My guest on this episode is Trevor Flanagan, COO of Flint Group, a home services roll-up founded by Collin Hathaway. Collin’s appeared on this podcast twice, on episodes 32 and 90, for good reason, and I highly recommend listening to those episodes as a primer for this conversation with Trevor. Trevor has a fascinating background as I’ll touch on earlier in this episode. He started his career as a district manager for Aldi before becoming GM of Bob Hamilton, a home services business in Kansas City.
He then left and co-founded Professional Chats, which offers website chat software to home services businesses, before selling it two years later. In those two years, he and his co-founder grew it from 3 to 150 employees and nearly $10 million in revenue. Soon after selling, he met Collin and joined Flint.
Our conversation covers how great companies scale, how crucial of a role sales and hiring play in scaling, the role of debt, and everything in between. Like Collin, Trevor has an amazing ability to make hard problems simple and teach through storytelling and I’m positive you’ll enjoy hearing his story. Enjoy.
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(3:40) – What’s your career been like scaling companies across different industries?
(10:24) – How were you able to land a job managing a grocer at only 22?
(14:27) – What was the most common issue these different Aldi locations were struggling with?
(16:54) – How did you set up systems when you co-founded your first company?
(23:23) – Where did your growth in the first 18 months come from?
(26:13) – How did you eventually get to Flint?
(28:55) – What’s scaling been like at the PE level?
(31:07) – Of the companies, you’ve seen, is there a consistent theme as to why they don’t scale?
(33:21) – How do you adjust cultures as quickly as possible without breaking things?
(34:37) – How do you figure out what KPIs are most important for certain roles?
(35:54) – Once you have established a culture and KPIs, what’s next to accomplish to scale?
(38:00) – Do you have a case study example of a formula that works for scaling?
(40:29) – Do you hire first before tackling marketing?
(42:44) – What are some of the most challenging parts of the sales side of these businesses?
(47:57) – How do you identify potential Salespeople and how do you design the training process?
(49:27) – What’s your philosophy for compensation and incentivizing Salespeople?
(50:51) – What’re your thoughts on scaling in terms of cash flow?
(53:43) – What other impediments to scaling are top of mind for you day to day?
(55:15) – What are you most excited about for Flint over the next 2 years?
(56:05) – What’s a strongly held belief you’ve changed your mind on?
(57:25) – What characteristics of folks make them desirable to work for?
(1:00:10) – What’s the best business you’ve ever seen?
Alex Bridgeman: I think one place that would be interesting to start is just hearing about kind of the companies that you’ve worked in that have scaled. There’s a lot of different things that you’ve done even just outside home services. I’d love to hear kind of your perspective on what scaling companies look like across a couple of different case studies that you’ve been a part of.
Trevor Flannigan: Yeah, so whenever I graduated, I worked for a discount grocery store, Aldi, for a while. And one of the best things I learned at Aldi was like what a billion dollar playbook looks like. And so, I’m 22 years old as a district manager, managing a hundred employees, and I looked like I was a child at the time because I was like 130 pounds and 6’2”. I’ve gained weight since then. And back then I got really good advice from a peer. And he said, “Just become a subject matter expert. There’s all these binders at a billion dollar company that say how to do the thing.” And so, I just did what he told me to. I read the books – here’s how to run a store, here’s how to run inventory, here’s how to run a district. And I just got really good at being a subject matter expert. So then if somebody came to me with a problem, I could help them find where the answer is, not always give the answer, but show them where I know where it’s at. And then I’m at least a resource. And so doing that was really helpful. And then whenever I left that grocery store, I got really great experience turning over some really unprofitable districts in Des Moines, Cedar Falls, Iowa, Champaign, Urbana, Decatur area, Minneapolis. And I left because retail is rough, and I wanted to get out. And I came back to Kansas City, and I started working at a plumbing company that I found an ad off of Craigslist. And I just thought that small business would be interesting. And so, I went in for the interview, and like a typical small business, the owner interviewed me. And he forgot I was coming in for the interview. And he said, “Oh, I forgot you were coming in. Well, I’ll interview you anyway.” And I was like, this is weird. And then he proceeded to tell me, at the end of a really solid conversation/interview, that he already filled the position that I came in to interview for. He’s like, “Well, our one service manager is going to do plumbing and HVAC.” And I was like, “Oh, that’s a bummer.” And he said, “But you have a really great attitude. Would you come here for a lot less money and manage the office?” And I didn’t have a job at the time. I went to the University of Missouri Kansas City Business School. And the MBA program was just super easy, so I was looking for a job because it was not a full time program. And so, my math was like a little bit of money is better than zero money. And so, I just came in, I accepted the job. And in our first month, I noticed all these things that weren’t all that dissimilar from like an unprofitable or one of the grocery stores that I’d seen not functioning very well. And I remember my first day, all the customer service reps that were answering the phones, they left at 12 o’clock, or they were heading out the door. And I said, “Where are you guys going?” They said, “Oh, we’re going to lunch.” I was like, “Who’s going to answer the phones?” They said, “Oh, somebody will.” No, they won’t. They just rang and like they rang and rang and rang. And so the next day they came in, and they all had schedules, like you’re at 11 o’clock, you’re at 12 o’clock, you are at one o’clock. Like it’s not complex stuff, but it needed to be done. And then we answered more phones during that hour period. And we made more money. And that created a little bit of growth. And I went into the owner’s office, and I said, “Hey, if I can grow us 20% this year and still keep double digit operating profit, can I have a raise and a promotion?” And I was asking for this raise and promotion 10 months ahead of time with a thing they’ve never achieved because they’ve been doing 7 million 4 years in a row. And he’s like sure. It’s a really easy promotion to give 10 months ahead of time. And we did. We grew 35% that first year and then 35% and then 35%. And in four years, we grew from 7 million to 25 million. And we went from 11% operating profit to 21% operating profit. And it was fantastic. It was just working the model every single day. And I’m not a creative person, so once I figure out what the model is, I just do that over and over and over again and then add people to it instead of trying to find a way to make more off of what we have, you just kind of scale up the infrastructure for what works. So that worked really well. But then in 2017, he decided to sell the business. And he came to my office, and he said, “I think I’m going to sell the business.” And I said, “Well, I think that makes a ton of a ton of sense,” because it’s easier to split a pile of money 12 ways than it is a company and he had 12 kids. Some of them were like in high school, and some of them were working in the business, and some of them weren’t. And my job was always to do what’s best for the owner. As the General Manager, I just wanted to make sure that I was looking out for him. And so, he said, “I think I’m going to sell the business.” I thought it was a great decision. A 22% operating profit for a plumbing company, that’s kind of as good as it gets. So prior- like about a year prior to that, we had a bunch of plumbing and HVAC owners come to our shop and try and learn how to do what we were doing because it was pretty abnormal for the industry, how fast we were growing. And it was a really well curated event that went three days. And at the end of the three days, those owners were supposed to give feedback to Bob for what they saw and their recommendations. Bob was the owner. And the recommendation was, you should give Trevor some equity. Like put some golden handcuffs on this kid because it’s going really well. And I didn’t even have an appreciation for what equity was at the time. I didn’t really understand it. And I was just grateful. He could have given me .0001% profit units, and I would have been like- call myself a co-owner and been so happy. But that never happened. So, whenever he came to my office and said he was going to sell, I took the opportunity to be a little frustrated. And I talked to one of my buddies who was starting a website chat company. And that website chat company was kind of in its infancy, and I was just trying to help him think about this is how I would structure it and this is kind of how I’d set up sales. And he kept on saying, “Why don’t you do this with me? Why don’t you do this with me?” And so as soon as Bob left my office that day that he said he wanted to sell, I called my friend Scott and I said, “Hey, how about we do that together?” And we went to dinner like that week. We came to terms on how we’re going to split up the company. And then I went in, and I quit the plumbing company.
Alex Bridgeman: So backing up, how did you get a job managing a grocery store at 22? Backing way up, how did that start?
Trevor Flannigan: Yeah, so that’s funny. So, backing all the way back up into undergrad, I went to Mizzou for college, even though my guidance counselor said like you can’t afford to go to Mizzou. She was right because college costs money, but you don’t know that as an 18-year-old. And I went to Mizzou anyway, and that first semester, I found out, oh my gosh, college is expensive. Student loans cover just a tiny little piece, and I needed to cover the whole piece myself. So, I got a job being a janitor. And I was a janitor for the student unions, and I was a really happy, good janitor. I worked at nights every night of the week and I cleaned up the rooms and I set up rooms for meetings the next day and I set up meetings for the Chancellor and the Vice Chancellor for all their events. And they loved me, apparently, because the Chancellor and the Vice Chancellor asked me to interview to work for them after I’d been there for a year. And I said no, I’m fine. I’d been a happy go-lucky janitor. And I even got two assistant janitors to work with me. And I was a manager at this point. I was making fine money, not anything to write home about, but it paid for school and kept me out of trouble, which was important. And they went to my boss after I told them no. And my boss said, “You’re not allowed to tell them no.” So, I begrudgingly interviewed for the position to be chairman for student organizations on campus. And I got a staff of six or seven people that worked for me. We doled out student funds to all the student organizations, including the Greek organizations on campus, and I trained people on how to write grant proposals. And it was like this weird world that I was kind of schlepped into of having some leadership and management experience right out of the gate. So then, whenever I was graduating in 2009 – that’s not a great time to be graduating school – I interviewed for a lot of jobs. And one of the jobs I interviewed for was Aldi the to be a store manager in St. Louis. And so I got the on campus interview. And then the second interview was going out to St. Louis, and the vice president came out the first day and he said, “We are not hiring any store managers. So, just get really good experience here. We want to keep good relationships up at the university. We just don’t have that position available.” And so I just did what he told me to, and I made a good experience out of it. And I was pretty pumped because they’re paying 51 cents a mile for gas and Columbia to St. Louis. I made some money off of interviewing all day. I thought this is the craziest thing. And then whenever I got back after that day, I got a call about a week later from that same vice president Paul. He said, “We were really impressed with you.” I said, “Well, awesome. I really thought you had a pretty neat operation.” And he said, “We actually think you’d make a better district manager than a store manager.” And I said, “Oh, that’s cool.” And he said, “And we don’t have that position available, either.” He said, “But I called around to all the VPs in the country, and I found a spot in Minneapolis for you. All you need to do is interview with them, and the job is yours.” And I said no, similar to not taking the job with the university. I really wanted to come back and work for Cerner in Kansas City and hang out with all my friends. So I was like, “I’m not really interested.” He said, “Well just take the interview anyway, and just see if it’s a fit. And you can make your decision from there.” And in the meantime, Cerner was kind of on a hiring freeze because they didn’t know if they’re going to get the Affordable Care contract. They do IT for healthcare systems. And so, they called me, they said, “We’re on a hiring freeze.” And so the only job that kind of made sense was to go work for Aldi up in Minneapolis, and I took the job and I just dedicated my life to becoming a subject matter expert, I suppose.
Alex Bridgeman: So within that experience, when you talked about going to a couple of different Aldi the locations that were struggling and trying to find ways to turn them around, what do you think was most commonly struggling at each of those locations?
Trevor Flannigan: Well, so that’s a great question. Back then, I did not have the appreciation for emotional intelligence that I have today. Whenever you work for a really big company, you can just slice and dice people and just get a new person in. And so, the way I turned around those organizations really early on was like fire everybody and hire all new people. Part of that’s just because I think that there’s like is it a problem with training, or is there a problem with willingness? And in really big companies, they do such a good job of force feeding training to you that most of the time if something’s underperforming, because it’s such a machine, it’s usually a people problem. And so, I felt like George Clooney from Up in the Air. I went into a district, and I just was like the Terminator. And I have like PTSD because I just like went through and just fired people nonstop. I was like- it was a hard job, but I was really good at it from the standpoint of going through the process of having the conversations and documentation and doing all the things and then hiring people very quickly that were pretty awesome. But they also had the benefit of being a very large company with a tremendous pipeline of people that wanted to work for you. And so, whenever you go into any metro, and you’re known as one of the better hirer-ers, it’s really easy to kind of use that turnaround methodology to upgrade your talent. With small businesses, you can’t do that because nobody knows who you are. And it’s really hard to get people to apply to begin with. And so, I’ve had to adapt quite a bit in moving to a smaller middle market kind of business unit. And I have so much more appreciation for emotional intelligence and kind of working with the team that you have and trying to upgrade and really kind of giving it a go to make sure that you’ve done everything possible because they haven’t been forced fed training from a corporate bureaucracy to make sure that they know what they’re doing sometimes. And you need to make sure that expectations were given and that it was clearly communicated what the expectations needed to be before they got terminated.
Alex Bridgeman: So, taking that experience and then the experience with the plumbing business and HVAC business, when you went to join your friend to start the chat business, how did you set up the systems for hiring, training, people management, and given all this other experience that you’ve had?
Trevor Flannigan: Yeah, so the chat business, when we went to dinner, Scott and I, that one night that we agreed to partner up, we said we were going to do it for two years, and we are going to grow a business to $10 million in revenue. And we came really close, which is shocking. We went from zero to 150 employees in 18 months, and we sold to Updata Partners out of DC. Our transaction took six months because nobody’s bought a chat company, and so the diligence process was pretty untenable. There were like, “What KPIs do you track?” We were like, “We track this one.” And it’s like the business was only a year and a half old. And we like changed KPIs during the diligence process. We’re like, “We look at this one now.” And they’re like, “Wait, we thought you guys said this.” So the way we grew the chat company was wild. I mean, we put the plan down. We kind of- I’m very firm on like a budgeting process from kind of like a bottoms up model. And I find that most businesses, to some degree, have conversion rate, an average sale, and a number of opportunities on the sales side, and how they kind of receive that revenue might look a little bit different. You might have an account that’s reoccurring, you might have a business that orders multiple times a year. But more or less, you can start planning your business around those three, whether it’s conversion rate, average sale, and number of opportunities or number of at bats. And so, we did a bottoms up model for what we were going to do and how we were going to get to 10 million. And it was challenging. And I come from a world where, like a plumbing background and a grocery background, where you don’t lose money on business. And the chat business was somewhat of a tech business. We had a technology that we developed with a local programming partner, Crema, that did an exceptional job for us. And we kind of had to build in the growth of being able to afford the program and be able to afford the people, and because of all of that, and we bootstrapped the whole thing ourselves, we didn’t have the ability to lose money. And so, one of the most interesting things we did, and my partner deserves all the credit for it because he’s a brilliant marketer and a brilliant salesperson and he’s just a brilliant guy, Scott Hansen’s his name, he was used to going to orthodontic conventions with his mom, because that’s what business he came up in and that’s what his mom did for a living. And he would go to these conventions. And because the orthodontist is working Monday through Friday, Monday through Thursday, when they go to the convention, they buy things. So, they’ll buy full on websites. They’ll buy massage chairs for their lobby. They’ll buy digital vendors. They’ll buy everything, and they’ll actually swipe credit cards at these conventions. You go to a plumbing convention or a chiropractor convention or a legal convention, nobody is swiping credit cards in a tradeshow booth. And so he was just so used to it, it was so foreign to him to not do that. And so right out of the gate, one of the things that we kind of modeled into our bottoms up projection was how many starts we’re going to get. And the start was the signup fee for the chat. And so, the startup fee started at something like $300 because we know free doesn’t sell. Giving people a free anything does not capture them as a customer. So, we charge a $300 startup fee, then we take that $300, and we use that on people and software and all the things that we need, and then we’d go live 45 days later with that customer. And so, nobody was really aware of the fact that their startup fee was basically the funding for our entire business model. But while we- January, we were, for simplicity’s sake, January, we probably wanted to sell like 6 accounts. And then February we’re going to sell 10 accounts. And then it was kind of like an exponential increase through the year. And by month 18, we’re selling over a hundred accounts. And our startup fee was different per vertical. So, with orthodontists and dentists and chiropractors, it might have been like $600. With home service customers, it was like $1,000. And the model still worked. It was 45 days later, we’d use all that influx of cash and we’d hire people. And towards the end, it was getting a little bit challenging. We’d actually bring in a training class of between 10 and 20 chat representatives because all of our people were here in Kansas City, and we would have to hire them up to be able to support the influx of volume that we’d have coming up. They’d go into a two week training period, where we had a full time trainer that trained them on kind of grammar expectations, how to use empathy, all the things that a good chat representative should have. And they’d take a test at the end of their first week on grammar and core values and some of the things that we expect from our people. We’d grade it and we’d give it back to them on Friday and we’d say, “You’re going to take this test at the end of your second week. If you don’t get a 95% or above, you don’t have a job here.” And then we would do that. They would take the same test at the end of their second week, and if they failed, or they got less than 95%, we did not hire them. So the 10 to 20 people that we hired would go to 5 to 15 or 12, depending on the volume that we had and based off of what we needed. And I think it was helpful because we just were very firm on the quality. All of our customers that were using our chat product had an average sale of between a thousand and ten thousand dollars. Like it was used car dealerships and plumbers and HVAC and orthodontists and legal profession, and there was just an expectation from us, because we’re part of their sales cycle, that the quality was really high, and we were unflinching in our need to deliver that. And so we would over hire to be able to wean back. It was an expensive way to do it, but we didn’t have really a whole lot of options with the numbers that we projected and what we needed to do to hit our model.
Alex Bridgeman: And when you say you went from six startup fees to over a hundred by the time 18 months rolled around, where did that growth come from? Was that a function of enough conferences or other marketing campaigns or word of mouth? Where did that growth come from?
Trevor Flannigan: It’s all of the above. We were very aggressive. I think one of the most under appreciated and underutilized pieces of being a small business is the ability to be dynamic, and you lose it, the larger your organization gets, it becomes more complicated. The hierarchy becomes kind of larger, and it’s hard to pass communications through. Wherever you’re all sitting in a room, it’s really easy to say, “Hey, let’s try this. Hey, let’s try this.” And you can share successes, and you can move so fast towards what works and stop doing what’s not. And we did an incredible job of moving fast towards the things that did well and moving away from the things that didn’t. A couple of the things that did really well for us – conferences were fantastic. We used the same model for orthodontia conferences at plumbing and dental and auto dealerships and legal conferences, which is swiping at the booths. And it was so disarming, like whenever we would go to a plumbing convention where nobody’s ever sold anything on the trade show floor in their entire life. They just hand out pamphlets, and they like call you next week. Scott, my partner, is like, “How dumb is that?” I was like, “What do you mean?” He’s like, “That’s the owner of the business. Why would they not buy our stuff right now?” I was like, “Well, that’s a good point.” And he’s like, “Let’s just ask them to buy.” That was like a novel concept. And so we just did it. And like nobody else was doing it. I had other people at tradeshow booths, they’d come up to me, like, “Did you swipe that guy’s credit card?” And I was like, “Yeah, he bought the thing that we’re selling.” It’s like, oh, wow, that’s so wild. So that was huge. And then the book Predictable Revenue was awesome for us. It basically rolls out a SaaS sales process from a SDR to an AE to a project manager. And that’s how we set up our business in that same frame. Kind of the thesis is that the same person that’s good at cold calling is not the best closer and the best person to close something is not the best person to start up an account and kind of do that project management. When you’re early in your business cycle, you have to have one person do all of that. But as the business grows, you have to kind of get away from that and flop people in to the right seat on the bus depending on their talents. Because rainmakers do not want to cold call a million people. That’s just not the way they work. They’re just not going to do it. And if that’s the only way to get a sale, you have to have- figure out how can we have somebody else do this piece and then warm transfer over to the person that’s good at locking it down.
Alex Bridgeman: We’re a half hour and we haven’t even talked about Flint. How did you eventually get to Flint?
Trevor Flannigan: Yeah, so I sold the chat business in 2018. And in 2019, I was up in Seattle and Collin and I just knew each other from being in the industry. He had done really impressive things already with Wrench Group and he’s kind of a known commodity in the plumbing, HVAC space. And whenever I was in Seattle, I asked him if he’d want to go to dinner. And so, we did dinner in early 2019. I want to say it was like March. And it was like we didn’t drink. I think he was not drinking to lose weight and I was not drinking too because I don’t think it’s right to drink by yourself. I think that that’s a really lonely thing to do. Colin says that if it was the other way around and I was not drinking to lose weight, he would have definitely been drinking beer. But I’m also the anchor on the fund ship Flint. So, we had like a four hour dinner. And we just got along so well that at the end of it, he was like, “Hey, I was going to do the Wrench thing again. Do you want to do it with me?” And I said, “Well, that’s a really interesting thing. Let me think about it.” I wasn’t working. And we talked it out. And very quickly we partnered up. And so, we launched Flint in June of 2019. We closed on our first business in July of 2019, like three days later, so we’re doing diligence and closing the fund at the same time. And even coming up with our name, I remember coming up with all the different things. Collin’s from Flint, Michigan, so that’s where the name comes from. But we’re just like- it was so scrappy at the very beginning, and it was so fun, still is. And then it’s just gone so fast. So since June of 2019, we’ve bought six companies. One didn’t quite work out. It was a smaller company that we kind of took a gamble on. We sold that for equity in a separate business outside of Flint. And then we have six companies now we’re operating inside of Flint Group, all residential plumbing, HVAC, electrical companies, no new construction. And we operate in Seattle, Portland, Houston, Boston, and Denver. Right now, we have about 600 employees across the six brands, and we do about 125 million in revenue. So, in three years, it’s just kind of like blazing fast. It’s been really, really fun. And Colin and I’ve really worked well together. And I think that’s one of the biggest surprises for both of us – you never expect partnerships to go as well as this one has.
Alex Bridgeman: Yeah, absolutely. What’s the scaling been like at the Flint level? You’ve been inside businesses that have grown and increased revenue, but maybe not through more of a private equity group where the scale is happening by adding these organizations so quickly. What’s that been like for you?
Trevor Flannigan: So we run very decentralized. Any of the businesses that we buy have a pretty large kind of- they’re larger for their market. And so, as a byproduct, they have management positions, and they have a pretty solid local management structure. And so, for a very long time, it was just me and Collin. Where started to get pinched was we raised a fund to be able to deploy the capital to buy all these companies, and just the fund management and reporting requirements and all of that, as we were continuing to buy these companies was pinching us a little bit because both of us operate in the business pretty heavily as well, just trying to hire where we can or support the companies. And so, the first position at Flint Group that we hired was a VP of Finance. Andy Thomas works here in Kansas City, and he’s our VP of Finance. He’s fantastic. And that was such a huge weight lifted from Colin and myself. So, we didn’t have to do some of that stuff and we could dig in a little bit with the companies. And then as we continued to acquire, I want to say it was in probably late 2021, we promoted our recruiter from our Portland company to our VP of People, Ashley Bacon. She’s exceptional. And she helps continue to pour into our recruiting team. We have a recruiter at each one of our portfolio companies and just kind of share best practices and help keep the recruiting flywheel running. And then we also hired a Chief of Staff. Austin Soncer works here in Kansas City. And he’s been kind of pitching in wherever is necessary. There’s always a special project. His ability to pull data and help all of our GMs at each company kind of have transparency with each other’s information has been super valuable. And Austin kind of heads a lot of that up, and there’s always a project to be working on for him.
Alex Bridgeman: That’s fantastic. I want to ask you a lot about how companies scale, but I’m first curious to hear a little bit more about the opposite. So of the companies that you’ve seen, are there any consistent themes you’ve seen for why companies don’t scale or fail to?
Trevor Flannigan: Yeah, I mean, that’s definitely a loaded question. I think what I’ve seen most recently, and I think that this is probably most relevant for your search listeners, is that I’ve seen a lot of companies that are run by a late in life seller before they kind of transition it. And those cultures are so different. The business owners get older, and they value creating a lifestyle business and they like taking vacations and they like going on a houseboat for six months and coming back to a business that hasn’t changed. I don’t think there’s anything wrong with that, but I think whenever a searcher comes into a business that doesn’t scale, it’s oftentimes because they don’t know how to run the business. And they’re taking over a business that is pretty sleepy in its own culture and its own growth. And so, if you always do what’s been done for the last 10 years, through a semi-retired owner, you’re going to get what they got as well, which is kind of slow growth and no changes if you go on vacation. And I think the best thing if you want to grow a company, or if you don’t want to take the risk of not growing and having high inflation kind of artificially push down your growth, you have to cut out that kind of sleepy culture as fast as possible because it’s so damaging. I mean, we’ve gotten a couple of companies that had that. And it’s just, it’s nuanced in the approach. It’s really hard to just kind of look and say, oh, that’s part of it, stop doing that thing. That’s part of the sleepy culture. It’s just kind of like the day to day. It’s like the amount of hours people work. It’s about the decisions they make. It’s people kind of like not being aggressive in the next move or not being aggressive on hiring. All those things kind of catch up to you. And I think that it’s definitely understated. And the faster you can cut out that kind of like sleepy culture and bring in really energized talent, the faster you can grow that business. I’m a firm believer that people grow businesses. And to that end, if you have the wrong people, they’re not going to grow your business.
Alex Bridgeman: So obviously, you can’t clean house like you might at Aldi. So how do you adjust that culture as quickly as possible without breaking too many things?
Trevor Flannigan: Yeah, I found that oftentimes even in these sleepy cultures, there’s a lot of people that are really eager for growth. I think people in general are eager. They’re not eager for change. But people like to win just as a byproduct. And so, I think one of the first things you can put in place to kind of level set what winning looks like is literally to create and find and articulate KPIs that help every person in the company know whether they won or lost for the day. And it’s so simple. But if somebody walks away from a company for the day, and they have no idea whether it was a good day or a bad day, you’re not doing your job as an operator. And so, your job is to make sure that they know what winning looks like and what losing looks like. And they want to win more. And I think that you don’t need to necessarily gut it. You just need to kind of articulate something that’s never been articulated. And the people that want to win, they’re going to step up and do more. And the people that are not interested in kind of like that kind of winning culture, they’ll probably opt out, so you won’t even have to do anything.
Alex Bridgeman: So how do you decide, how do you figure out what KPIs are most important for certain roles? I imagine, eventually, you kind of figure out as you work with enough home services businesses, you kind of know which ones to look for. But how do you kind of initially design those KPIs to help folks track what they’re working on?
Trevor Flannigan: Yeah, I think most of the time, I just ask people what their KPIs are. I think if you are being the man, and you’re telling them this is the number, that rarely is a recipe for success. I think if you ask somebody, “Hey, what is a number that you think is success in your position?” One, they know their job better than you know their job. And two, they’re probably going to give you a number that makes sense because they know their job. And so, I would just show them the mirror more so than tell them what their number is. If you say, how many listeners is success in a single podcast, you’d be able to say like, oh, it’s 3000 people or 4000 people. And then every week, I would say, hey, how many listeners do we get? And then if you said 2000, you’d be like, oh, yeah, I’m going to change this, and I’m going to change this, and I’m going to get up to 3000. And it’s as simple as that. Showing people the mirror has a huge impact in just kind of pushing them to like make the changes necessary.
Alex Bridgeman: So once you have that initial culture established and folks know their KPIs, what are kind of the next pieces for scaling home services business?
Trevor Flannigan: Yeah, so I got really good advice from a guy that’s been doing this for a long time. He runs a group that’s about five times the size of Flint. And whenever I was building out, we actually moved into five new buildings in the last 24 months with five of our companies. So, our buildings are all like 35 to 45,000 square feet now. I’d never designed out a 45,000 square foot building before, but I’m very in tune to what works and doesn’t work as far as workflows in the office translates into success in the P&L. And so, because I’ve never done it before, I asked this guy for help. And we had a Zoom, and I showed him the space. And he gave me some really, really great advice that saved us millions of dollars, I’m sure. Because he probably already made those mistakes, and I’d prefer not to make them. But at the end of our call, I asked him, what’s the best advice that you have for me? And he gave- he said, “The hardest thing to do as the owner of a business is to figure out what works, and then just keep doing that.” So there’s a tendency as a business starts to be more successful for you to think I need to be more creative, or let’s change this. And it’s like a gut punch to the success of the company. Instead of changing the thing, the formula that you know is successful, just add more people to the formula that is more successful. And that’s scale. I think that everybody thinks that as their workload decreases as an operator because things start moving the way they should as far as process and their individual workload goes down, that they need to like stick a wrench in it and try and fix something. Like do not do that. Just add people, if you can, to the thing that works really well or move and add more people to the next thing. I mean, that is scale. It is just being able to add more personnel to a working machine and make more revenue off of the same platform.
Alex Bridgeman: So what’s that look like for you? Can you walk through maybe a case study example of one formula or one aspect that’s really been working at a particular company and how you just added more people to that formula?
Trevor Flannigan: Yeah, I mean, in a very simple sense, if we come in, and there’s 10 plumbers, whenever we buy a company, usually the flywheel is like calls come into the business. We have technicians that go to the calls, run the jobs, that people have broken things. We fix those things with some kind of a sales process, which sales gets a little bit of a dirty word, but it’s more about offering options and being able to educate customers on what else they can do inside the home. If I have a master plumber inside my home, the thing that broke is not the only thing I probably want fixed. And if they give options for that, I’m going to say yes because it’s a time saver. And then continuing to train and develop our people, hiring more technicians, and then marketing for more calls. And so that flywheel can keep on spinning. And so, if there’s 10 plumbers when we start, and where I most often see it is that we’re canceling- an average plumber can run three calls a day. And if we’re canceling three calls a day or if we’re rescheduling three calls a day, that’s one plumber. So instead of just continuingly rescheduling those three calls, let’s hire one more plumber. And usually, it’s not as fine as that. Usually, it’s like we’re rescheduling 12 calls a day. And 6 of them are canceling out of the 12 because they found somebody sooner. And usually, it’s that that we can kind of hone in on. It’s like oh my gosh, let’s hire two plumbers, like let’s hire three plumbers and see if we can keep up with that. Because if you don’t, you end up kind of running the flywheel. And the easier thing to do is spend more money on marketing, and then you spend more money on marketing, and you don’t actually get the pickup in revenue because it’s the same number of bodies able to run more calls. And so, you just end up canceling more calls. And so being really in tune with where in the flywheel you need to put the resources into to make sure that you’re not kind of like spilling money out. If you over hire for plumbers and you don’t invest in training and the options and making sure you’re giving them attention, it’s going to cost you somewhere else. So being pretty in tune, and that flywheel is not all that complicated, but growing a business really isn’t all that complicated either.
Alex Bridgeman: Is there an order that makes sense that you like to do? Do you like to hire first before marketing? Or is it, like you said, it kind of depends on where you are?
Trevor Flannigan: It really depends on the business. So I think of operating these businesses or any business now that I’ve seen a variety. Also, my wife and I, we invest in some search funds on the side as well and I serve on some boards there. But any of them that I’ve seen like kind of have similar categories of business to focus on. So, there’s pricing, communication, marketing and customer journey is kind of one in my head, operations, recruitment and retention, financing and training. So, depending on the business and depending on what’s going on with it, any of those categories could be the thing that’s kind of deviating and needs a little bit more attention. And once you fix it, then you probably hop over to another category. We have a playbook, like a literal playbook, with Flint that kind of walks through each of those categories. And each one has like sub functions of is this working the way it should? Is this working the way it should? And we just focus on one or two things a quarter that we can improve on any given business. One might be working a lot more on building out their training regimen. Another one might be working on making sure their communication is tight with their employees. I firmly believe in one on ones every week with every employee and weekly meetings with every group of employees. And they might just need some structure around it. They might need to know how to run a good meeting and how to keep people’s attention. Because the other piece of that is if you’re going to have somebody come in for 15 minutes to an hour and spend one on one time with you, you better deliver value to that team member for the time that you’re taking for them. Same thing with a meeting. Like don’t have a meeting just to have a meeting. Have a plan with it, you’re bringing in 5 to 20 people to come in for a meeting to learn from you. And if you can add value, then it was successful. But the categories is just kind of like floating in between which one needs your attention and having a process for all the different functions within that is huge.
Alex Bridgeman: So a lot of those relate to sales generally. You’ve mentioned it being kind of a dirty word, but I find it really, really interesting. What are some of the most challenging pieces with the sales in terms of organizing a sales function and a team? And maybe it’s more marketing for home services; I’m not sure. But I’d love to hear a little bit more about how you think through sales broadly. And then, what are some tactics that you use?
Trevor Flannigan: Yeah, broadly, I have a lot of opinions on sales. So I see- I talked to a lot of entrepreneurs in Kansas City; I’m a part of a couple different mentoring groups as well. And so I see a lot of smaller companies that are just starting up, 5 to 15 employees. And I hear often, we don’t need a salesperson or I do most of the sales. And it always kind of gives me the cringe. Because I think that that, in my experience, once you have really good salespeople, really grows the business. I mean, sales is everything. And so, I think hiring a salesperson is awesome. So that’s step number one. But hiring two salespeople is even better. Because sales is a competition sport. And if you only have one, they’re never going to reach their critical mass. They’re never going to be able to push themselves. It’s like any kind of sport, if you’re doing it against yourself versus doing it with a competitor, you go to any of those new kind of like kitschy workout classes nowadays, like the benefit of them is that there’s a bunch of people there and you’re competing against other people. Same thing with sales, just a lot less sweat. So, I think hiring two is awesome. And then, some people say, I can’t afford sales, I can’t afford a salesperson. And it’s just not true. Salespeople should pay for themselves. That’s like the job. And so finding the right salesperson is way, way harder. And I’ve found, and it’s so fascinating to me still, that there’s a spectrum of sales. At the very far end, on one side, you have hunters that will cold call and find people and knock on doors and do whatever it takes and find the people and close the sales. On the other end, you have order takers, and depending on the sales environment of the company they’re in, they’re on one side or the other, and some of them are in the middle. But the order takers think they’re salespeople. And so if you’re looking for a salesperson to join your company, like they all have the same title. They all think they’ve done sales before, and they only know the experience that they’ve had. But if you’re a small business that doesn’t have a brand and doesn’t have an influx of people calling your business or submitting sign me up on your website, the people that are order takers are going to do very bad at that job or it’s going to be a huge learning curve for them. And so, I think being very comfortable with knowing this person might not be good for us and being able to move on from that person and rehire for the position is going to be a natural piece of building out a sales department, especially on an early stage business. Because when you find the right person, they’re going to like crush it and you are going to be like, holy cow, I wish I would have found them years ago. But it’s just they’re not falling off trees. It’s just such a huge spectrum of being able to find the right fit that is kind of able to do what you need them to do. And then beyond finding the person, what I’ve also found, and we experienced this at Professional Chats, is that your sales compensation might change, and you have to be able to change it. Because what I found is if you’re really early stage, say like in our example, you’re selling six accounts early on, well, by the end of the year, you’re selling 100 accounts or 100 new orders. If your sales plan has not changed, you’re starting to pay that salesperson like $300,000, while at the beginning, they’re making like 70. And you need to be able to have the conversations and readjust and you might lose salespeople if the conversation goes bad. But I think some operators think, well, that’s not fair. And it’s like, well, you can fair yourself out of business. I’ve seen a lot of companies fair themselves into bankruptcy. You can’t- you don’t make that much money as an organization that you can just continue to pour good money after like bad. And sometimes at the very beginning, you as the operator end up selling a lot of the accounts and doling out those commissions to a salesperson that works for you and kind of sharing in that. I think it’s such a- it makes sense. And I think it has to be something that you make a big deal out of, like, oh, I’m going to give you commission on this one that I sold. But I think it can oftentimes create really bad habits of like, oh, if I sell something, the salesperson gets it as well, gets the commission for it. So, that doesn’t make a whole lot of sense. And they’re like, yeah, we’ve just always done it that way. And so sales organizations are really important for an organization. But any important function in a business that should take a good chunk of your time to make sure that it’s set up correctly, make sure that you’re incentivizing the correct behaviors, and just pour attention and training and thoughtfulness into the roles that you have.
Alex Bridgeman: Yeah, I’d love to break down incentives here coming up shortly. But first, starting with bringing sales folks into your team. So you mentioned that spectrum for different types of salespeople. How do you identify the good ones from each end of the spectrum and the middle? And then how do you design a training program? I’d love to hear how you think through the hiring and training of good salespeople.
Trevor Flannigan: That’s a great question. I don’t have a great way to do that. With the HVAC and plumbing space, we have a process. And so we run a process and people will ultimately get sales out of it. But I would not say that I’ve done an amazing job, especially at the early stage, like with Professional Chats, of kind of developing out a sales routine. I more so hired for the people that said they could do it, similar to hiring a controller or a marketing specialist or something like that. I think good salespeople are a specialist kind of position. And I think sometimes we feel the burden of having to teach them how to do the job like we do some of the other roles in our business where this is how I used to do it. Salespeople, once you find a good one, oftentimes I had that good one train the next one because I can’t do in sales what a really good salesperson can do. That’s just not the way I’m wired. So I think just really aggressively going after and hiring the first one and then recognizing what success looks like and then just trying to replicate that one person works the best.
Alex Bridgeman: And then what’s your philosophy for incentivizing and compensation for sales teams? It seems like such a incentive driven group of the company.
Trevor Flannigan: Yeah, I think what I’ve found is that really, really good salespeople want to be fully commissioned. I mean, fully commissioned. They do not want a base. And it’s a bit of a safety net. But I’ve found that the people that are fully commissioned perform better than anybody else. Because I mean, usually, they’re going to be making more money being fully commissioned than if they had a base and a lower commission. And they just know that. So if you had a $50,000 base, and 5% commission, the person that really wants to bet on themselves, they’ll say, well, give me an 8% commission or a 9% commission and no base because they will just try and exceed every benchmark that’s been done and make it themselves. And I’ve seen it even in interviews, people are like, is this an option? And good salespeople are like- It’s like, yeah, let’s make that an option. I think good salespeople are worth their weight in gold. I think it’s such a talent to be able to sell really well and to be able to connect with a human being. I think that some people are just born with this innate ability that I just admire so much.
Alex Bridgeman: Yeah, they’re really impressive when you find a good one, that’s for sure. We haven’t talked as much about the financial side of scaling businesses. And of course, the chat business was bootstrapped. And you said you could never run at a loss. I imagine managing cash flow is a huge piece to scaling. What’s your general philosophy on scaling and how cash flows help or hinder that?
Trevor Flannigan: So, the plumbing, HVAC, and electrical space is really compelling for a lot of people that have done commercial work or construction work or new construction in the past because we get paid same day. And so we get paid today by our customer, we pay for our labor next week, and we pay for our materials in 30 days. And so, frankly, cashflow has never really been a huge concern for this business. Because it’s like negative net working capital. It’s a cash flowing machine. And I think that’s part of the reason that it’s really interesting to private equity right now because, I mean, numbers don’t lie. It’s like recession resistant, and cash flows really well. But I think that cash flow is everything. And I think nobody looks at cash flow like the owner of a business. And we’ve hired a lot of general managers that are just exceptional. We have a GM up in Seattle, Mike, that’s just, he’s amazing. And Tim is in Portland. Joe’s over in Boston; he’s been with that company for 20 years and essentially started it for the old owner, and he’s just a brilliant guy. Robert is in Houston, and we’re looking to fill the one in Denver right now. But I just think that we’ve hired all these really talented people, and none of them have had the burden of kind of managing cash flow before. A lot of them we hired away from larger companies before. And it’s so interesting, Collin and I look at it and it’s like last time Collin did this, a lot of the owners stayed around. And so, most of our owners have retired after selling their company. And nobody manages cash or expenses and overhead like an owner of a business because they’ve seen the downtimes and they know the value of it. And for most really solid operators that come out of like a Danaher or a fortune 500 company, they’re not focused on managing cash, that’s somebody else’s job. I look at cash pretty extensively because I’m really interested in what the cash can do for us long term with Flint. I mean, we raised the fund to be able to buy $100 million of revenue. We’ve kind of checked that box. But because these businesses cashflow so successfully, being able to use free cash flow and debt capacity with our EBITDA expansion is really interesting to me to be able to continue perpetually adding to the portfolio and building this thing bigger and bigger and bigger.
Alex Bridgeman: So if cashflow isn’t the constraint, and we talked about sales being, of course, a huge ingredient to scale, what other impediments to scale do you focus on and are top of mind for you on a day to day basis?
Trevor Flannigan: The biggest one is just talent. I think we’re at a unique place in our business where if you’re a call center manager or service manager of a $7 million business, you might still be the service manager whenever we’re $30 or 50 million in revenue. But the role is so different. You just have so much more responsibility and scale and people, and the job looks different as the business looks different. And so, I’m really in tune to, do we have the right people and do we have the right infrastructure at all time for the next leg of growth? And I think sometimes I see this oftentimes with some of the businesses that we buy, people get really comfortable with a certain size of business, and they kind of limit themselves to where they’re at, they don’t want to hire the next slug of managers or they don’t want to invest in a big bunch of new vehicles or move into a bigger building. And I’m really in tune to where is our next impediment to the next leg of growth. I have no interest in plateauing at the next level. And so being able to anticipate what that level is going to be and what it’s going to take to blow past it is a huge focus for me.
Alex Bridgeman: Where are you excited to see Flint Group evolve or change over the next two years?
Trevor Flannigan: A lot of our GMs are new, and I’m already seeing this, and I just think it’s really cool, they’re starting to get their sea legs underneath them now that they’ve been there for 12 months. And I’ve been saying some of the same principles of like let’s tackle this thing, and it just takes a little longer whenever it’s new for it to really settle in. And as they’re kind of getting into the routine of being able to see the same season. Again, they’re learning from what happened last year, and they’re just such great operators that they’re making better decisions than I would have ever made if I were in their shoes. And I think that’s just the coolest thing to watch.
Alex Bridgeman: That is pretty cool. I’m sure you have a whole bunch of these, but I’d love to hear what’s a strongly held belief you’ve changed your mind on?
Trevor Flannigan: I would say for that it is the value of EQ over IQ. I used to think smart people can do anything. Like if you’ve been to a big school or you’ve been working for a really large organization, you can do plumbing. That seems like a no brainer. But it’s just not true. We’ve seen it a few times with different hires that we’ve made that like the EQ is so much more important than having the IQ. Some of these companies that we buy or that we see the marketing information, some of these guys didn’t graduate from high school even, but they’re able to grow multimillion dollar super profitable organizations. And it’s because they’re so emotionally intelligent and able to work with people and be able to not only connect with the managers they had to bring in the business to grow. They’re pretty high level, but also they’re able to connect with plumbers and warehouse employees and a customer service rep to a degree that people want to work for them. And I think that EQ is so important. And I just think it’s- I wish I could put a number on it successfully on the hiring process. Because if you have high EQ, you can grow a small business.
Alex Bridgeman: What are some characteristics you’ve noticed for folks that others are really excited to work for?
Trevor Flannigan: I think the biggest one is that they’re really good listeners. And people oftentimes aren’t heard. I think Mike Soriano up in Seattle, he is such a good listener, and he’s so thoughtful, he’ll pause. Tim does the same thing. He’s in Portland. They like pause, they digest what you say, and then they like say- kind of repeat it back to you in some way or say something thoughtful back. And I’m like, man, they treat their people this way, that has to be so magnetic. And Tim came out of sales, so I expect it from him because he’s an exceptional salesperson. But seeing Mike do it too, I’m just like, man, these guys are just so cool. And whenever an installer is in a 120 degree attic, and they’re breaking their back, they’re thinking of, who am I doing this for? And if they connect with the person running that business, they’re happy to do it. If they’re like, man, that guy’s a real dickhead, I should probably look for a new job, they will. And they have the ability to go anywhere. And so I think that being able to connect with people, listen to your people, and really just like have a presence for being a great, impactful leader and trust, I think is huge.
Alex Bridgeman: Is there a piece of that in regard to EQ that you feel like you’ve had to work the most on?
Trevor Flannigan: For me personally, yeah, I mean, whenever I came out of the grocery store, I was a robot. I had all IQ, no EQ. It was like the way the business ran, it was like a machine. It was like if somebody’s not doing this, then get rid of them and hire the new person. And whenever I went to Bob Hamilton, the plumbing company, it was such a shock to me because I was like, oh, let’s just get rid of this person, and let’s hire the next one. It’s like, oh, yeah, you can’t hire plumbers because no one’s a plumber. You can’t hire a customer service rep. We don’t have a line around the door or whatever it is. And we can’t just pay goobly gobs of money for every position just to keep people in aharsh work condition because we don’t have goobly gobs of money at a small business. And so I think all of those pieces kind of come together. It’s like, oh, what can I do to kind of balance this relationship and make sure that we’re getting the most out of people through trust and respect. And if at the end of the day, they’re still not a great fit, then maybe it’s time to do the termination, but I think it puts a whole lot more burden on you as the operator to make sure that you’ve done everything possible and own some of the responsibility of their performance.
Alex Bridgeman: What’s the best business you’ve ever seen?
Trevor Flannigan: I think the best one I’ve seen lately is BUCS Analytics out of Kansas City. And it’s amazing. There’s a ton of small and medium sized businesses that have like no ability to visualize their data. And BUCS is the solution. They’ve developed a platform that kind of sucks in all the data from a multitude of different sources. And they can use all kinds of formulas to create data visualization. And we use it at Flint. It allows us to pull from our payroll provider, our intact and sage environment, QuickBooks with some of them that we’re buying and Service Titan, our ERP. And they kind of create all this stuff. I mean, we tried to roll out Domo, and this is like so much better. It’s unbelievable. So BUCS Analytics. And I think that they’re going to continue to pick up. Most of my private equity friends in the country use BUCS Analytics to do their diligence on new companies. And in doing the diligence for these new companies, usually they transition into using them at the portfolio company for data visualization. So, it’s kind of a neat business that they’re able to do kind of like that first step, which I have friends at a bunch of big accounting firms, and the diligence process that BUCS is able to do through pulling out the data and being able to slap it into reports and pull ongoing. They’re like, this is unbelievable, this is so helpful, like it’s better than what we can do with a team of auditors. And they populate meaningful reports throughout the diligence process. So that data that gets pumped in during your diligence process is updated every single night at midnight. So, it’s just fascinating. You’re not having to guess like, gosh, I hope they’re having a good month or last month of the year before we close. It’s just unbelievable. So BUCS Analytics I think definitely takes the candle for that one.
Alex Bridgeman: Is it specific to home services or is it broad industry?
Trevor Flannigan: I think we’re the only one in home service that I think uses them. They’re broad, so they work with everybody.
Alex Bridgeman: That’s amazing. I don’t know if I- I didn’t tell you earlier, but I love data businesses, and especially analytics ones like that. So anything with numbers and data is pretty exciting and interesting to me.
Trevor Flannigan: Yeah, I agree. It’s mind blowing. I’m on the search fund boards, and the amount of information in the legacy systems that some of the searchers inherit and that they still use for entirely too long, I’m like, you don’t know this, and you can’t pull this information? It’s like, no, this system sucks. And I’m like, gosh, like every single one of these companies should be having BUCS Analytics at least create their own dashboards separate because all these businesses are just so different that I just don’t know how- there’s not like a big ERP that serves every single different individual market.
Alex Bridgeman: Yeah, that’s amazing. We’re out of time, unfortunately. But thank you so much for coming on the podcast and sharing a little bit about what you’re working on. This easily could have been a couple of hours episode. One day we’ll be a Joe Rogan for small business, but not quite yet.
Trevor Flannigan: Well, I hope I didn’t bore anybody. I get pretty passionate about all this stuff. So it’s been a pleasure. And maybe I’ll come back one day.
Alex Bridgeman: I would love that. Yeah, we should definitely have you back.