomes a conversation between our representative and the homeowner. Some people are out there getting six figures, and you’re never going to be able to help that. And sometimes you’re those people, they may never even buy, that’s the way some folks are it’s the way they buy a car. It’s the way they interview general contractors to do a remodel. Some people do that and you can’t be afraid of it, you can’t want to run the call, it’s bad business to not do that. You have to go out, treat every customer as they’re the most important and give them attention and even though they might not be serious. I have people that ask my technicians, give them a ballpark before you send somebody out here, that’s not the way it works we’re managing that process, we’re in control of it.
Eric Thomas: So What are your thoughts around presenting the pricing on your website in regards to the good, better, best option and allowing the homeowner to configure what they think is best for their home?
Lawrence Castillo: That’s something that’s been talked about a lot recently, the whole e-commerce portion of our business, and some managers do it there are some companies that will put their pricing right on their website. We don’t do that here, I’m a big believer in the customer experience and some managers might want to go on and build their system and you can do it with a car, If you go onto the Mercedes website and you pick a model and you can add your interior and add your features, and it’s going to tell you exactly what that car costs, that’s great for that industry. But for me, this is not the case coming from somebody who, during my career I ran plenty of sales leads and sold a lot of equipment.
There was something special about going to somebody’s house and meeting them and getting to know them, taking a look at their existing application letting them know how we could improve things for them. And then being able to price it and be in control of the situation right there. I think that’s giving people a great experience, so we don’t put anything on our website and I don’t see us doing that anytime soon.
Eric Thomas: I do see a lot of stuff online about different pricing in general not like the e-commerce side, and even in recruitment, you put the money up front when you’re putting a job ad, and ask how much are you going to pay me? Or put that out there before I interview. And to point out what you were saying, they could probably afford it, whatever it is but seeing that price up front might queue a reactionary defense response that tells them I can’t afford this right now, or I’m going to go take this and try to find it cheaper and it could hurt your ability to sell.
Lawrence Castillo: I think I’m a real big believer, and I think that the award that we won last year, it was all about that award was given for customer service. These people selected us as the best company in Los Angeles based upon their experience with us and that’s it, their experience with us, and I believe in giving people a great experience. And if you do that, the perceived value of anything that you have to offer, whether it’s a service agreement, whether it’s replacing your system, whether it’s the repairs that you’re offering, you have all the ammunition because of how you’ve treated the customer, and if I just have numbers on a website, or we’re quoting over the phone, there’s no value to that. We’ve done nothing, they don’t know us, we are trying to make people members of our family, and the only way to do that is to wow them.
Eric Thomas: So, another thing that’s kind of been, really affecting the whole world as everyone probably know is the coronavirus, and we were talking about going into the home and sit down with them at the table or going in to inspect their system. Some people are getting scared from having people in their house and people are getting sick. so how is COVID affecting your business right now?
Lawrence Castillo: it is affecting our business in the last two weeks we’ve had somewhere between five and 10% of our workforce out of the office. And this time around it’s traveling quickly and our customers as well, you walk into a beautifully built service or installation schedule, and then you get the call that somebody’s tested positive, and that call goes away or that installation goes away and gets rescheduled. And now you’re looking at a crew that you have to find work for service technicians that you’re looking for calls for. so you just do your best it’s something that we’re going to have to live with, you just don’t overbook. That’s a lesson that a lot of folks have to learn the hard way but we’re just handling it day by day.
We know that everybody does this differently, but here at our business if you’re not vaccinated, we test you every Monday. And the reason that we do that is because we are guests in our client’s homes and many of them request vaccinated technicians. I had a customer two days ago that he wants to do a $20,000 system he’s 91 years old and he wants to make sure that the folks that are coming to his house aren’t going to get them sick. And I am absolutely full of respect, and I understand his wishes and we will grant his wishes because we are thrilled that he chose us. So we do everything that we can here to keep our employees and our customers safe, and we will continue to do so.
Eric Thomas: How do you communicate to the homeowner, like say they’ve got an installation scheduled and they’re supposed to expect a technician crew at 8:00am to come and start the installing but then they’re both sick. How do you communicate that to the customer?
Lawrence Castillo: The installers are sick or the customers are who’s sick?
Eric Thomas: The installer.
Lawrence Castillo: well, in the last couple of weeks we had some like that happens. So, you of to change the team and we’re fortunate enough that, I have some people in service who are also, installer that have spent a long time installing so we can adapt and move things around. Sometimes maybe you have some smaller job that can be time sensitive at this time of the year the biggest thing for us here is to make sure that everybody has heat, that’s the most important thing. And some client might have a family whose installation today was based upon age of equipment and efficiency, and you might have another family that their installation was based upon their system stopped working, and they have no heat at the moment you prioritize, you move things around, you just try to get everybody taken care of, but you have to have the capacity to handle something like that when it happens we’re fortunate that we do here.
Eric Thomas: On the other side if the homeowner calls in and says, I’ve got COVID, how do you handle that?
Lawrence Castillo: We’ve had that happen a number of times. We were in the middle of a large project couple weeks ago, multiple systems. We were at four or five systems in the house and we had done three and then over the weekend they tested positive. So we moved it out, let them know we would come back when, everything was good and when they felt comfortable. And so you try to roll with the punches, but it’s going to happen. This is a strange time for all of us. And, we just do the best that we can, but we have to expect these things to happen and you have to prepare for these things in your business.
I think about my business, the people that it’s affected, on a management level, as well as rank and file level, and you have to put a worst case scenario in your head. Last Saturday, I get a call that two of my CSRs tested positive. So, there was a text chat between a bunch of us managers figuring out how we were going to get that handled and so that wasn’t going to interrupt business. And we could take care of all of our customers, so you have to be thinking about it now, because it’s going to affect many businesses. If it’s not affecting you today in two weeks, somebody’s going to be home for a week trying to get better so you got to be thinking about it.
Eric Thomas: Yeah, it’s getting to the point now we’re rolling up on year two, two full years of this being a thing in the United States at first it was a dependent variable it was hope that this wasn’t going to affect you somehow. And you of work around it but now it’s okay, it’s been here for two years now, you have to build into your plan. Like you were saying, good businesses have a plan you need to have a plan for this. You need to have a plan for Monday morning, you show up and 80% of your team is sick or 80% of your jobs canceled because they’re sick or whatever it may be, or there’s a new illness going around and so you got to have a plan for those things.
Lawrence Castillo: This is a great reminder for all of the folks that are listening that run or own a business because, things can change overnight. And you lose a couple of lead installers three or four technicians or folks that are answering the phone the folks in the warehouse. If you’re under demand in your warehouse and you’re staging a dozen for tomorrow, how does that affect you? Or even three or four jobs, it doesn’t matter what size contractor you are it’s just, people are going to be asked to do things that they’re not used to doing. So it’s just preparation people need to be thinking about this.
Eric Thomas: Yeah, Preparation and planning is huge and speaking on planning, I’d like to talk about setting benchmarks for a yearly plan for your business and what approach do you take when it comes to creating that plan and setting benchmarks?
Lawrence Castillo: I think that it’s appropriate to talk about now, because we ended last calendar year. It’s a great opportunity for you to look back and take a look at each department and see where you failed or succeeded. And to really put a plan and not just roll into January 1 and wake up expect everything to continue. Your planning is the key to success in business so, for us we did that and for my business here, everything is a multiple of manpower. And as I alluded to earlier, we started with nine new folks in the field this year, and we’ve add in the office as well.
But we have to pay for those, so you have to make the adjustments and know that you’re going to absorb some non-revenue generating labor over a certain period of time before it begins to pay dividends. So for us manpower and training equals sales and sales plus management equals profit. So that’s sort of the model that I live by over here and it all starts with manpower, and I can’t stress enough I know I’ve been talking about it for the last hour here, but nothing’s going to happen to change your business without having additional employee. And the great companies really do a good job with this you don’t grow into a 30, 40, 50 or 60 million dollar company without having a growth process.
And I’ve been a part of that at the largest company in Southern California, where we had a school and the recruiting effort was just wave after wave and you have multiple training classes at different stages at any given time and this is how companies go from 30 vans to a couple of hundred vans. so for any contractor of any size, it’s just all about manpower and so for us, that’s what it was is to examine the manpower, and see what we needed to do for this year.
Eric Thomas: Yeah, I see how a lot of times how manpower and creating leads can go hand in hand because you can create leads all day for your business, but you got to have someone to run the calls. And so it comes to a point where say okay, we hit 5 million last year, and that consisted of eight install crews and eight service technicians. I want to hit 10 million this year but I want to keep my costs down so I’m not going to hire anybody else and so it makes you almost want to laugh because I hear this all the time because they think I can use the same people and generate more profit or generate more revenue. And that means I’ll have more profit but they don’t think about the part where they need the people to go run the additional jobs that’s going to take for the revenue. So when it comes to like staffing up and getting that manpower in place, do you hire for those positions based on the projections that you anticipate for the year?
Lawrence Castillo: No, during the course of the year, your demand is what your demand is going to be let’s say it’s the middle of summer and you see that you don’t have the capacity, and this is really the story here not enough technicians to run the number of calls that we have. We identified that as a problem and we said, we’re going to do everything we can so that we’re not in that position next year, and you have to take a look at your own business and it’s all math. So for us, I know that a certain amount of calls is going to turn into a certain amount of replacement revenue or it’s going to turn into a certain amount of service agreements sold and then you pencil out the profit after that. But there’s a lot of folks out there that have a small business and they’re just not used to doing part of it and some coaching would help folks like that in getting to the next level you just can’t wake up every day and think that things are going to change without you taking the steps to affect change.
Eric Thomas: Yeah, absolutely. I think that’s a good lesson for any business owner in general is what got you here is not going to get you there, you want to be a $50 million company well, you got to get a 50 million process in place and you got to get 50 million team in place maybe not worth 50 million dollar, but able to generate 50 million dollar either profit or revenue.
Lawrence Castillo: Eric, I think that for the folks out there that have businesses, that something for me that always been keys. I have a lot of friends in the industry, I’ve had a chance over the years to visit their shops and to have meaningful conversations with them and to share financials and to share ideas. And this has been key for me and I saw a lot of smart stuff from a lot of smart people, and these are some of the things that you learn and you take with you and implement in your business, because if you’re operating without talking to people, you’re not exposing yourself to what others might know. So I think, there are people who need to have friends in the industry and whether you’re part of a best practices group, whether you’re part of have ongoing conversations and friendships with other people to do the same thing that you do.
Eric Thomas: Yeah, well that perfectly bridges us into a topic that you and I have talked about numerous times recently. And I’ve seen conversation about on different podcasts, different Facebook groups I’ve even talked about a few times on our podcast and that is, coaching and mentorship and that you were saying, there’s a lot of really smart people out there with good ideas that are willing to help and then there’s a lot of people out there that perhaps aren’t so smart and have a lot of advice to give, when it comes to taking advice and finding a coach, what would you recommend our listeners to heed with caution with?
Lawrence Castillo: Everybody’s business has different needs; there are the best practices groups. They have a lot to offer, and I came up through one of them and I’ve said this many times I spent many years in airtime 500, the success group the success academy, all of that stuff. And that stuff was really important I started in this industry at a very small company and I needed a blueprint for success Jim Abrams, brilliant stuff, was really impactful for me. And I learned so much about running a heating and air conditioning business through his group, there’s next star out there, there’s Praxis, which is what Abrams does now and so there’s a lot out there.
You have to be the kind of operator who, is going to spend that money and take it and apply it to your business so that it can make a difference. But you gain a lot of friendships I have so many friends from 15 plus years ago, that I met through the success group. So you keep those friendships and you talk about how to make each other’s know what they’re doing in their business that can help you possibly in yours. So I think that the best practices groups are worthwhile, and all the information out there talk to people think that talking to folks that have actually been a part of these groups is a great place to start. I think most contractors know people who are in one of those groups and chat with those folks.
There’s so much good stuff that comes out of them when it comes to other folks business coaches or sales coaches, my acquaintances with many of the folks in that space, and there’s a lot of options. And I think that all of these people, they bring some value to the table in one shape or form. I think that if you are a business who is looking for sales training or a business coach or whatever it is, I think that you need to probably choose somebody who can provide relevancy and results, so once again it’s just doing your homework. It’s what we all do in our daily lives, you do your homework and you talk to people, and try to make the wisest decision.
There’s a lot of smart people out there have a lot to offer and who can probably help some of your listeners’ businesses, but just pick what’s right for you, by doing your homework and finding somebody that’s fits what you need and talk to people. There’s the Facebook groups that exist out there and there are a number of ways to get involved in the conversation. So it’s all out there.
Eric Thomas: So for those people who have cut a check for some type of coaching and got burned, what would you recommend for them as they begin looking for another group?
Lawrence Castillo: I’ve seen it, I talk to enough people and I know that there are some folks that write a check to somebody and they’re not happy with the results or the results aren’t what they thought they were going to get. But, that could be once you get the training, you have to follow up. You have to stay on, I did this many years ago, back in the early 2000 I had Charlie Greer come out to my business and he did sales training with my technicians and did ride along. And if you think that’s going to change your business and Charlie leaves town and it was then up to me to make sure that we were practicing the paper towel clothes and all the things that Charlie would preach. And, so it’s the same thing with any folks that are doing this now if you’re not following up, you’re not going to get results.
Eric Thomas: That’s a great reminder as we head into week four of the New Year where a lot of people’s resolutions are slowly tapering off and people are beginning to forget about all the big goals that set for the year. So on the other side of our entire conversation because a lot almost all of our stuff has been in regards to, having a plan, making sure that you write your plan down. This is a big question here for those who don’t have a plan and they’re listening to this later on and they’re in the middle of April or May, and they’re really fell behind on this year and my phone’s not ringing and I need to get something together. What’s a few courses of action that you would recommend for them to back on track before summertime?
Lawrence Castillo: It’s too late by May, you have to identify things way earlier than that if you’re sitting there in March and not much change has happened and the phone isn’t ringing the way you want to, and you haven’t increased your manpower by the amount that it should and you have to act now, if it’s March or April it’s going to be too late. In order to be hitting at all cylinders in May, you have to execute well in January, February, March, and April. But if you’re sitting there in May and you’re looking at it’s going to be a tough summer, you’re going to be understaffed and too many calls and not priced correctly.
And when you’re understaffed, guess what happens? Your people are running too many service calls. They’re running five and six calls they’re spending too little time on those calls. They’re not able to give a great customer service experience, which turns into reviews, which makes everything, slides downhill. So it’s managing your business every day, Eric, and for those folks who aren’t in the office every day and who are calling it in from their dining room table or from their cabin up in big bear or from an island somewhere, that’s not a sustainable situation, you have to be in tune with your business. I’ve done this for a long time, and I sure would like to be home or I’d like to be traveling right now.
But if I do that, the stuff that I need to happen here is not going to happen. I’m standing in front of my technicians constantly I’m down in that call center, that’s the kind of operator that I am and that I’ve always been, but the results have been because, that’s the way I do it. So, you have to manage that business every day and you’re going to go home some days and you’re going to be disappointed in people, whether they’re your customers or whether they’re your employees and you’re going to have a knot in your stomach and that still happens. But you make it a better day, the next day, you train and you overcome, that’s what good managers do. And if you’re not doing that, I have plenty of friends that own businesses that they’re not involved in the day to day, like they should be. And the results are when that profit and loss comes out.
Eric Thomas: Yeah, moment of fate.
Lawrence Castillo: That’s right.
Eric Thomas: Moment of truth, so when it comes to some marketing, some levers, we like to talk about levers around here, different levers you can pull at different times for the business owners out there who perhaps don’t have the strongest marketing or the strongest brand presence or community presence or whatever it may be. And they’re just looking for a few levers to pull. What are some things that you’ve seen work well in a saturated market?
Lawrence Castillo: We market to our service base quite frequently, if your customer service agents aren’t capturing the email with every single time they talk to somebody, they’re letting everybody in the building down. Because those emails are who we market to and we build lists, from those emails, some people are going to get emails talking about the tankless opportunity and some people are going to get emails that are asking for what do you want to do as far as changing the air quality in your home? Some people are going to get emails saying, your service agreement is about to expire. Some folks are going to get emails saying, we left you a bid two days ago, click here for us to help you, you have to have the emails.
And there’s a large part of our revenue that comes from the emails that we generate to our service base. We don’t hit people too much, you’re not receiving two emails a month from us we don’t bother people like that, but we have directed marketing, through the emails in our base. And then of course, anybody who we visit, we’re asking for the review in the home, but if they don’t leave the review, we are reminding them a day later, you didn’t leave us a review. Johnny technician was out there and we hope he did a great job, please let us know. There’s just the power of the email is huge. So for the contractors out there who aren’t using that, it’s a great source of business, unexpected business sometimes. It’s gravy for a lot of folks who aren’t using it, just start capturing email addresses with every call that you book. I think most middle to large size contractors all do this, but some of the smaller ones probably aren’t doing it.
Eric Thomas: I’m a huge fan of building that email list because, you got to own something. If Facebook goes down and you’ve spent the past 10 years building your Facebook page, how are you going to contact them? or if Gmail goes down you need to have a phone number to call them. And of course, if the internet goes down, the whole, world’s going to catch on fire, anyways so you don’t have to worry about that, but you need to have some type of tangible way of contacting them outside of a Google ad or hoping that they find your website somehow and that comes from having their contact information and their address would be ideal as well for direct email.
Lawrence Castillo: So that’s a huge part of the levers that we can pull here and we can pull it quickly, and if you are a plumbing business, which it’s a demand business, people call a plumber, not for preventative maintenance, they call a plumber because they have a problem, paper click work in plumbing, is a little more prevalent than it is in heating and air conditioning work little bit differently, but managing your paper click spend, managing your LSA ads, just all of that stuff, you have to really be on top of it. Sometimes people will be spending money every day that they don’t need to be spending, getting good at shutting things off when they don’t need to be on is important. So managing the money you’re spending online having a layered marketing approach is just to me the way to do it, your direct mail is part of our regular diet over here and like I said, we market for tune apps. And so I’m a believer in direct mail I always have been and it makes the phone ring, so just having a layered approach.
Eric Thomas: Awesome, Well Lawrence, we’re beginning to wrap up here is there anything that you feel I’ve missed or anything else that you really wanted to touch on?
Lawrence Castillo: I think we’ve touched upon a lot here, I’ve enjoyed coming on with you twice now and I’m glad to hear that so many people heard our first broadcast and I’m not a guy sitting here with all kinds of silver bullets, but as an operator, as somebody who shows up to his business every day and talks to his employees and tries to make impactful change I’ve learned over the years. I’ve seen great owners and great managers and I’ve watched how people have operated their business and you got to do it yourself, your employees are, they’re just waiting for instruction from you. And some folks just don’t give instruction they don’t give good instruction, they don’t hold people accountable.
People want to be held accountable, to be a good leader; it doesn’t take all that much effort. But you can really just get great results out of people if they’re incentivized properly if you let them know what the expectation is, if you’re a call taker, this is what your call booking rate should be. This is my expectation of how many calls you’re going to book; this is what the length of call should be, that when you’re booking this type of a call, capturing all the right information, getting it to dispatch so it gets scheduled to the right person, you need to be involved in your business. And if you’re knee deep in it, shoulder to shoulder with your folks, great things can happen.
Eric Thomas: Yeah, absolutely. Well, this has been another outstanding episode with you Lawrence, I’m looking forward already to publishing this one because I know that a lot of contractors are going to find, some good information here, even if it’s one or two things, it might have been that thing that they hadn’t thought about in the past and now it’s that happy moment, so I really do appreciate you taking the time out of your day to join me once again.
Lawrence Castillo: My pleasure to be here – enjoyed it just like last time. And I’ll always come on air and chat and try to provide some value for your listeners.
Eric Thomas: Awesome, there’s one last thing before we go, I meant to ask you this last time, I noticed some football helmets back there on your bookshelf, is there a particular story behind that?
Lawrence Castillo: I’m from Colorado and I went to the university of Colorado and my sisters went there, and my daughter went there and it’s black and gold runs through our veins. So, Boulder’s a special place and I grew up in it and it’s quite important to me It’s a special university. If you’ve never seen a football game in Boulder, then you need to make sure that you do that because that campus is just spectacular, Boulder is the last two years it was U.S news and world report, number one place to live in America. Wow, and very special place, so awesome. Love my bus.
Eric Thomas: There we go, well thank you all for tuning into another episode of the smart HVAV Marketing Podcast. Remember folks around here, we say marketing is two things one, get people to do something and that includes you. I got you all to listen to this podcast and now I’m asking you to leave me review that’s part two of the “Ask here”. So if you enjoyed this episode and you found the value in it made you laugh, it made you cry, it made you rethink the way you run your business; I would love to hear about it. You could leave us a review on Apple Podcasts, or you can review it now on Spotify, that would mean the world to me if you left us a review. And until next time, I hope all of you take care and run a profitable business.