Mastering Business Budgets & Insights with Lawrence Castillo

What this episode is about

Lawrence Castillo, an expert in operations and strategic planning, shares insights on effectively recruiting top talent and scaling businesses in the home service industry, drawing from his experience growing Brody Panel Heating and Air Conditioning from $7 million to $70 million in just four years. He emphasizes the importance of having a strategic plan, a dedicated recruiting budget, and comprehensive training programs to cultivate a high-performing workforce and drive company growth.

Key takeaways

• Recruiting is like dating; it’s about finding a personality match, not just technical skills.
• In a sea of 4,000 resumes, the right attitude will always rise above the rest.
• The desire to learn trumps previous experience—passion can outshine a polished resume any day.
• Great team members share stories and laughs, proving that personality is the new currency in hiring.
• Strategic training programs are the secret sauce for transforming potential into performance; everyone loves to feel chosen!

Who speaks in this episode?

• Lawrence Castillo (Guest) · 55 min speaking
• Unknown Host (Host) · 10 min speaking

What is discussed, and when

1. 0:00 – 10:00: Airtime 500, Lawrence Castillo, Clockwork Home Services
2. 10:00 – 20:00: Rocket Fuel
3. 1:00:00 – 1:04:37: Lawrence Castillo, Clockwork Home Services

Notable quotes from "Mastering Business Budgets & Insights with Lawrence Castillo"

• Expert in operations, scaling, and strategic planning. He's based out of LA. He's the president operating partner of Brody.

  about Lawrence Castillo · at 0:09

• Self-taught, right? selftaught with the aid of a couple of great mentors. I started in airtime 500 company and all of that great rich Jim Abrams stuff was at my disposal. So that was my first education. That was my freshman year of.

  about Airtime 500 · at 6:52

• Their processes through Airtime 500 and the success group and Clockwork Home Services. They've gone on to great success. And so that was my, that was how I started. I learned that stuff and then had the opportunity to be the.

  about Clockwork Home Services · at 7:54

• This idea there's this book called Rocket Fuel and it talks a lot about there's extreme visionaries and there's extreme integrators.

  about Rocket Fuel · at 16:55

Who and what is mentioned in this episode?

People

• Lawrence Castillo — Person · Main guest · 2 mentions · first at 0:06
  Primary interview subject sharing how he scales home-service businesses via recruiting, training, process, KPI discipline, and strategic planning in the LA market.

Books & papers

• Rocket Fuel — Book · Primary recommendation · 1 mention · first at 16:58
  Recommended by the host as a book that discusses the dynamics between visionaries and integrators in business.

Companies & orgs

• Brody Panel Heating and Air Conditioning — Company · Business focus · 2 mentions
  Primary company discussed in the podcast, highlighting its growth and operational strategies.
  His expertise in strategic planning, recruiting and building internal training programs, Lawrence has helped reshape multiple West Coast companies, making them leaders in their markets.
• Airtime 500 — Company · Referenced expert · 2 mentions · first at 7:01
  Mentioned as part of Lawrence Castillo's early career and education in the HVAC industry.
• Clockwork Home Services — Company · Referenced expert · 2 mentions · first at 8:00
  Cited as a company that has contributed to the success of many in the HVAC industry through its training programs.

Full transcript with timestamps

0:00 All right, guys. Welcome back to the home service expert. Long after due, we've had some technology problems, but I got Lawrence Castillo here. He's a expert in operations, scaling, and strategic planning. He's based out of LA. He's the president operating partner of Brody. Oh man, my eyes. Panel Heating and Air Conditioning Los Angeles. The most awarded HVAC company with over 25 years experience in residential HVAC and plumbing industry. Lawrence is recognized as the top operators in the field. He has driven significant growth scaling companies like Brody Panel from 7 million to 70 million in under four years. Known for his expertise in strategic planning, recruiting and building internal training programs, Lawrence has helped reshape multiple West Coast companies, making them leaders in their markets.

0:51 Hey man, pleasure to have you on. Happy to be here and uh looking forward to our conversation today. You know, this is something I'm just going to jump right into it. Um, and then we'll hear more about you. But I think that the the hardest thing to do is recruit A+ players. And I noticed in Hack Plumbing, Electrical, um, several guys do 10, 12, 14, 15 million. What do you look for? How do you build up the workforce to find the people that are just going to crush it, that want more, that want to continue to grow themselves? Because the law of the lid says, you know, you can only go as far as you're ready to go. If I talked to myself 20 years ago, I wasn't ready for the information yet.

1:40 I think that uh, you know, for us here, we bought a little company and had dreams of making it big, right? And you know, you just borrow a page from your past. And uh we did this at Service Champions, you know, some 15 years ago. Just we had a plan. We wanted to be a big company and we weren't that big. We were 10, 12, 15 million people or 10, 12, 15 million in revenue. And um so we wrote a plan and we had a recruiting budget and we built a training room and we you know built a book on how to recruit people and we would bring people in from you know wherever and and we would fill a room up of people and we were very selective and we would come out of a group of 70 people and we would choose two or three and we would do that every week and before you know it we had some training classes. So, here at Brody, we're doing the same thing. Um, just a page out of the past. What I've learned here recently is the demand for

2:42 what we are doing. It's tremendous. We we do this class four times a year, right? It's a three-month class. And this most recent class, we had almost 4,000 resumes and we took 20 people. And you know, so we are selecting people that we know that our customers, the kinds of communicators and the kinds of people that our customers will want in their homes. And that's always been the key for us. We can't, you know, we can always teach anybody how to turn a wrench, but you can't teach personality. And so we recruit for personality and then we teach for skill. And uh that's been the recipe for success for this school. Um and you know, we're in the middle of a class right now. We've strategically recruited people that we could deposit in each of our four locations. Um, you know, which geographically it, you know, it has to make sense. So, we're recruiting people for for each of the businesses, training

3:39 them up for three months here, and then we're, you know, sending them to the businesses for the next stage of their training. So, it's been a good plan for us, and uh, it's working. What would you say are the major characteristics? I'll just throw out a few. Number one, they need to believe in themselves. eye contact, tonality, smile a lot, uh some leadership skills, just being able to like have a fun story you could share and like tell me a joke, tell me what make me laugh a little bit. And like a little bit of humility and then the the the fact that they're just competitive as hell. They aspire to be number one. They're never going to be complacent.

4:15 Uh when I see this type of person, I'm like, I need them on my team. We do these classes in the evenings and on weekends, right? six o'clock, 7 o'clock at night, we're here and we open it up. You know, they these 3,500 resumes come in and we filter it down, but we invite them in. And if they have just been able to figure out a way in their lives to make it here in the evening with all the distractions that they have and all the obligations that they have in their life, if they're willing to at least come here for a chance to change their lives, that's the first step, right?

4:49 They have to have the desire. So every time we get a class of, you know, a classroom full of 50, 60 people, I congratulate them on just taking the first step because most people don't do it. It's easier to just sit on the couch and watch the game, right? So the people that do show up, you congratulate them and then we start to to filter from there and they all have an opportunity to stand up stand up and tell us their story and the stories can be compelling. You know, in this last class, we hired a kid who he lived in Hawaii and where he lived burned down and he moved here because it was the closest place to move and he knew a few people and just a really compelling story. But you're listening to him tell it and you're hearing his communication skills and his mannerisms and his engagement with everybody and you're starting to see somebody that you're like, "Yeah, that that's somebody that can be successful

5:36 in the home, right?" Um, you know, we're also looking for people that have longevity on their resume and the places that they've worked or have meaningful customer service experience, but sometimes we'll we'll roll the dice on somebody. You know, this is a panel interview and we we make the decisions together, but sometimes you just go with a feeling about somebody, right? Some of these stories are pretty sad. a lot of good people have been washed out of a good job or kicked around and and you know maybe this is the place for them.

6:07 So um you know we try to take a measured approach. We're looking for communicators. We're looking for people who um really show the desire and they really want this. They want a change in their lives. So um it's great. I I I love putting these these interview sessions on and we do it for you know in each of the four cities for all four of the locations. So, let's talk about the early days, where you came up, what's happened since then, and where are you going? Um, I'm an accidental tourist in this industry, right? This was this was not on my this was not in the plans for me and uh I just sort of stumbled into it and that was, you know, 25 years ago and self-taught, right? selftaught with the um with the aid of a couple of great mentors. Um you know, I started in airtime 500 company and and all of that great rich Jim Abrams stuff was at my disposal. So that was my first education. That was my freshman year of

7:10 uh heating and air conditioning and I really got to learn it the right way. Um and then I was fortunate enough to work for Mr. Abrams and have direct access to him. And you know, when you think about you think about great coaches in college football or pro football, guys like Parcels or Nick Sabin, and they each have this coaching tree, right? Where all of their assistants, they over the years they get an opportunity and they go find their own success, right? Nick Sabin had Lane Kein and Kirby Smart and all of these great guys. Same thing with Parcels.

7:43 And when you look at Jim Abrams, it's the same thing. so many incredible individuals that went through his training um and developed, you know, their processes through Airtime 500 and and the success group and Clockwork Home Services. They've gone on to great success. And so that was my, you know, that was how I started. I I learned that stuff and and then had the opportunity to be the general manager at Service Champions. And um you know, that was the second part of my education. And you know, I walked in the doors there and I think the epiphany for me there was process and accountability and procedure.

8:26 Walking in the door there, that place didn't look like an air conditioning company, right? At least the kind of stuff that I was ever used to. You know, I was used to an old shop with a bunch of old beat up vans and, you know, you walk in there and everything is sparkling and every there's manuals everywhere and it just it looks like you're on the 70th floor of a high-rise downtown. and I started to look at it through different eyes and um and the math part of it really became you know it played a much bigger part right I I don't think early in my career that I understood the importance of the measurement of you know Mr. Abrams taught that stuff, how to have a great balance sheet and a great P&L and what you could do to get there. But when I got to to Service Champions, I saw a different level of detail. And I think that, you know, that that measured approach helped me beyond in in the rest

9:18 of my career. um here at Brody Panel, you know, we found a a small company here and uh it was a rebuilding opportunity and you know, with a with a brand that had just been, you know, left sort of on the side of the road and hadn't been taken care of. And I think that in the last four years, we've taken that brand and we've um you know, we've given it the the love that it probably should have had over the last 79 years and we've restored it to glory and we're really happy with the the results here, right? So, it's it's been a great it's been a great career and I this industry has been so great to me, you know.

10:01 It's amazing. It's it's amazing. I um feel like I'm going to sneeze. I uh I spent a lot of time with Leland and if I had to tell you, I think there's three types of CEOs. There's the CEO that comes from a CFO background. There's the CEO that comes from a COO background, and there's a CEO that comes from a CMO background. I happen to fit way more in the marketing set. way more on how to get great people in the door to work for us and how to get great clients to buy from us and and just what does that funnel look like? Uh Leland reminds me a lot more, although I think he's a great operator. He's always looking at making sure his bottom line's 22%. It just seems like no matter what, he's always looking at the P&L. He's always looking at how do we just maintain this and he's he's brilliant at it. What would you say are some of the biggest takeaways that you've personally learned from a guy like Leland Smith?

10:58 I started there and one of the first things I started to notice was that his car was parked at the office on Saturdays and Sundays and you know I sort of it put some pressure on me, right? I felt like well if he's trusting me to run his business um the least I can do is match his effort, right? And so on Saturdays I was in there in in the operations building. He was in the accounting building. And you know when I started there, he was teaching me, right? He was walking around the parking lot taking pictures of vehicles with trash on the windshield. And he was sending those pictures to me and just trying to get me in in his cadence, right? The kinds of things that he was looking for, the kinds of thing that things that he desired. And I think we learned that we were, you know, quite similar in that respect. And so I think, you know, and as we get further down the road, I I I see a lot more of him and me and the way that I

11:57 operate the business. Um, you know, he we we met constantly as a management group because he he wanted he was involved, right? In the early years, he was involved and we would have meeting after meeting after meeting and different departments, different KPIs, where are we with this? And he was always the smartest guy in the room, right? And we would sit at these tables and the way that his mind worked, you know, he was an he was an accountant, right? And he looked at it through those eyes and he saw the stuff that we didn't see. And I think it just, you know, it made me such a better operator. but the the the math that is involved in running a successful business. Um and the relationship part of it, right? He you know he was a little softer touch probably than than people will admit to. Um his you know people always like to go to him to try to get what they wanted and he would try to point him back to to me or another

13:00 manager to to make sure that they were held accountable but everyone always liked to go to him and that never stopped over the course of the years. But um I just think process and procedure, you know, we we ran a very tight, very organized business. Some people likened it to the military and in truth it was a little bit that way. Um but the results that we got were incredible. And like you mentioned that 22%. We were higher, right? We were we were higher than that. Um because we left nothing to chance. Everything was everything was in writing. Everything was accounted for. nothing was out of place.

13:39 One of the things that I love that that Leland did well and probably still does is uh he found himself as the lowest one in the circle, people to look up to, people to share financials with. Uh he told me stories whether it was Keegan Hodgeges and some of the other guys he used to talk with. They used to have a lot of transparency. And he said, "One day I started, you know, they said, why aren't you selling insulation, the blown in insulation?" And he goes, "We don't really know what we're doing." And they said, "Just offer it." And he's like, "I'll be damned." I sold 30%. And we just subbed it out till we brought it in. And I love this idea of just this humility of saying, "Maybe we're not the best. Maybe we could learn from someone else." And that's why I do shop tours.

14:23 Last week, I did a shop tour. A month before that I was at Morris Jenkins. You know I the I don't ever think we've like we still got a lot to learn. I mean where else have you learned a lot that's helped grown you to what you're doing today? And I and I think before I answer that I think that that's the mark of a great operator, right? Is the humility um and just saying hey you know I may have a ton of success but I've I can learn from anybody out there, right? and he was always that person. Um, and still is to this day. Um, I think that I think the relationships, it's funny as you get a little further into your career, you really lean upon the relationships and and some of the the most valuable stuff that I've picked up from. It's just from those people that I've met along the way. You know, you just mentioned uh Jonathan Bankro's shop. Like so much to learn from a place like that, right? Um, you know, back in

15:24 the day, Kevin Cmerford used to come down from Service Champions North and visit us in our shop, uh, in Orange County. And, you know, he would sit across the desk from me and he would say, "Teach me something." Right? And I'd be like, "Man, what are you talking about? You teach me something." Right? like you know guys the guys who are ultra successful in our industry they're super humble and they understand that you know they can learn from everybody else. Um, for me, yeah, Leland, Abrams, um, I think today, just some of the people that I talked to, um, you know, these are folks that even here locally, small operators.

16:09 I have a I have a shop tour here today in my shop, $6 million shop in the Inland Empire, and uh, heard a couple of things they're doing that I think would be great ideas. they came to learn from us, but gosh, we end up learning from them. So, um, just so many great operators out there. I I think, you know, I I love when I have a chance to go to these events and talk to the, you know, the Paul Kelly's and the Ken Haynes and and, you know, these guys, they're just they're they're battle tested, right? They've seen it all. And, um, so I I just try to speak less and and listen more when I'm I'm in their company. So, I call those guys all the time. There's there's a lot of mentors I I look up to.

16:55 You know, this idea there's this book called Rocket Fuel and it talks a lot about there's extreme visionaries and there's extreme integrators. And I don't know this for sure because I never worked for Jim Abrams, but it seems like Terry Nicholson was his integrator. Did you work at all with Terry? And what was that relationship like between Jim and Terry? And then what was that relationship like with you underneath that? Terry was the he was the face and the momentum and and honestly, you know, at this time right now with their other venture with Practis, Terry is still out there hustling, right? I see him at these events and sit down and eat with him and and just, you know, talk about the past.

17:45 And we used to have sayings that Terry would say posted in the wall at Service Champions about how you can't hide from the numbers. And then we'd have the numbers posted on the wall. Terry was, you know, just great at getting people excited and motivated. And I think that, you know, I even to this day, I just enjoy talking to him and and you know, I think that John Young and and and Jim Abrams put together a blueprint that all of us could follow, but it was really up to Terry to get on stage and to get everybody excited about it, right?

18:22 Because John and Jim were the brains behind it, but Terry was the face. And uh Terry would get you up there and boy, he'd you know, he'd have you standing up ready to sign a check, right? So, um Terry's great. Love seeing him these days, too. And uh but yeah, he was the he was the motivating force, for sure. I spoke to a lot of people in the past that said those guys were not the easiest to work for. And I don't think any driver that's looking to grow at the pace some of us like to grow are easy to work for. Good is never good enough. I I mean I don't care, man. We're setting a record. Last week was a record week. We had a record day. Record month for sure.

19:04 And people are like, "Aren't you happy?" And I'm like, "Yes, I'm very very happy. I thank you all." And it sounds really bad. But I don't care if we're doing 10 billion. I've got bigger a bigger vision. And it's hard because I feel like the top 1% of the 1% are drivers. What are your thoughts on that with with still keeping a great culture, having a strong vision, but also being thankful? Gratitude is everything. And as I get down the road in my career here and I look around at at the people who have exited and they did so because, you know, they they just accumulated so much success in what they did. The Ken Goodriches, the Leland Smiths, right? these guys, you look back at their body of work and and you listen to them talk now because I I knew those guys when they, you know, 20 years ago when it was a different story and they were in the middle of it. But now that they're down the road, I hear I hear a

20:07 lot of gratitude in their voice, right, for all the people, even Mr. Abrams, I, you know, spoke with him recently and the very first thing that he does is thank everybody. thanks everybody that helped to to make his organization a success and he hoped that you know we were able to take that success and and grab a piece of it for ourselves. But you know I think that gratitude is underestimated and I think that the people that I run into in the industry that are in my age bracket um I think as as you get older life changes a little bit and you look back at the people who helped you know help you to get to the success that you have. So, I'm grateful every day for everybody that works for me and everybody that ever did. And I'll always lend my support and whatever I can for free. Like I said, I got a shop tour today here. Um, happy to help anybody who is looking for the help.

21:02 When you got when you started at seven and you got to 70, what were the most crucial factors in driving such rapid growth? What do you think? Obviously, hiring was a big one, but and knowing the math and really knowing your numbers, but what other things California is a tough market, especially lately, especially with the marketing side, but what were the things that really stood out to you? Um, I think that we bought a small business that had a bunch of people that had been here forever and just, you know, a lot of change was necessary and getting everyone on board for the change and to break the old habits because nothing's going to happen if they don't have an open mind to change. So, they needed to be able to step outside of their comfort zone. Um, and just open their eyes to what could possibly become. Um, I think that, you know, once we were able to do that, the first step was to let them know that we were there

22:03 to grow the business. You know, this was a business that had had 30 people for, you know, the last 10 years of its existence before we bought it. And you know in this in just Brody's location uh here in Culver City we have 180 here and you know our other locations make bring us up to about 300 but um you know we the recruiting effort was massive right they had never recruited anybody into this business um everybody had worked here forever so a school um processes uh teaching customer service you know there's no way that a 75-year-old business should have 250 reviews, right?

22:45 So, we had to and that's what it was. We bought a we bought one of the oldest companies in Los Angeles and there was no online presence, right? We had to build that. We had to tell our brand story and be proud of it. We had to we have we're bumping up against 4,000 reviews right now, which is more than anybody in Los Angeles, but that doesn't happen without a plan and a process and accountability. And we made sure that it happened. And we made sure that everybody that was in a uniform for us walking into a house every day was going to get a review. And you know, you put these processes in place and before you know it, you've got momentum and you know, here we are four years down the road and and we tacked on 65 million bucks to what we started with and um we're just still out there battling every day, you know.

23:31 And what what do you think? One of the things I I've been very I guess I I've said this a lot to a lot of people. Um have a 5-year plan or less to take some chips off the table. I think AI I think there's a lot of disruptors. I don't think there's going to be a robot fixing garage doors, doing gutters, or fixing HVAC units anytime soon. But I do think there's a lot of innovations happening and I mean I look at 10 softwares a week, not CRM, but different things to help the company out. We just implemented one yesterday. It's constant. I think we're running around 28 different softwares.

24:11 uh which sounds like I always say we're a software company that does garage doors and I think we're in the like A1 in general is in the beginning of the first inning but this mentality of man what's he going to bring on next and I've got a massive technology team that we're looking at things to give us the competitive edge but what do you think the next steps are for you as far as where do you want to take it? You know, I I think that and I was talking with uh with somebody about this recently, but I really feel like there will be a lot less overhead inside of your office here than the next few years, right? Um I think that we can, you know, and it's already happening, right? They're booking calls with AI. um you know your your your installation department. I just think that many of your inside staff um we will be able to do this in a much smarter and more efficient way. So I think our overhead will change um and

25:19 you know there's a lot of these softwares that are testing things that are just incredible. Um, so I think that for us inside staff will change. Uh, we'll be using AI a lot more. Um, as far as the field, like you said, robots aren't going to change out garage doors and and I don't see robots uh going out and doing service on air conditioners, but I really feel like the manpower of these businesses will be sliced up a little bit. and even selling over the phone. You know, this is happening, you know, that and it's happening in many people's locations, right? It's the, you know, and it's something that I'm testing here. I know that, you know, there are a lot of people that have great success with it. Um, and you know, I'm I'm an old school guy and I'm probably late to the party. Um, but I'm I'm listening and really open to it.

26:16 So just looking for ways to to have a healthy bottom line and still be able to provide great customer service. Speaking of bottom line, what is a healthy bottom line? What what would you consider this is healthy? I think that most people have no idea what a healthy bottom line looks like in heating and air conditioning. And you know, by most standards, if you're double digit, you are an achiever, right? because most companies that are out there scraping and scratching aren't hitting double digits, right? And if you're lying within 10 and 15, you are certainly doing great with your business. Um, if you're somewhere between 15 and 20, uh, you're top of the class. And if you're north of 20, you are one of the, you know, one of the best in the nation. Um, and there's a handful of companies that live in that that 20 plus range and there's a lot to learn from those folks.

27:19 And but to me, if I'm if I'm living, you know, if I'm always living north of 15, even in the down months, um, then I'm doing it right. And, you know, ideally we're we're north of 20. and you're scraping and scratching trying to make decisions. Here in Los Angeles, guess what? The next five months, the urgency is gone, right? We don't have cold weather. We don't have warm weather. We just have that beautiful 75 degree weather that everybody moves here to enjoy. And so, we have to be different. We have to be better. You know, we don't have them. We're we're not coming in here every morning to 25 or 30 furnace breakdowns, no heat calls. We don't have that in Los Angeles. So, my guys have to go out there and they have to just do a bang up customer service job and create their own urgency. And if we do that well, then we're able to, you know, keep our our bottom line where it needs to be. Um, so this is the time of the year

28:23 that you have to look at your business and just make sure that everything is um well set up for the time of the year when we have to work harder. Yeah, I know a lot of companies that are seasonal, they they just expect to lose money five, six months out of the year because they've got a lot of installers that they need during the busy season. And it's tougher because I'm not used to having a massive shoulder season. So, I'm kind of fortunate, but also my tickets are not even close to HVAC Plumbing or Electrical. I've got to run 22,000 jobs a month, soon to be 30,000 jobs a month. People are always like, they're like, "Man, if I was in garage doors, every HVAC, plumbing, electrician that I know that looked at garage doors, got into garage doors, said, "F this."

29:11 And they got out of it just as quick as they got in it. And every garage door guy I know that got into Hrek in particular got out of garage doors right away. I And I'm not kidding. It's not one, two, or 10. There's a lot of them. And I'm not saying it's easier either. I'm saying look it in a lot of ways it's harder because you got to get a specialist and it's harder to train those positions. But the ticket people always say if you could go back in time I said look the competition in window washing HVAC plumbing electrical garage doors locksmiths you name it. It's all competitive. What's the biggest ticket?

29:49 What's the largest ticket I could get? You do more of that. You need less leads. You need less bookings. You could run a much bigger company with way less people as long as you pay attention to gross profit. But you know, if you could go back in time, would you still have landed is and by the way, Humbly Electrical's almost a 200 trillion or $200 billion market cap? Uh where where garage is hovering around 14. So there's just more opportunity just based on pure revenue. But what would you if you could go back when you started, would it still be been the path you chose?

30:26 It would still be air conditioning. And and here's why. And I I stand in front of my technicians and I tell them how lucky we are to be in this industry. Because if you're installing granite countertops, it's completely aesthetic, right? And if you're if you're a landscaper putting in a a rock slide in a pool, it's these are things that impact people less than what we do because installing heating and air conditioning, it's comfort. We can affect their pocketbook by we can cut their energy bills in half, right? It's air quality, the cleanliness of the air that they breathe. It's the comfort of the home. It's your your your monthly expenditures. I mean, we can affect so much within the building envelope. And then when you add, you know, other streams uh of additional supplementary revenue, you know, attic insulation, make the home quieter, there's just there's so much within the building

31:20 envelope that we can do if we use air conditioning as our leadin. So, I'd probably stay with air conditioning. Do you have a basis of how much you like to spend a year as a percentage of revenue on marketing? So it's different for all of our businesses. We are we're fortunate at Brody we spend 4% here and you know there are some companies that are spending 8 10 15 you know up to 20%. And I think that you know for us here at Brody we had a name when we arrived here that we knew people on the west side of LA knew. just had to sort of shine it up and make them remember us. And we made them remember us through our our our reviews, right? Because tonight when you order a pizza, you're not ordering a three star pizza, you're ordering a fivestar pizza. And we just decided we wanted to have the most reviews. And we've got 4,000 fivestar reviews. And when people Google and they want someone to come service their air conditioner,

32:29 they're going to always choose the company with the most fivestar reviews. So, we decided we wanted to be that company. We are that company now. And as a result, my phone will ring just by virtue of the number of reviews that we have in our in our, you know, our review score. That helped to reduce my marketing expense significantly here. Um, you know, we have a layered approach, right? I spend a bunch on digital and and you know there's a little bit direct mail mixed in there and a couple of other things. We have some billboards. Um but I think that you know to keep it at 4% um we do some tests right it might reach as much as five or 6% but we're fortunate here in the other locations that we have um you know one of our businesses it's it's a little younger six or seven years old and uh we have to spend more there. you know, there's not as much brand recognition. So, uh, everywhere is a little different, but,

33:24 um, I think if you're spending, you know, six, seven, eight%, that's a good that's a good place to be living. What are your thoughts? And this is kind of a tough question because I think they both work. green field or acquisitions if you had to choose and and I know not every acquisition is built equally. So I know that that's a tough question but and Greenfield's hard. I feel like when you figure out Greenfield it's the it just creates so much value but there's an ROI of that too that like you got to come out of pocket more on a green field versus you get lent the money because of the EBID that already exists. you could get a multiple of that on a line of credit. So, what are your thoughts on acquisition versus Greenfield?

34:15 haven't done Greedfield and I look around at some of the people Chad Peterman like you know these guys younger guys much smarter than us older guys that have been doing this for a long time and he's doing a bunch of stuff right and I know that he's had a lot of success with that and it's you know for me it's we've it's been acquisitions um and I I'm comfortable with the acquisitions simply because I'm confident in our ability to turn a business around, right? To me, it seems like there's more lowhanging fruit to buy an older business that needs someone to change the processes and the procedures. You find out which of the people are the ones that are going to be critical mass that you want to keep and then you train the others and if they don't work out, then you just recruit more in. But to me, as somebody who spent years turning around businesses, it's a much easier path. the green field

35:11 approach. Um, it's just probably not part of our plans. Uh, but some people have great success with it, but I'm just an old turnaround guy. So, I I think I'll probably stick with the acquisitions. I I do agree with you. I think that if I were a buyer, a massive PE company, I would say I can predict Greenfield much more than I could predict the right acquisitions coming along. So, so it's to each their own. I think that's accurate. I think that in Los Angeles, what you've seen from private equity over the last five years is that, you know, there's a few groups that have come in and and just, you know, bought a lot of businesses that under normal circumstances we wouldn't have considered. And we looked at many of them and we just decided they weren't something we wanted to do. and the other groups scooped them up, right? They have a different idea of what they want to do with these businesses. And um but the

36:14 green building isn't really in Los Angeles not happening. It is not it is not anything that is happening in this market. None of the groups that have come in. This is a very unique market. Um it it's not anything like many of the other major cities, but nobody's green building. the groups have come in and they've, you know, I would say that of the, you know, the the top 20 30% of the the the reputable businesses in Los Angeles, they're gone, right? They've all been purchased. And, you know, the people that have come in are doing things quite differently. And the the the landscape is changing. you know, the the top two players in in in this marketplace, they don't look at all like they used to in the last, you know, since they've been purchased. They they've radically changed. Um, but yeah, the green fielding isn't isn't really happening here in Los Angeles, but the acquisitions, it's just it's uh you're

37:13 you hear about a new one every day. as a purchaser of a lot of companies. And don't take this the wrong way, but the last place I'd buy is California. Right along there with Washington, Chicago, New York, but California by far. Because I just had an event in California. It cost me 40% more than anywhere in the country. Literally, we've done the math. And I know for certain, and I'm not afraid of getting sued, by the way, as long as we're doing stuff HR above board, but I know there's more litigators in Southern California than the rest of the country combined, and they're calling our guys up saying, "Did they text you at home? And are you getting paid for those text messages?"

37:55 It's like they're going and finding a way to sue. and the different taxes like this new tax for the wealthy. I I heard it's 2.5% to accommodate for the homeless, which I'm all about. We just raised money for water and food for the homeless, the Justice Center here in Phoenix. I get it. I'm just saying if I was a smart business guy, I'm going to be I'm not going to be like, "Man, I can't wait to organically open up in Southern California." You know what I mean? like like there's so many more places and people say, "Well, what about Phoenix? What about Vegas?" And I'm like, "Well, you don't of course there's the weather." And I could I could literally put duct tape on the side of my truck and keep a couple guys busy in those markets, but now the cost per lead is going up. It's going up dramatically because now you're competing. People are willing to pay $400 a lead because they got a high booking rate, a high

38:49 conversion rate, and a great average ticket. So, that's driving up. I know a lot of people are like, "Man, maybe I'll go back to TV, radio, and billboards." Just because I think a lot of people set up their Google campaign for broad match and they don't even realize it, but they're paying a fortune. And then there's click fraud and everything else. But but that's I understand it's a different type of market. And if you could make it in California, I truly believe you can make it anywhere. You could have a great business pretty much anywhere if you could make it there because you got more traffic, you got pockets, you got the it it's crazy. Then you got now cloud seating which is making clouds and like now now the seasonality is hard to predict.

39:29 What are your thoughts on all that? I think that um you're right on so so much of this. You know if you if you terminate someone tomorrow in this business they're going to drive out of here and on their way home they're going to see 10 billboards from the lawyers and it's a fullscale attack. It's an allout effort and it's really it's it's so insulting as somebody who runs a business the right way, but their job is to talk to anybody and everybody who has been terminated from a business and to start to go after their wage and hour policies to start to go after like you said text message. you know, there's it's just um I'm in the middle of it a little bit, you know, and and yeah, I think everybody that I talk to that is in other places, uh including the attorneys that are part of these cases, they say that whatever we do here in Los Angeles, it's it's 10 times more than whatever it would be settled for in other states,

40:40 right? It's just the game. And it truly is a game and it affects all of us. the cost of doing business here. Workers compensation insurance is just so many companies have left here because it's it's just so expensive to operate a business here. So, uh you have to be a you know you have to be a great operator in order to have really a successful business here, right? And there there are a handful of really successful air conditioning companies um in Southern California. And you know, usually there's a great operator behind the desk. So, uh, yeah, a lot of a lot of stuff to navigate here that, you know, it it that makes it different than other places in the country, for sure.

41:20 So, it's about that time of year where if you're a great operator and you're a great business founder, you're getting pretty deep in the weeds on budgeting. I just got off a podcast with Yano Peterman, Erin Gainner, Travis Ringy was on there and we were talking about some core fundamentals of a budget, KPI driven budget. Uh we don't accept cash anymore as a company for the last few years. Uh we look at the working days in a month, although we do work Saturdays and Sundays. The we look at each month 23, 22, 21 working days. We look at a lot of different factors. Uh we're not a seasonal, but uh we look at I have a different budget than everybody else. And mine's impossible to hit. It's just what I think we could do, but it's never like how I build my bonus structures or anything. Like I want to be able to tell every person around us that we hit budget and make sure it's attainable. I put a high a higher

42:19 standard on myself than anybody. And I think that's the way I was raised. And it's okay if we fall short of the Tommy budget as long as we hit our bee hag because our we got the B hag and then we got the Tommy budget. But we got this is no matter what we have to do this then we have this and then we have this and this is the first year we said if we hit the B hag budget you'll get a double bonus. So if you make 200 grand you'll get a $400,000 bonus for the year. Uh but what are some of the tips and advice you would give I it in building a budget to make sure that it's attainable the the following year?

42:57 I think that um you know for us here we've been on a rocket ship really the last three years. You know this was a a small business that we bought and regrew it quickly. And it you really have to you have to know your business and be in it I think in order to build a good budget. You know there are some guys that have exited and you know they may be building the budget based upon the numbers that they have pulling them out of service titan or out of their sage or whatever. But I think that if you're in the business it's a different experience. I'm in my businesses, right?

43:36 I I travel each week and I'm at I'm at Brody today and I'll be here a couple days this week and I'll be at, you know, a couple of the other ones later in the week, but I'm in it and I have a good feel for the business being here and, you know, touching it every day. So, I think that the budget that I'm going to build isn't going to be just me sitting behind the desk at home looking at Service Titan. It's more than just the numbers. It's the people. it's your manpower count. It's there's just there are other things that I look at. So, um I think that if you're in the business, number one, that will help you to build uh the proper budget. Um I think you can look at things historically, but sometimes that's going to lie to you a little bit just because of we a year like this. Market sentiment is a little bit different. Los Angeles is a little bit different this year, right?

44:34 in 2024, we we weren't able to to stay on this trajectory. We we did this a little bit and but it's it's everybody here. You know, I talked to the vendors and Lennux says that they there's 15% less equipment that's been ordered and it's just it's everywhere. So I think that the the talking to your vendors, being in your business, talking to your friends in the same marketplace, I think these are the things that are going to help you to build a successful budget because otherwise you're going to put something together that it's unattainable or it's beefed up and you're going to be disappointed at the end of the year. So I think boots on the ground, you're going to have a better opportunity to do so uh to build a successful budget and to talk to your people as well. You know, I on Friday we up in our training room, I had all of our managers at a table for two hours. We bought them lunch and we just talked about the

45:32 problems that we have in the business, the solutions that we're coming up with. And if you're doing that, you really have your finger on the pulse. And I think this is the kind of stuff that we talked about Leland earlier. I learned this from him. He wasn't he wasn't out on the weekends, you know, on an airplane and no, he was in the business and that's that's what made him so great, you know. So, when you get to a certain point as an operator, you can choose to live your life one of two ways. And uh but I think if you're still in your business, you probably have a better shot of of putting together a realistic budget.

46:11 You know, one of the things that Leland discusses is the way he pushed his vendors probably beyond where they were comfortable. I've seen him on several stages. I've talked to him in person where he said, "I feel confident that nobody in the country had a better uh arrangement worked out with the vendors." And it's something that I've learned from him actually that that I push pretty hard. But instead of going, "What can you do for me?" I say, "What can we do for you first? Where do you need us to grow to? How do we get a better product mix? How do we make sure you're making the most money possible? Like this isn't a one size, one size, one side wins. Uh do you think that your purchasing power in comparison to and I can say wrench group service champions, I can say any hour, I can say there's the Apex, you know, do you think that you are able to negotiate as well as some of those guys are? Uh and how

47:06 much does that play a role? Should people be negotiating more with their vendors? They should. And um I think that so many people talk about not accepting pricing, right? Not accepting price increases. Um and I think that's a great way to live, right? You you have to look at each year separately. And as you go into every year, you know that in the first month of the year, you're going to get an email from your from your vendors that say that says, "Hey, we're going to be, you know, four to six% this year." And it's up to you whether you want to participate in that or not, right? I did learn a lot from Leland and we always had a backup vendor. And sometimes, and I remember one time that he just turned one of our main vendors off, completely shut down. You're done. we're going with these guys who was our backup. And man, like he got exactly what he wanted when he did that, right? He was he was so

48:05 good at that kind of thing. Um, so yes, have backup vendors, put people in place so that you can put the screws to one, um, you know, and get get what you want from the other. Um, that was a great a great lesson to learn. Um, I think that but this is the time of the year that, you know, we we all know what's coming at the be at the first part of the year, but we have to start talking to our vendors now and making plans otherwise it gets real expensive. It's amazing. You look at Costco, for example, they uh they were always Amex and Ax came in and said, "We got to do this." And they said, "No, you're not.

48:52 We're too big for you to do that, too. And now now it's Visa. And I think the fact is you got to be willing to walk away. I've turned off things. And the crazy thing is I don't bluff. I'm not bluffing. Like I've turned off 800 zones of Valpac for three months. I'm like, we're out. I don't need you guys. And very rarely when you get to a certain size, I I mean, look, we've got options out there. And people don't understand this art of negotiation, but it's never to put them out of business. I want them to innovate. I want them to invest in technology. I want them to invest in better machines to bring their prices down. And the idea of what I did, which was way different than Paul Kelly, I said, "I want to own one industry and get into 100 markets to get the buying power to where I mean, they cannot live without me." And then I'm getting into the home more affordable. The next step is what other lines do I bring on where

49:57 Paul's like, I own the customer. I'm going to bring them 20 lines and I'm going to own Phoenix do 300 million. And by the way, I like his approach. It's much easier to grow where you grew up, where you go to church, where you know a lot of people, where all of your contacts are. I tell people all the time, wait a minute, you want to expand, you must have a ton of market share. You must be killing it. You must be over 20% of IBIDA. You must have standard operating procedures checklist. You must have everything worked out. Or they say, "I want a franchise." And I'm like, "Wait a minute. You you suck. Your business is still in single digits."

50:30 Yeah, but I got something really special. Well, why don't you get investors? Well, nobody wants to invest in me, but if I did a franchise, they'd invest in me. I And I don't think there's one way that's wrong. Um, but I saw an industry and I said, man, if I take HVAC's approach to it and learn service agreements and learn how to offer promotions, which is financing, and we get really good. I'm still not to the point where I'm like, man, this is so great because the average ticket's just not going to be the same. And the demand isn't as high. Quite frankly, it's still high. like if you can't get out of your garage, you're calling somebody. But, uh, I'm a little bit envious still of of of HVAC, but I got to tell you, I've I've always said I've learned so much from these guys. So many people have mentored me. Uh, until they're out a little bit deeper out of the game, I just wouldn't insult them by

51:20 by doing something in a market they're in. I understand that. But, you know, we all look at you, you're doing something that, you know, you're living in our world, right? you're the the people that you've mentioned, the people that I've mentioned, these are the most successful people in the Western United States in what in what I do, right? And everybody whenever I we gather at these conferences, whenever I'm in a room with, you know, some of these guys, your name comes up constantly, right? Because you've done something that none of us are familiar with. It is a lower average ticket.

52:01 like we're looking like how do we do that, right? Because what you've done is just quite different, right? So, if you got involved, I think that you'd probably teach us all something that that we haven't seen before and we would probably all stand to benefit from it. No one's going to lose from that, right? the to have the the really sharp people um in contracting in in the air conditioning industry. We all we all stand to benefit. I'll tell you my latest kick and I know we got to get going here, but uh garage doors kind of fall not into only home service. I I'm a home service industry, right? Garage doors, it breaks, we go fix it. 60% of our revenue is made up from repair.

52:49 I can tell you that the new circle I've aligned with is home improvement and I'm amazed by Anderson Renewal and the bath remodelers and the kitchen remodelers and the windows and the way they build demand where it doesn't exist. And of course your multiple is not going to be the same because they go out and they they build demand where it doesn't exist. But I'm now everybody in this circle, this new circle, does over a billion to a billion and a half of revenue. And they do it through 300 home shows a year. They do it from door to door. They do it by crazy things. And as I learn, I'm like, whoa, outbound calls, the things they're doing, I'm like, we have a potential to 3x and not even expand. No, no green field, no just organic taking these home improvement.

53:39 And no one's ever married the two. I don't know anybody that says, "I've turned my home service industry into this home improvement." And I think garage doors is one of those unique things that kind of follows right between the line. It is home improvement, yet it's home service. And that's I always want to go to the next mountain and go to the base camp and say, "Hey guys, I'm new here. What's the best way to hike this mountain the fastest?" And for some reason, I don't know why. I think it's because I go in and I'm not like, "Guess what I'm gonna do? You guys better look out." I just go in and I say, "Hey, I I'm still learning. Uh, look, can I buy dinner for you and your whole company? I'd love to come in and just be a fly on a wall. If there's anything I could learn, come on the podcast. Do you have a book I could read?" And I just genuinely I take notes. They see and I always pay it

54:26 forward. I say, "Look, I give it up to El Levy. I give it up to Ken Hayes. I give it up to everybody that I've ever worked with that I've learned something to. I never say, "Look what we did. Look what I did." I'm like, "If I didn't learn this, if I wasn't in that room that day." And so I think it's a lot more uh people approach me in a different way when I come in very humbly and I'm like, "Look, I I still I'm just getting started here. I got so much to learn from you. How did you do it? Like this is crazy. I'm so impressed."

54:55 Sometimes you're smaller, but I don't even And I stopped talking so much about revenue. I used to walk in and be like, "How much revenue you do?" And now I'm like, look, what's your profit? You know, but that's what excites me is is going into a new category that that still is, I think, just huge because if you could do build demand wherever you want and still be all those demand calls coming in, it's the best of both worlds. The windows here in Southern California, there's there's air conditioning trucks on the road, but like the Yeah. the the bath fitter, the rebath or Anderson windows, they're everywhere. We pull up into a neighborhood to do work and they've got two trucks in the neighborhood already, right? Um property values are expensive here and a lot of these people bought these houses for, you know, $200,000 and they're worth three and a half, four million now, right? And they're taking care of the

55:50 house, right? The house is taking care of them for 30 years. Time for them to take care of the property. Anderson, they, you know, they have the market here and um but yeah, the way that they market, it's quietly, right? But they're just they're creating the demand. Like you said, it doesn't exist, but they're creating it. Uh a lot to be learned from from folks like that for sure. So, um well, listen, let let's start wrapping up here. I know you got to probably get going. What uh what's the best advice you ever got from Jim Abrams?

56:26 Uh I think maybe to test things. We you know his was a business that was built upon direct mail, right? It was all these letters and and many contractors across the country have sent those same letters for 30, 40 years on a very regular basis. And so he was very involved to see what our our success rate was with those letters. And he I think I learned, you know, he was always saying, "Test a letter. Send a very small amount out." And I had never heard that before. People were just, you know, here's $10,000 and here's $20,000. I'm going to send 50,000 pieces. He would he would say, "Pick this zip code here. Pick this zip code here. Send out a thousand letters. See what the return is. If if there's a return, then flood the market." Right? So, I think testing the mail was was something that um that wasn't in the books. It was just something that he would tell us. He would have these WebExs where all the

57:31 all the general managers from around the country were on and we would just pick up our little things. Um, I remember a one holiday, it was July 4th or Memorial Day and he he called our location in Los Angeles and he said, "Hey, it's it's Mr. Abrams. Just wanted to, you know, say happy Memorial Day to anybody who was in the office and check and see who was working today." Right? like he had all these locations and he's sitting at home dialing the numbers to all of his locations to see how many were open, how they had them staffed. Like this is why this guy had that kind of success, right? Because just like Leland on a Saturday and a Sunday, Mr. Abrams on a holiday calling his locations, this is what it takes, right? These are the boots on the ground. So these are these are the great lessons.

58:25 Is there any books that you've read that are like a must that that you think just kind of fast forward your success? I think that um Ron Smith's Hback Spells Wealth is a great book and I always um The Guide to the Successful Contractor by Mr. Abrams, which isn't available. It was only it was available way back in the day and it was only available to people that worked for his business. But it is every bit um the equal of HVAC spells wealth. But since you can only get HVAC spells wealth, that's the one. And Ron Smith was a visionary. Um everything that he talks about in that book doesn't matter if it's service agreements or your customer service uh approach or your profit and loss statement. Everything about what he talks about is gospel. And um you know there's a handful of guys that you know that really shaped the way that that that a lot of us contractors went and um HVAC spells wealth is the one

59:32 that I would recommend to anybody who's in our industry, anybody in the home service industry. I had him by the way the listeners out there. I did have Ron Smith a few years ago on the podcast. I actually ordered the CDs to Ron Smith, HX Bell's Wealth. I still have those on my bookshelf and I got the book. And what I could tell you guys is one day I was with Keegan at his house with Flores and I said, "Isn't Jim Abrams just the godfather of everything?" He goes, "No, Ron Smith is the godfather." Much older, much different time, but he started pioneering the way of how he would get people together and they'd learn from each other. And this is something that I noticed the garage door industry didn't have, but HVAC had. That's what drew me to HVAC and plumbing and H or electrical so much is I was like, they share numbers. They want to see each other win. They encourage each other to do better. The whole industry wins. And

1:00:32 that's something that 30 years after Frank Blau started doing this with George Brazil and some of the guys and Jim Abrams before that, like it's starting to catch on for some people, but very few. And the people that embrace these best practices and they get around the right people and they do shop tours and they're podcasting and they're reading books and they'll go out there today and buy Hex Bell's wealth and they'll study it. They're the ones going to grow the fastest. They're the ones that are going to appreciate it the most and they're the ones that are going to give back to the people that helped them come up. So, uh, how do people get a hold of you, Lawrence, if they want to reach out, do a shop tour or just, you know, bend your ear?

1:01:09 Um, LinkedIn. But before I before that, let me just say this. Thank you for what you do because what you just described, you know, it used to be best practices group, used to be next, it used to be uh uh Clockwork Home Services and the success group, all of that kind of stuff. And then all of a sudden there were a bunch of podcasts and that's I think when we really started to see contractors want to help each other and it changed like all of that really changed things and there were more conferences and there was just there's there's more and more and more there's so much more available now than when I started in the industry. Um, so anyway, thanks for what you do because, you know, on the back episodes of of your podcast, I've been able to go back and just like it's freebies, right? It's great advice. You're having conversations with the leaders in the industry. So, thanks because all of us,

1:02:03 you know, we we pick up this stuff and and you know, you're out there doing the hard work. So, thanks for for what you do. I can be reached on LinkedIn. Um, Lawrence Castillo, C A S T I L L O. And finally, the way I close it out, um, is there something we missed, something heavy on your mind, something you feel like the listeners got to hear right now? I'm just going to turn it over to you. You know, these podcasts are always for the contractors to listen to. And um I you know in the spirit of giving I've always I I had great mentors and that's why I do these podcasts is because anything that I have that might be of value. I'd like to share it and you know do the same thing that that that you're doing and the people that host these podcasts they're just trying to get the information out there so that other people have access to it. Um I'm always happy to help. Right. Um, you know, if I hadn't had the the exposure to the stuff

1:03:06 that Mr. Abrams or or Leland Smith had taught me, um, then the businesses that I ran would have just continued to be small businesses, you know, without much change. And because I had exposure, I was able to impact those businesses. So, I think that, you know, for the people that are out there to be able to listen to the things that we say today or listen to the things that you interview people about, it really it helps. So, um I'm always happy to help. Uh, I think that, you know, for the little contractor out there who's doing a million bucks or two million bucks and who's, you know, going to lay out a bunch of money to wrap his trucks and gonna join every best p practices group and drain his bank account, you know, because he wants to do what everybody else is doing on the podcast. They always have to remember that the people that are on these podcasts, these these are people that have 10 and 20 and $50 million shops

1:04:02 that that can afford to do these things and that sometimes when you're a small contractor, you've just got to work hard, right? You've just got to work hard and put your nose, you know, down and and and your trucks may not look great and you may not be able to afford the the fanciest computer program. Uh, and you may not be able to to fly to all the conferences, but if you work hard and recruit some people in and have some processes and procedure at

Questions about this episode

Who speaks in "Mastering Business Budgets & Insights with Lawrence Castillo"?

Lawrence Castillo (Guest), Unknown Host (Host).

What is "Mastering Business Budgets & Insights with Lawrence Castillo" about?

Lawrence Castillo, an expert in operations and strategic planning, shares insights on effectively recruiting top talent and scaling businesses in the home service industry, drawing from his experience growing Brody Panel Heating and Air Conditioning from $7 million to $70 million in just four years. He emphasizes the importance of having a strategic plan, a dedicated recruiting budget, and…

What is mentioned in this Home Service Expert episode?

5 people, works and ideas are mentioned, including Lawrence Castillo, Brody Panel Heating and Air Conditioning, Rocket Fuel, Airtime 500, Clockwork Home Services. Each one on this page links to its own page with every episode that mentions it.

How long is "Mastering Business Budgets & Insights with Lawrence Castillo"?

The episode runs 1 h 5 min; the transcript is about 11,689 words in 77 timestamped sections.

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