Entrepreneurship through Acquisition: Niklas James’ Blueprint for Business Growth
Alex Hudgens: [00:00:00] Welcome to untapped with UpSmith. We’re here for another fabulous episode and Wyatt, I would love for you to introduce our guests since I’m just getting to meet him for the first time.
Wyatt Smith: Well, Alex, I’m, I’m thrilled to introduce, uh, my friend, Niklas James, who, um, is the founder managing partner of a really great investment platform that’s focused on making a big impact in the world.
Um, we got to know each other, uh, through his work as executive chairman, um, service, uh, service star in Texas. Um, which is doing really work important work in the home services industry. So Niklas, welcome to the podcast. Thank you. [00:01:00] Great to be here. We’re thrilled to, um, get a chance to like explore with you ways you’re tackling the skilled worker shortage, how you’re thinking about building valuable companies in the world, serving customers super well.
Um, our focus is in helping create value for people who are out there doing similar things. And so we’re excited to hear your story.
Niklas James: Yeah, absolutely. And, uh, it’s more prevalent now than it’s ever been before. How can you get more out of the assets that you have? And, uh, increasingly as people focus on organic growth, this is definitely a key initiative for us as well.
Wyatt Smith: That’s great. Well, we’d love to start Alex from the beginning, right?
So hearing, hearing the story,
Alex Hudgens: I could spend the entire podcast just going into your life story, but let’s at least get the first part. Uh, tell us, how did you get set on this path to where you are now? You can go all the way back to childhood if you’d like.
Niklas James: Sure. Um, well, a lot of people always ask me about my accent, so I might as well clear that out right away.
[00:02:00] I’m from Norway. Originally grew up there in a very pretty town called the banger. Um, it’s idyllic safe and as a kid, you have a lot of autonomy. Um, so that’s my background. I moved to the states in 2011 to do my MBA at the Harvard and graduate from there in 2013. Um, since then, I’ve been mostly involved in the space of, uh, acquiring and growing small businesses, and, uh, I got involved in the home services space specifically in around 2018, 2019, and eventually acquired this platform that I’m, I’m spearheading now in, uh, 2020, in which we call ServiceStar, and with ServiceStar, we have assembled 8 brands across North Texas, across HVAC and plumbing.
Thank you. And, uh, we have done obviously our fair share of M and a to grow this platform, um, and also do, uh, uh, you know, a lot of folks on organic growth. We saw that [00:03:00] 2021 and 2022 were extremely strong for organic growth in the industry. I think there were a lot of macro tailwinds supporting that. And, uh, we felt like geniuses of course, growing at a very fast pace.
Uh, 2023 saw a little bit of a pullback on the market. Uh, consumer demand was, uh, not as strong as, uh, as it had been in the past. Uh, and, uh, you know, I can give some more data and details on that, but the consequence of that, of course, is that you need to be, uh, you know, on top of your performance in order to both get out the same margin with the same amount of revenue.
And in order to convert those leads that you get, uh, because they’re more scarce than they had been before. Right. Um. And I think how this pertains or leads into workforce productivity is that, you know, we’re looking at each other going through 2023. I think we’re doing a great job. Our marketing department is doing well with generating leads and doing the best we can with the [00:04:00] marketing conditions as they are.
But as far as our margins, we’re looking at each other and you know, why aren’t they as high as they should be? We feel like our prices are where they should be. We really can’t push them much higher before we get customer pushback. Uh, we have. You know, we stay on top of our costs as best we can. It’s not something we’re oblivious to.
There’s no like one big silver bullet on the cost side to increase our profitability. And so hence the answer to increase your margins therefore has to come from productivity. How can we get more performance out of the same assets that we currently have? And of course, being in the trades. Um, but, but, you know, really your main asset is people.
So how do we get more out of that? And, uh, that really sharpened our focused on the necessity of training and really getting strong on each metric operationally in the business.
Wyatt Smith: Did you always know you wanted to be an [00:05:00] entrepreneur?
Niklas James: I do think, uh, that was always in me. Yes. Uh, my grandma apparently said that, uh, I was too obsessed with monopoly as a kid, not to go into business.
So, so that’s a kind of a family story. Um, and I’ve really enjoyed the path of doing entrepreneurship through acquisition, which is the space I’m in. And, uh, you don’t necessarily start things from the ground up, but you get to acquire stuff and, uh, Grow it from there, and that also happens to fit my skill set as I had a background in management consulting and, of course, in consulting you, you don’t start stuff from scratch, but you go in, you assess what you’re, you’re dealing with, solve bottlenecks and make incremental improvements, and that really motivates me when you can make a lot of small changes to see big impact, and it’s a skill set that you get from the generalist background that I have.
Alex Hudgens: I had this visual
Wyatt Smith: of you dominating the Monopoly board and just really. Yeah, I’m out of here
Alex Hudgens: because you [00:06:00] guys both like Monopoly. You couldn’t pay me enough to play Monopoly ever again in my life. I’m so sorry, not to mention. Both HBS grads, the consulting thing. Like I’ll just see myself out before all of the acronyms start.
Wyatt Smith: That’s why we became such fast friends.
Alex Hudgens: Yeah.
Wyatt Smith: Um, would you mind sharing Niklas’s story about one of those early acquisitions? Like how did it happen? How did it come to pass? What did you really see in the team? And that’d be really interesting for people to learn about.
Niklas James: Yes. So I have been in the space of acquiring small businesses for a handful of years.
Um, my wife took a job as an executive at Lennox in Dallas, and that really opened my eyes to the HVAC industry overall. So Lennox is of course, one of the big manufacturing companies providing HVAC equipment. And, uh, she got a pretty strategic role. And that organization in mid 2018, um, at the time I was sourcing for my next deal and [00:07:00] being in Texas, HVAC companies are abundant and, uh, I could see that it was a good fit with the, uh, the value add that you can bring strategically as more of a private equity investor.
Um, and it’s a fragmented, not so sophisticated space. I would say sophistication is dramatically improved, even since I’ve been in the space. But, but at the time, anyway, that was my impression. And, uh, I would say the industry got really, really hot from an M& A perspective during COVID, but this was actually still before that.
So I saw that opportunity to, to excel in a fragmented space. And then that fall, I connected with, uh, Gentleman called Junior. He’s still our CEO today. Um, and he had, you know, he was approaching 40. He had gotten this business to a great point. I think they were doing about 20 million of revenue, but it had stagnated a little bit, and he was mostly seeing it as a lifestyle business, and [00:08:00] he had a desire to, you know, step it up, get some partners, grow the thing, and then feel some reinvigoration.
And, uh, we just had a very good chemistry from the get go. And, uh, we were pretty creative about how we approached our partnership, which culminated in me bringing on investors to buy off a majority share of the business. Uh, for what she still holds a small minority and he runs it as the CEO day to day, and then I’ve been augmenting his skillset by bringing in my strategic background and helping with the M& A activity that we’ve done.
And, uh, that partnership continues to this day. Uh, so that’s how I got into both the space of buying businesses, uh, but more specifically into the trades and, uh, I like it, you know, I’ve done deals in software before, uh, but I really like the tangible nature of trades you, you, uh, you can really feel not only the impact of what you’re delivering to customers, but also, uh, the, the workforce is, uh, [00:09:00] you know, uh, diverse and, uh, uh, Real people and you can really sense the difference that you’re making in their lives as a good employer.
And then that’s something that is more gratifying than standalone business results can ever be.
Yeah,
Wyatt Smith: totally. I’ve had the good fortune to get to know junior also. Um, so I’ve sat across from him and I know how important trust is to him. And so I’m curious about how you built trust in that business relationship and partnership.
And what was your, what was the journey like as it relates to that effort?
Niklas James: Yeah.
Um.
Niklas James: I’m not sure I have anything groundbreaking to say there, but I think, uh, transparent communication is key to, uh, maintain integrity. Um, and I think one thing he has been very good about is being aware of his, uh, weaknesses and development areas, and then.
Ever since the start has been open about that. And then it happened to be [00:10:00] that we have pretty complimentary skill sets where why weaknesses or lack of experience is more in the direction of actually hiring and recruiting and managing a blue collar workforce. He has done that over and over. I, I don’t have direct technical experience of that.
Operating an HVAC company. I’ve learned a lot since I got started, but I didn’t have that up front, but I do have strategic experience and, uh, uh, have, have, uh, experience to see where you can take a business in two to five years if you make those investments. And, uh, I think as this was the case with junior and it happens to be the case with a lot of small business owners, they get their businesses to a.
Stage where it supports a really comfortable lifestyle and then they’re unwilling to or unable to reinvest in the business to take it to the next level and part of it is risk aversion and that they finally now make a good living. Their wife is happy. They’re taking home X because when you start a business, you [00:11:00] know, and you know, you’re, you have to be super scrappy.
Every dollar counts so much and you’re bleeding cash from a personal perspective. And then over time, you get it to the point where you can scrape by and, um, pay your bills. And that’s great when you can get your business at that point. And then after a while later, you get to the point where you’re actually living comfortably.
And you’re taking home money, you’re starting to go on vacations, and you have a good lifestyle. Uh, but that’s the point where, in order to grow to the next step, you’re You’re not stretched thin, so you really should hire more of a back office. You should hire resources and people to help take you to the company to the next level.
But, um, a lot of business owners are too comfortable at that point to do that. And I think the junior saw that and then saw, I really need a partner who can help me overcome that step. And, uh, Uh, yeah, it’s been a great partnership. Uh, we, we has to continue to have strong communication and a lot of fun working together.[00:12:00]
Wyatt Smith: That’s great. There are a lot of people I’m sure in a similar spot of thinking about, how do I build trust with my partner? How do I use that as a way to make hard decisions and change the way of working? Cause there’s a set of habits that you form over years when you’re, when you’re building things. And I think what’s really cool is, you know, you come in from a perspective of being able to help bring new ideas and, and change some of the approaches, but do so in a way that also acknowledges the things you don’t know.
And one thing that you’ve written about a lot has been how important the people investment is in these businesses, given that a lot of your costs you’re carrying are labor related. And so I’m curious about like insights you’ve developed on that topic in leading and growing trades businesses over the past few years.
Niklas James: Yeah, I’m a late convert on the people side. You know, I’ve read countless of business plans and, uh, company websites saying They are most important assets and we are so differentiated because of our people. And, [00:13:00] uh, I guess I was cynical about it because how can every single company in the world be differentiated because of their people that, that didn’t make sense to me, but, uh, I have converted around on that and, uh, increasingly see people as, uh, as a driver of, uh, performance.
Um, but also I’ve started to acknowledge the gratification elements of, uh, Managing people well and giving people opportunities and I guess when you’re younger in your career, you, you spend a lot of time trying to figure out what’s in it for me and you know, how is this rewarding for me and you get a kick out of working and consulting, you know, there’s always the next promotion and the next ladder and next milestone you can reach for, uh, but, uh, being a little later in my career now, you know, it’s, uh, It’s even more rewarding to flip the script and say, well, what’s in it for, for me, it’s actually what’s in it for, for others and the value I can deliver to them.
And I’ve also seen firsthand now that if I deliver good value to others, [00:14:00] I get rewards for that, not only emotionally, but also it’s good business. Um, so, yeah, I do write about this, uh, in my posts on linkedin quite a bit about the link between good business, good business and, uh, people management. Um, and I think it is a differentiator for an operator to be good at the people element.
Um, and it also is 1 of those areas where you can never be perfect and you can always learn more, but, uh, it’s, it’s exciting. I find a lot of joy in reading books about people management and always learning how to do that a little bit better.
Alex Hudgens: You said my favorite word, books. What are your recommendations?
Yes. Usually we do this at the end, but we can do it now. What are your book recs for our people listening, specifically who want to be better at people?
Niklas James: Yeah. Yeah. I enjoy books too. Um, I’m on a good streak here for the last couple of years, um, where I consume quite [00:15:00] a bit of it. And, uh, um, as far as like people mentioned books, I think, uh, Winning by Jack Welch.
I actually just reread it 10 years after having read it for the first time. He is extraordinary when it comes to people management and that’s, that’s his legacy more than anything. He obviously was a super successful CEO, but, uh, just how crisply he thinks about stuff like, you know, G G E would have this, you know, you have 20 percent of, uh, employees are top performers, you need to.
Invest in them, promote them, drive them forward, because they’re the ones who really drive value in your business. Then you have 70 percent of employees are, you know, You need them in order to execute the business. You need to keep them content and the most of them are pretty content where they’re at.
And then you have 10 percent that you probably want to see some favorable attrition every year. And you need to push them to where they can thrive rather than in the organization or in the role where they’re currently at and maybe not thriving. And [00:16:00] this is an uncomfortable topic, but he’s so eloquently talks about how it can be a win win.
If you can help these 10 percent even if you reposition them or or help them on their way to find something new it eventually as a win win because nobody enjoys being in a job where they’re not excelling. And so I find him to be really good on this topic. Um, another book I’m currently rereading is, uh, he was an executive at Disney, Lee Cockerell.
Um, and his book is called Creating Magic and he talks a lot about how at Disney, how they go about, uh, developing people and managing people. Um, and how they differentiate on that front. So, so those would be 2 people oriented books that I really like. Um, a 3rd book for you, Alex is, uh, I read it about a year ago.
It’s called unreasonable hospitality and, uh, that one was awesome. It’s about this restaurant operator in New York and, uh. Uh, [00:17:00] you know, he, let me just tell the long story. He, and I think it pertains to business in general, really does. Uh, so he was finally nominated to be one of the top 50 restaurants in the world and went to this gala and then before they had even sat down, the number 50 was announced and it was him and it broke his heart.
Even though he’s happy to be there, he, uh, He had hoped to be a little higher in the list. And so he sat down allegedly with his partner that night and they discussed, you know, why are we number 50? Why aren’t we, you know, top 10, what differentiates them? And they came up with every other company is, or every other restaurant is doing something very innovative.
They’re not the only best in class. They’re doing something truly groundbreaking being, you know, how they prepare food, how they serve it, how it’s sourced, how the facilities are. And. That’s when he came up with the concept of unreasonable hospitality that he wanted to innovate by being so good [00:18:00] at service, um, that that will be the number of thing that they became known for.
And lo and behold, a few years later, the restaurant 11, 11 Madison park in New York was ranked number one in the world. And, uh, because they were just outstanding on the customer service side. And I think there are a lot of things in that book for any business to borrow from.
Alex Hudgens: Ah, you’re speaking all my languages.
I actually live in New York, very close to 11 Madison Park. And if you liked Unreasonable Hospitality, you should also read Setting the Table by Danny Meyer. It’s kind of the like predecessor of that book. And I agree. It’s like, how does this apply to every aspect of my life when I don’t work in the restaurant industry at all, but it’s amazing.
Business is business. And business is personal, so it works for your personal life as well.
Wyatt Smith: I would, I would go so far as to venture also works really well in hope services. Uh, given that Niklas, well, he’s in the, he’s in the hospitality business, right? Like when his technician shows up at your home, that’s a high [00:19:00] trust environment.
You’re inviting somebody into. And I’ve heard you talk before Niklas about how, like a lot of times we don’t get coaching and training around how to be a good customer service professional, like how to help people. In the context of sales, but in the context of like getting to the right answer to solve their problem.
And so I’m curious how that book or other influences have shaped how you think about training people to be really good at consultative sales, especially in the context of being a technician, dispatching to someone’s home and providing them service. How do you think about it?
Niklas James: We’re in an industry where we don’t have to reinvent or we don’t have to invent the wheel.
And, uh, What we want to accomplish has been done by others. Um, and, uh. I think that is a big key here, and that if you can, and that to me means you can be trained to do it better. Whoever you are, you know, somebody is always doing it better because it’s a very competitive field. [00:20:00] And so if you, if you’re looking to be the number 1 restaurant in the world, you need to innovate, but if you’re looking to be top 10 percent home service companies, I think you just need to be a little bit better than the pack.
And there is the saying that. 2 percent of us share best practices, which means we do not belong to the 98 percent to lose. And I think this is true in the home service industry. A lot of our pair companies were sharing best practice, learning from each other. And I frequently visit other companies always take away so many things.
And of course, when I visit, I’ll invite them to come visit us, and I will share as much as I can about how we do it or if we do anything differently. I’m done. Uh, as one of them said, I was, I spent a half day with him in his offices visit guy, but you know, if he could only get one or two nuggets away from me that day that about how we did it, that would be worthwhile for him because he can implement those one or two items in his, in his business and that’ll take him to the next step.[00:21:00]
And having peers visit him once or twice a month, it’s effectively the best coaching and consulting he can have. ’cause he learns how others. Do it, and then he never is blinded by competitors doing it better as long as we learn from each other. Um, as far as a personal experience, what am I, you know, apart from being a paper boy as a teenager, one of my 1st job experiences was to, and this sounds like a joke from the 1950s, but I was actually selling vacuum cleaners door to door as an 18 year old.
Uh, is this in Norway? Are you in Norway? This was in Norway. I was in Norway and it was like a 3, 000 vacuum cleaner and they had like incredible financing terms, which is how we can get people to buy it. But I was commission based. I would get 10 percent commission on every sale I made. And in a busy day, I could do up to four demos.
They would take up to three hours each. So if I really cranked it in, I could get four demos into one day. [00:22:00] And, um, Um, well, where do I start? I think in the first 3 or 4 weeks I made maybe 1 sale, which wasn’t that great of a pay even 20 years ago at the age of 18 when you kind of amortize 300 across that many hours.
Right. But then. That, uh, the manager had given me a CD where they had recorded. This is what the optimal script is for you to sell. And I went from about like the 1 month mark into my 3 month summer. I went. I shifted from doing it 90 percent that way and improvising the rest to doing it 100 percent the way of the script and my call straight went up.
I did approximately 1 a day after that. And all of a sudden I was making great money for for where I was at the time. And, uh, that really taught me a lot about the importance of training and [00:23:00] scripts and, uh, Doing it to proven way and then, of course, overall, the job going into people’s homes and selling an expensive item where I literally would go and vacuum clean under their beds.
Um, that was my question a lot about psychology, you know, we would have. We would have, like, a filter in between the machine and the holes. And the filter was not white, but black, so that all the dust, which is more white in nature, was super visible. And so it’s just like, really visual. Hey, look at all this dust you have under your bed.
And very persuasive way to, to convince people. And, uh, Um, they would be so embarrassed that they just would feel like they had to buy it. So, so that was, I learned a lot, scammed a lot of people with that one.
Alex Hudgens: This is my favorite origin story yet. I was going to ask, you literally were just giving people a free house cleaning and then maybe they bought a vacuum.
That’s a great service.
Wyatt Smith: [00:24:00] Yeah. Yeah. Uh, it’d be, it’d be fun to hear about an experience you had going and being a guest of another home services company. The end. Sitting down with an operator and like learning something that you said, wow, that is a really great insight. Comparable to the, how do you show the person that Dustin or their bed to get them excited about buying your, your, your product?
Well, I’d love to hear about that experience of like a white bulb going off on a, on a visit.
Niklas James: Yeah, I, I write extensive summaries of each of my visits and, uh, a lot of data points for whatever reason, one, one thing that comes to mind as we’re talking is a, is a company I miss visited in the Midwest and their warehouse was very cleverly built in a way where.
The truck, it was a drive through warehouse, which I hadn’t seen before. And, uh, uh, so the trucks would drive in and stop and then drive on, like they wouldn’t even have to get out of the car and it was right in the middle of the warehouse and the construction was, there was a door on both sides. It was basically a road going through the warehouse and small thing, [00:25:00] really, but, uh, as a, it just is so deliberate.
And so then you build a process around that. And, uh, And you, you know, and you get cost savings based on that. That’s one that pops into mind, not the very powerful one perhaps, but honestly, I’ve been so impressed with all the companies I visited, even smaller ones, like just people being smart about how they do things and the word deliberate.
I really like, because, uh, they, they think it’s true and this is how we want to do it. And, uh, Learning from that is not always 100 percent transferable or applicable to what we do, but you just see that it’s a very cohesive process that they’ve built out. And, you know, smaller shops have less focus and resources at their disposal than bigger shops, but they can still do really clever things in their day to day.
Um, another one that we picked up on was, you know, that. [00:26:00] You know, whenever we go to a homeowner, we’ll put on, you know, the, the stuff over your boots to cover your cover your boots as you walk in and you’re very polite about polite about how you greet. But these guys have printed doormats with their logo on and they would put that down right there as they stepped in.
And it’s just clever, you know, and they could use that in their marketing and they would give them away frequently as well. And it’s just a small investment that makes a big difference. Um, we just got a. At our company, uh, one of our company’s Lions, Aaron Heath, we just rebranded, uh, so upgraded the wraps on the vehicles and whatnot.
And, uh, as part of that, we’re really enhanced. Lions is the surname of the original founder. Uh, really liked those guys a lot. And, uh, uh, they always had like a tough, cool line in their logo that looks majestic, but we actually converted that to be a very like cute looking line instead. That is more for our kids rather than a, uh, Private [00:27:00] equity firm.
And, uh, now we have a stuffed animal that we have brought this lion and we give it away to kids whenever we go to a homeowner. And it’s just a really good way to create positive feelings around the table. And, uh, uh, it’s a small investment, honestly. Right. But it makes a big difference.
Wyatt Smith: And you remember it, it gets talked about.
Yeah, exactly. That’s the goal. I think it’s talked about, how do you get these invitations? Is it a professional network? What, what leads to someone opening up their shop?
Niklas James: Yeah. Um, mostly it’s for, you know, our friends and, uh, uh, just being in the network in general. I, I’m also fairly forward leaning and asking, can I come visit?
Um, and they rarely say no when I ask, uh, but for the most part, people are really good about sharing. And many of them have come visited us. And in Dallas, um, so, so it’s a two way street, um, and you kind of learn from others who are more open to sharing and opening up their [00:28:00] doors than, than others. So, so you learn that way to, I think the hardest part is not so much them opening their doors and sharing.
It’s just actually getting time on the calendar. I mean, everyone is busy
Wyatt Smith: when, when you host and people come to visit you, do you have a routine that you walked them through? Is there a specific way that you. You host
Niklas James: yeah, I would say so I kind of give them a tour and, uh, depending on how much time we have, I paste the tour.
Accordingly, um, if I only have 90 minutes or whatever, if I dispose a little bit more in the conference room and. Discussing strategy versus if I have half a day at my disposal, I’ll do that. Walk them into a lot of the managers offices, and they wanted to tell them a little bit about what you’re working on this week and, you know, walk through the warehouses that were organized.
And so, yeah, I have, uh, if not scripted a little bit of, uh, templates that I follow when people visit, uh, but for the most part, I try to have them talk to my colleagues and not me, um, because, um, I can talk extensively [00:29:00] about our strategy and high level, but the real gems for other operators is learning those small process steps, and they can be really minute details, but they can make a big difference.
That’s awesome. That’s awesome.
Alex Hudgens: Yeah. You’re very thorough. I can already tell for one thing, when we send out our like briefing documents, say, Hey, here’s what we’re going to talk about in the podcast. You filled it out. Like you got your thoughts on paper. I’m so impressed. I need to do that more. And so I very much trust you to be a details person, even though we’re meeting for the first time.
And I would love to know, like, you’re kind of into it already, but what are some of your You know, fine point strategies or advice or recommendations for companies who are trying to increase work first productivity in the face of labor shortages specifically, because that’s what we’re up to.
Niklas James: Yeah, and again, the pretext here is that in [00:30:00] 2021 and 2022, you didn’t have to do this.
I think what I’ve heard is that nationwide, you see about 6 and a half or 6 to 7M replacements, HVAC replacements per year. Um, and that number skyrocketed to 8 to 9 million in 2021 and 2022. Why did this happen? It happened because people were sitting at home, people were investing in their homes, people were more flush on cash than they normally are, times were good.
And also a lot of people were trading homes and wanted to upgrade before they moved into their new, newly bought home. And then we call it in the industry to pull forward to demand where. A lot of the demand that would have naturally occurred in 2023 and 2024 already happened in that. Usually, when you need to change your HVAC systems as a homeowner, you like to kick the can a little bit.
You’re like, hey, can you repair it and give me another 2 year runway here? But so we saw a lot of people in 2021 who were like, I might as [00:31:00] well replace it. Now get a better system, more energy efficient and all of that. And, uh, that was great at the time, but the flip side, of course, is that they were out of the market more recently.
And so that 8 to 9 million units a year contracted significantly starting in late 2022. And so, because the market is, uh, you know, temporarily, we believe, uh, compressed. We have to then assess, okay, how do we get more out of the people that we have and the leads that we generate? And, um. I think for us, how do we increase productivity?
I think we are. Increasingly aware of how can we use technology. I think this is if you compare home service today versus 10 years ago, technology is the number 1 way in which productivity has gone up. Of course, using a dispatch system has gone from being a differentiator to being boiler plate [00:32:00] now. Um, I think a lot of companies, and us included, have experimented with how we compensate our technicians, try to make it more competitive by enabling them to earn more if they sell more, and that often sounds ravenous when you say to a homeowner that, oh, we’re, we’re commissioning our technicians, but, but, um, of course, a very, very good technician will know that They sell most if they’re very good at educating their homeowner and presenting a lot of options.
So those are the keys, educations and options. It’s not pressure or pushing that in fact repels customers. So I think they’re, it, it’s not intuitive, but there is actually a little bit of a win win by increasing commissions because they’re more motivated to spend more time with the homeowner and educate them more.
Uh,
Niklas James: just in general, more focus on training, and I think there are 2 aspects to this. I think 1 of the [00:33:00] productivity problems we had was attrition, and we’ve all heard about labor shortage, but, uh, coming into 2023, it was worse than ever, instead of losing, or in addition to losing technicians to competitors, we were losing them to Amazon and 1 went to work as a manager at a Whataburger.
It was like all over the place. And, uh, so why is this happening? That that’s, you know, of course, a question we asked ourselves, but we went into the summer season. Having issues with both quality and quantity, where normally you have at least a base team and all of that. We, we, we didn’t have as many technicians as we had budgeted.
So, coming into 2024, we are focused on both having the right quantity of technicians. And, uh, what we do in order to get quantity is that we are now recruiting students off the street. We’re pulling them through a six week program to give them all the technical training. And this now ensures that we have, you know, we’ve just graduated 2 more [00:34:00] cohorts.
Um, so we now have the labor and now the next step is, how do we get the quality? How do we get these guys? So, 2 months ago, didn’t even know what a wrench was. I mean, I’m exaggerating, obviously, but how do we get them to. Persuade homeowners to also invest in an indoor air quality product when their kid has, uh, uh, asthma, you know, and that’s that’s training and that’s quality training.
So, quantity training and quality training. I think, uh. Uh, both are important, um, and then, of course, as we have scaled as an organization where before we could rely on hiring. Superstars, and if we got 2 or 3 of them every year, we were kind of the. On a path to success now, we. Uh, we, we can’t, we’re just too big to be able to recruit word of mouth alone.
Um, we need to have more applicants come in, which is why we have this training program and when you have more, you, you, uh, you also have to have more scripts and processes. You have to standardize what you do [00:35:00] and going back to the vacuum cleaner example, we, we essentially have that CD recording now. Uh, and try to be as consistent as we can around that and consistency equals performance.
Um, and then lastly, I would say technology and the dispatch systems that are out there have really driven data. And the more data you have, the more scientific you can be about what your closing rates and conversion rates are. And, uh, figure out what are the methods that work best versus not working best.
Cause you’re able to actually measure, uh, in a way that the industry was never able to 20 years ago. Uh, now you can really measure it all the time, that booking rate and so forth. So data is a, is a big one as well.
Alex Hudgens: That was a masterclass in everything UpSmith is up to right now, everything we care about.
Wow. And I really want Whataburger now. Thank you so much.
Wyatt Smith: Um, that’s a, I mean, that’s a, that’s a very thoughtful investment of [00:36:00] resources and priorities and process. Leading change is difficult. You talk a lot about how, how important it is to communicate to people that this is the lie behind what’s going on.
Are there other techniques that you’ve seen work well in taking that strategy just laid out and implementing it?
Niklas James: So, so you mean, how do you affect change and, uh, get people on board with that? That’s right. Yeah. That’s a little bit of a work in progress, I would say. Um, and we just adopted a new technology.
Um, and you and I were discussing it wide recently, and, uh, uh, you know, we had, uh, resistance there among the technicians. Oh, yet another tool, yet another process that, you know, I have so much, uh, you know, they carry the whole company on their shoulders, you know, the technicians are in the field, generating our revenue that that’s their responsibility.
And we put a lot on them. Um, and so you, you really have to work on, um. [00:37:00] You know, educating them just like we educate the homeowners and why they should pick the highest, the highest grade systems because it eventually is better for them. Um, we have to do the same as we implement new changes with our employees.
We have to really from the ground up build the value, and that can be an iterative process. And we try not to jump on to actually procuring new technologies before we have them on board. We want them to be part of that decision making as much as possible so that they feel they had a say. Uh, with this, this latest technology, we, we did jump on it, but, uh, our technique for getting buy in is that we only bought X licenses and we have many more technicians than X.
Meaning that only a few of them, we essentially created scarcity, a scarcity around it. And, uh, so we went into the meeting when we met with all the technicians, we saw. Sold them in on, this is what it is. And then we said, we only have X licenses available. Raise your hand [00:38:00] right away if you want it. And, uh, and so we quickly got them on board.
So now we have, you know, a pilot group who are testing it. If it works out great, we will expand our use of it. And if it doesn’t, you know, our investment was more limited in the first place. So that was probably a good way to go around it because the people who are using it are very motivated now. We didn’t force it on them.
Didn’t raise their hand.
Wyatt Smith: I love the insight around. It was something that you got a chance to do, not as something that you had to, had to take on. So the op, the opt in element is pretty powerful.
Niklas James: Yeah. Opt in is a good word. Yeah. The more you can do with that, the better.
Alex Hudgens: We’re getting close to time here and we could keep you all day if you’d like to clear the rest of your schedule for us, but if not, why any, any closing thoughts on a great conversation?
Wyatt Smith: Yeah, well, it’s just, it’s really inspiring what you’re building and the chance to shape people’s lives with the work. Cause you’re creating lots of really important jobs that are builders, people that are shaping people’s lives. Safety and they’re saving [00:39:00] comfort and they’re shaping society. And that’s really cool.
I’d love to run through a couple of those lightning round questions at the end, Alex, that, uh, you’re so good at, at leading us through.
Alex Hudgens: Well, we already got into book recs. If you have any others, feel free to throw them in. I would also love, um, One of my favorite questions is if there’s anything you could tell your younger self, what would that be?
And perhaps that avatar is also maybe a business owner further back in the journey than you are currently, what would you tell him?
Niklas James: Yeah, on the book recommendation, one more on the people side. Yes.
It’s
Niklas James: called The Dream Manager by Matthew Kelly. A great book about retention rates. And, uh. As we all know, attrition is very expensive because you have to hire and retrain.
And so what can you do in order to retain more people? And I talked about this recently that our HR departments, there are [00:40:00] four things to HR. It’s admin work, recruiting, training, and retention. Sadly, most companies invest in these four from left to right, or however you’re reading my fingers on the screen there, uh, meaning they start with admin, you know, you obviously need compliance and payrolls.
I’m not saying it’s a bad place to start, but it is tactical. It’s not value add. It’s, it’s, uh, something you need to do to execute and operate. Um, and then they do recruiting and then they do training and then lastly, they’ll come around to really investing in retention. And that’s where you’ll see, you know, professional services firms are really good at this.
Um, but, you know, the real strategic value out is if you invest from right to left, meaning you start by retaining your people investor resources there, and then you go. Approach HR essentially upside down and this book I think really it’s it’s a parable. Uh, so it’s a fictitious story. Um, but that in a way narrates very well.
[00:41:00] And, uh, it was compelling. I said, I read it in 1 sitting and it was that good. So I would highly recommend that book. As far as what would I tell my former self? I think coming from Bane and HBS. Uh, generalization is something that, uh, is glorified and the whole mindset of if you’re general and you’re, you know, you have, you’re dangerous on everything that means you keep all your doors open.
And I think that makes sense when you’re 23, you’re 27 and it resonates with, you know, you haven’t had to narrow it down. You haven’t had to make the hard decision about what do I want to do when I’m when I’m older, but I do think it can limit you actually and and or or to say it. Conversely, I think specialization creates a lot of opportunities downstream and I’m noticing now the more specialized I am in my career, the more inbound flow I get and the more And not just I get from my expertise within these fields and and also it’s more gratifying [00:42:00] because I am an expert in certain fields.
I’m able to add value in ways that nobody else could versus being a generalist. And that’s you can be dangerous and everything, but you can never be, you know, lethal in the same way. So, so I think, uh, uh, for me, a specialization, a younger self, I would say, just specialize on something and do a lot of that.
Alex Hudgens: That was good. Dangerous and lethal. I’m about to turn on some like, hype music and figure out what I’m an expert in. Great. Many things you. Yes.
Wyatt Smith: Yeah. We’re, we’re grateful for your time. I mean, I think that, uh, you certainly are an expert in helping to build really great companies and getting a chance to share your insights with other people is a really cool thing.
So thanks for joining us.
Niklas James: Thank you as well. Awesome to be here.
Alex Hudgens: Awesome. Thank you. We’ll see you next time. You’re, you’re signed up for several episodes after this friend. It’s always great
Niklas James: hanging out with you guys.
[00:43:00] Outro
