How To Scale Your Contracting Business (ft. Tommy Mello)

Logan Shinholser
Hey, everyone. Welcome back to Contractor Growth Network. I’m Logan Shinholser and today we have Tommy Mello, who is the owner of A-1 garage door service. It is a national garage door repair chain that services over 16,000 homes every single month. Last year, the company did over $120 million in revenue with 25 million in EBITDA, aka bottom line. He’s also the author of books Home Service Millionaire and Elevate build a business where everyone can win. Tommy will be speaking at our new era of contracting summit on January 24 and 25th. He is high energy, so please enjoy this conversation with Tommy Mello. The first question I asked Tommy was to rank these aspects of the business in order of importance. Marketing, sales, finance, operations and hiring.

Tommy Mello
Oh, that’s tough. Obviously. I think marketing is number one by far. Marketing is basically bigger than all those combined. Marketing is your everything. Marketing is how you acquire clients. Marketing is how you hire your staff. No one will come to you. I don’t care how great your books are. I don’t care how operationally excellent you are. If you don’t have clients and you don’t have people applying to you that are a players, you don’t win. Recruiting doesn’t matter if no one knows who you are. You could be on indeed in glassdoor. Why not? You got to put it out there that great people are finding you all the time. So marketing is everything times ten. And sales are important. How to win friends and influence people. Dale Carnegie I’d say sales are number two.

Tommy Mello
Sales are super, super important that you have a high closing ratio and a high average ticket and you get five star reviews and you got great people coming. When you hire somebody, you’re actually selling them on your company. A lot of times we want them to sell us, but we got to sell them back. A players could work anywhere they want in the world, in any type of industry. So sales are number two, number three. So you got operations.

Logan Shinholser
You said hiring and finance.

Tommy Mello
Yeah. So hiring, I think, is actually a lot to do with marketing. So I’d put that under marketing. Very, very important. Recruiting a plus players, operations and finance. I think finance kind of leads to operations. It tells you when to grow or when not to grow. Financing is one of the things I didn’t have for a long time with a great CFO and a great FP and a person to kind of evaluate certain things. When we got control of our ar, when we knew we call it our known financial position, when we learned about discounting and limiting discounting and how to use finance tools and all the stuff that came out of the finance department, it actually kind of helped run the operations. I’d say marketing is by far the most sales are number two. Sales and marketing kind of fix everything.

Tommy Mello
And then I’d say your financing is going to help run operations.

Logan Shinholser
Tommy rebranded A-1 after doing $40 million in revenue. And he firmly believes that is one of the biggest reasons on why he’s going to do almost $200 million in revenue this year.

Tommy Mello
So branding is like, I actually had a guy come in two weeks ago. They saved Old spice, they saved KFC, they came up with a line for Nike, just do it. You have no idea what your brand does when it’s not right versus when it’s right. Your customer acquisition cost goes way down. People remember your name, you’ve got such a competitive advantage when you pull up to the house. People are willing to spend more money. People start applying to you when you start getting the brand dialed in, the branding should show what you do and it should be simple and it should match your website and it should match your billboards and your truck wraps and the way your buildings wrapped. What I found is I was doing 40 million when I rebranded with Dan Enshri of 200 million this year.

Tommy Mello
So everything got easier. My acquisition cost came down, conversion rate went up, average ticket went up. Like, Dan Antonelli is the best in the world at this. There’s nobody that even comes close. And people say, man, I could never spend 20 or 30 grand. I’m like, you’re going to spend that in two months on Google that you’ll save. You’re not going to get eight players, you’re not going to get the conversion rate, the average ticket, you’re not going to be remembered. And so my click through rate is like ten times higher now that people remember my brand. They might not know it off the top of their head, but when they write garage door repair, they go, oh, yeah, A-1. I’m gonna call those guys. Those guys are everywhere. Or they call a, they type in A-1 garage.

Tommy Mello
And my cost per acquisition is so far cheaper because I got the highest quality score. So the first thing you should do as a company is make sure your brand is on point with kick charge. And you should make sure that your trucks are on the website because that’s what people recognize. They see the trucks and they go, oh, yeah, those guys. It’s a game changer. It’s such a game changer. I mean, I five x and we’re going to do another five x.

Logan Shinholser
When did you know that? That was like a missing link of the puzzle, of scaling A-1.

Tommy Mello
So I worked with Al Levy, who taught us about manual, standard operating procedures, depth charts, the performance pay, how to organize your building. And he came up to me one day and said, hey, I took a picture of your truck and I put it in black and white, and I want you to tell me what you think. And I’m like, well, actually, I can’t really specifically says we’re a garage door company. But it doesn’t really pop for me. He goes, me either. And he was the one that let me know about Dan Ansanelli, that Ken Goodrich gave me the thumbs up as well with Gettleigh. And so Dan just, I just trusted the process. I didn’t give a lot of criticism because I’m not really an artistic type person.

Tommy Mello
He did a complete analysis over every market were in that we didn’t match anybody’s colors. He made sure that the brand stood out, what we did stand out, and he just made sure that we have a position to scale and that, I mean, I remember the floodgates, just people applying after that. The customer acquisition cost went down. We were able to charge a higher price. Like, that is the most important thing. Small businesses, if you’re under a few million bucks and you’re not branded correctly, and you’re like, I just don’t have the money, you need to pretend to be who you’re not today. You need to be a premium brand in your marketplace. Like, people say, I can’t afford that. You can’t afford not to do it. You can’t afford servicetitan. Like you’re going to be the cheap.

Tommy Mello
You wonder why people don’t want to buy from you, why they’re so incongruent with your brand, because you’re not. You don’t believe in yourself enough to invest in yourself. That’s, that’s the missing thing people don’t think about. Nobody buys from you because you can’t. You can’t even afford a consultant. So you wonder why customers say, I’m not really comfortable with you, I want to go shop around. It’s because they don’t buy from your brand. You don’t believe in yourself. You don’t believe in yourself enough to buy from you is the hard facts. You don’t believe in yourself to buy a new vehicle with a great wrap on it and redo your website. You don’t want to make the investment in yourself. No one else is going to do it. If you won’t do it into yourself.

Logan Shinholser
Tommy is an expert at scaling and hiring, so we asked him about finding the right team members and how to train them.

Tommy Mello
So I was just in Flagstaff at a management meeting. I had about 20 managers, market managers, and some other people there, and I spoke for 3 hours, all about a plus players. I just played a. There’s this Trump glimpse where he says the worst employee is a good employee. Bad employees get fired, great employees take you straight up. Company records, growth, profit, all the above. Good employees, they just kind of get by. They fly under the radar. They’re never really present. They didn’t get written up, but they don’t really get promoted. So a players, they build the company. They allow us to have more marketing dollars. They’re great examples. They’re handing out business cards, they’re going to b and I meetings. They’re talking to people at gas stations. They’re representing the brand and any player, if you could.

Tommy Mello
In about 2014, I had a great employee come on and I kind of. I called him every night and learned what he did, and I built a sales process, and he became kind of what I modeled the company of the technicians off of. And my great employees will do over a million dollars of revenue each, and they’ll be at 25%. So a great employee for me is going to make six figures, but deliver me $250,000 of profit. And I can tell you this, you get more five star reviews, you get less complaints, you got people that’ll pick up a weekend or a night. I mean, the opportunity is endless when you’re graded of recruiting and going and get a plus players. And here’s the deal. They’ve got a lot of options.

Tommy Mello
If you don’t have great benefits and you don’t get them motivated, and you don’t get them excited and passionate about what it’s going to do for their life and what it means for their vacations and their dream home and their kids and their wife specifically. Most of our technicians are male, so that’s why I say that if you can’t get them bought into how their life is going to get better, you’re going to be in a tough spot. We do insurance, pet insurance. We pay for a portion of their afflac. We give them a $4,000 worth of tools, PTO, 401K. We allow them to take a large vacation. I insist on that. They take a vacation. We help them dream bigger, and then we apply what their goals are to what they’re gonna make.

Tommy Mello
Not each quarter not each year, but each month and each week and each day, they’re gonna understand what they need to do today and this week to get what they want for the month, the quarter, and the year. So it’s a game changer. We do that with csRs, dispatchers, installers, maintenance technicians, product specialists, and that’s. I’ll tell you what. We got a great chart. We had a great hierarchy, and now we’re just scaling it. We nailed it. Now we’re scaling it. And employees are the lifeblood of a company. You get a plus players, you’re going to win.

Logan Shinholser
How does, like, if I’m going after a technician and A-1’s going after a technician, to me, it sounds like I got no chance because of how dialed in you are with who the employees are, what’s important to them, essentially, how. What A-1’s all about aligns with what their mission in life is all about as well. How did you come to not only learn that, but then be able to actually implement it into A-1? Because it’s easier said than done. And what you’re talking about is, like, next level in any industry, and then especially in the trades, like, I don’t know anybody else doing that.

Tommy Mello
So I read this book. Well, there’s a compound effect by Darren Hardy where he wrote down 100 things he wanted and a wife, and he wrote down this large list of all these qualities kind of manifesting. And then he read the list out loud and said, I can never get a woman like this. So he wrote down 100 things he needed to become to be worthy of such an amazing woman and the mother of his kids and his lady, his queen. And when I read that, I wrote down, I got to, like, 25 or 30 things that I would need to become to get the type of people that make myself worthy enough to be, even be in their. To be their leader. So I needed to become a better communicator. I needed to say, what’s in it for them?

Tommy Mello
And then I read this book, the dream manager, and I figured out if we could help them work on their dreams and show A-1 a tool to accomplish their dreams and give them everything they want, deeper relationships, give them a backbone, be their family man, if we could do that. And then if I could share the stories out there with people, which is marketing, people are going to hear this person was in debt, they bought a house, they got their dream Harley. They’re going on a three week vacation to Disney World, first class. I think. I think we just think about things a lot differently of what’s in it for them. And no one cares about your records. No one cares about if you hit your goals this month. There’s nothing in it for them. When you realize human beings are predictably irrational.

Tommy Mello
They care more about themselves than anybody in their families, and you could coach on that, and you could learn to motivate them on their own wants instead of your wants. It changes the dynamic of the company.

Logan Shinholser
When it comes to hiring. I know, like chick fil a, they talk about, look, everybody wants to beat us in the Super bowl, but they lost in the draft to us. And it sounds like for you, that’s a very similar mantra of, you want to take down A-1? Good luck, because we got the best people in the best programs here. When you’re hiring, talk to me a bit about how you balance the right soft skills and personalities compared to, man, we got to get this guy because he’s the best garage guy out there. Where does the soft skills versus the hard skills come into play in your hiring process?

Tommy Mello
So technicians are different than installers. Installers have to have. I want great installers. I could do four doors a day. They’re more technical. I don’t care if you could fix a garage door. In fact, I prefer that you don’t know how to fix a garage door. When you start with us as a technician, I’m looking completely at your eq, your smile, your consideration, your empathy. 55% of what we do is body language. 37% is tonality, 8% of the words we use. I don’t care if you can fix the garage door. Some of my top technicians couldn’t change their own oil. I’ll train that. I care more about your smile, your engagement, your eye contact, your empathy, your voice, if you ask great questions, if you tell a great story, and just your eye for detail. And that’s why I recruit all the time.

Tommy Mello
I’m always recruiting. And the best employees are not on, indeed, in glassdoor, and they’re not on ziprecruiter and they’re not on Craigslist. They’re not looking for a job. The average person is on social media two and a half hours a day. My avatar is on Instagram, TikTok, and Facebook. So I want somebody that already has a job and advertising to the wives of this guy spending more time at home. He’s his soccer coach for his kids. He’s spending Sunday going to church. They’re going, man, because my guys that I have, they’re not job jumpers. They’re fine with where they’re at, but if they see a better opportunity for them and their family, they’ll take it. So I think a lot of people, they go, man, nobody greats applying. You got to go get it, man. You got to go to b and I meetings.

Tommy Mello
You got to have a recruiting program, and you need to find great people that are already doing something and get them to move over to you. The best people already have jobs.

Logan Shinholser
So one of the things that you brought up earlier was about when you got your brand dialed in. It wasn’t just that you had more homeowners remembering you. It was also you had more people applying. In your mind, where is the differences or the crossover between good marketing and good hiring as far as, like, people wanting to come work for you?

Tommy Mello
You know, somebody asked me about a month ago, what’s better, Tommy Mello’s brand or A-1’s? And I’m like, man, that’s a tough one because A-1 built my brand, but I put my stuff everywhere. I get people reaching out to me on a daily basis, asking me, literally, they say, we want to come work for you. We know what kind of company you are. So I’d say matching the brand, letting people know who we are, I think hiring is more important. Like, I always tell people my marketing, for human beings to come work for us is more important than customers because you get the right person. You look, if everybody that’s listening takes their top guy versus their bottom guy, there’s probably a huge variance. What if you could stack the deck?

Tommy Mello
Let’s say you got eight technicians and the top tech’s doing 700 grand. The bottom one’s doing 300. If you had every single guy eight doing 700 grand, you literally triple the company. So that’s how important it is. I mean, people don’t understand. They’re so they make. If I was to say you got to sell your company in three months and you need top players, you’d probably make a lot of. You make a lot of drastic changes, but they’re just content. They’re like, yeah, this guy’s okay. We can work with them. He’s the best we’ve got so far. That’s just the wrong way to go about it. You need to get lean, and you need to make decisions in your company today, and you can accept second best.

Tommy Mello
If you don’t have a path to get them to a top performer in 90 days or less, you need to part ways with them, lower your marketing spend, and stack the deck, especially going into 2024.

Logan Shinholser
Now, if all this sounds too good to be true. We asked Tommy, how do you actually start to get out of the day to day of the business and start to work on the business?

Tommy Mello
So there’s a few things here. My buddy Cody, we partnered with him, he was doing 500,000. He got on servicetitan, he got the manuals from Al Levy, the seven power contractor. He got on QuickBooks, and he got rebranded. He did that all in twelve months. He went from $500,000 profit to 3.5 million. So what I recommend is, Al taught me this. Make a top 30 board, and then make a top five of what will make the biggest impact the fastest. What I recommend is taking a daily journal, one of the old school ones, and writing down your big things you need to do each day. And every time you get distracted, write it down. Great book called buy back your time by Dan Martell. You gotta get your time back. You need to learn how to delegate.

Tommy Mello
There’s eight steps of delegation, which I’ll share with you. You could send out to everybody, but learn to be a delegator and delegate more. And what you need to do is buy back as much time as you can and stop working in the business and on the business. And what I can tell you is it doesn’t happen overnight, but when you have the ability to get things done, most people know what they need to do. You know, you shouldn’t be drinking a twelve pack tonight. You know, you need to do cardio and workout. If you want a six pack, you know, you need to stay away from carbs. We know, a lot of us know what we need to do. We just don’t have. You wanted a business for freedom, to do what you want, when you want, with who you want.

Tommy Mello
You wanted flexibility, but you don’t have that in your life because you’re not grounded, you’re not disciplined, you’re not consistent. So you need to get started. Are you going to say, someday I could be like, tom, yours today, day one, I’m going to make you don’t say, I’m going to start January 1 because I got a new year’s resolution. You get started today, you say, I’m going to make the phone calls. I’m going to call Dan and Tonelli. I’m going to order the manuals from Al Levy. I’m going to become a better leader. Today is the day that I start. People with a depressed, shitty mindset. They worry about what they don’t have. They worry about things they can’t control Ukraine or Israel. I can’t control the traffic or the weather or I can’t control the taxes or Biden. I can’t control this.

Tommy Mello
They also say, this is what I have. I have my health, I have my wife, I have my kids, I have my mother. I have a roof over my head. I have a meal every day. So they focus on what they have versus what they don’t have. And then they also don’t live in the past. They focus on what they’re going to do today and going forward versus what they do. And I think a lot of people, they should have never been a business owner because they’re making 120 grand a year, but they don’t have any days off. They work seven days a week. They work nights, they work weekends. They’re sacrificing relationships. And they say, I just don’t have the money. And, well, why did you decide to be in business? Did you do this? To have this? It’s worse than a job.

Tommy Mello
When you own a business, I mean, everything falls on you. And what I would say is start making changes fast and implement quickly because if you don’t, why do you have this business? And I always ask this question, do you have a five year plan or less to sell your business? People say, I don’t want to sell. I want this business forever. Why? You don’t get to help out your employees ever. You never get. If you got an equity incentive program, you can help out a lot of people that helped you get there. And the industry is going to change a lot over the next five years. So have a goal and create real wealth for yourself and put some money in the bank. You got a $2 million EBITda company. You could get 1015 $20 million when that money is in the bank.

Tommy Mello
You just signed a non compete in that area. You go start another business wherever you want. But now you’re a millionaire. Opportunities are going to find you one.

Logan Shinholser
Of the things that you brought up. And I think this is a sticking point with a lot of people buying back your time, coming up with that list of 30 things, five things that are really going to make that big impact. I know, I’ve read buyback your time where he talks about the 80% rule. Can you talk to me about how you approach the 80% rule? I guess what it is in your mind and the impact of that when trying to scale a business.

Tommy Mello
Yeah, well, the predator role says 80 20, right? 20% of what we do actually will make the biggest impact and the top 20% of your company makes 80% of the profits. I mean, it’s almost uncertainty how this rule works. And it’s just reading between the lines and saying, I break it down into four main KPI’s. What’s your average ticket, what is your conversion rate, what is your booking rate? Or what does it cost you to acquire a customer? If I just focus on those four things and improve the percentages and the numbers, I’m going to win no matter what. I can walk into any business in the world and improve their company with those four things. And so I make it super simple. It doesn’t need to be complicated. People over complicate things in their life and they don’t know where to get started.

Tommy Mello
They don’t know what. They hate Mondays because they don’t know what they’re going to walk into. They didn’t create a system, a standard operating procedure and a checklist. Business is supposed to be mundane and boring and vanilla because everybody knows what they’re supposed to do, and it runs like a machine. Most businesses do not run that way. There’s three reasons why usually systems fail. There’s no system. It’s the wrong system or the system’s not being followed. And I think more people need to come up with a process and a system in their business than to just hope everything goes all right. You don’t have a manual, you don’t have a checklist. You don’t have any checks and balances. And I think the 80 20 rule explains it is sometimes you don’t even understand where the money’s going because they don’t even know their.

Tommy Mello
They don’t even know. They say this, I have enough money in the bank for the next month. I’m good. They don’t know what their profit margin is. They don’t know their gross profit. They don’t know their cost of goods. They don’t even know what to be working on. So you got to be good at the financials and you got to understand KPI’s.

Logan Shinholser
How does perfectionism factor into this? Do you consider yourself a perfectionist?

Tommy Mello
No. I consider myself. I’m the best I’ve ever been, but the worst I’ll ever be. I like progress better than perfection. I want improvement month over month. I want improvement. I told everybody, you don’t have to be number one. Even though my core values aspire to be number one. You need to improve on what you did yesterday. You needed to be 1% better each day and it’ll start to compound itself. I don’t. Perfection is unattainable and I want to be the best version of myself and continue to work on myself, because if you’re not working on yourself each day and you’re not spending time educating yourself, listening to books, reflecting a little bit, you’re never going to be great.

Logan Shinholser
A-1 is a national brand that operates in different markets. So we asked Tommy, how do you identify which markets should you be in?

Tommy Mello
So there’s only so much time in a day. And when you really look at a market, you say you can take a lot of factors. You can look at the population size, the average credit card score, you can look at the average real estate. You can look at how many home starts are there, new construction, and what gets measured, gets managed. And I just knew these markets, there was not a distribution center in both those markets. We didn’t really have the people that I thought could take that market to like, I need to be able to do $2 million in a market of EBITDA, which is profit, fancy word for profit. If I couldn’t get there and it was too much work I was doing milk runs with, I had to have an extra staff member.

Tommy Mello
It just tore up the profit in those markets. And weren’t failing. We were actually making a pretty healthy profit. But what if I put the time, energy, and money into another market and went from a million and a half of EBITDA to 5 million with the same effort, I could have put into one of those markets and got a 10th of the result. So sometimes you got to know how to fight your battles. And here’s the real deal, is learning to say no to things is more important than saying yes. Learning to stay. Racehorses wear blinders. They’re focused. They understand where their time and attention are going. And most people, we’re such a big company now. I’ve got more resources than we’ve ever had that we could chew gum and walk at the same time.

Tommy Mello
We’ve got a lot of, lot of projects going on simultaneously. But we just decided we’re going to attack ten markets. We’re going to make a four to $5 million EBITDA in those markets, and we’re going to still grow every other market. But two of them are really hard to get to. It wasn’t operationally sound to be in those markets.

Logan Shinholser
And when you look at that, are you emotional going, I think we can do it. Or I guess, like, where does the logic versus the emotion of, like, we’re going to make this thing work no matter what? Because, you know, we have a plan to stick to. Let’s make it happen no matter what.

Tommy Mello
Ten years ago Tommy would have said we could do anything we put our mind to. We could work through any obstacle, whether the storm new Tommy says based on data, based only certain hours in a day, based on being disciplined and keeping my head down and looking at the right data as we’re making a decision and it’s going to better off and we didn’t fail, we just went a different route, I’d say. I don’t have any qualms or negative things to say about my decision. I don’t feel bad about it. It’s not that I feel like I’m a failure. We’re moving a lot of the technicians to better markets. It was completely logical. It had nothing to do with emotion and pretty good at separating the two.

Logan Shinholser
Tommy will be speaking at the new era of contracting virtual summit. So we asked Tommy as our final question, what does the new era of scaling a contracting company look like?

Tommy Mello
Well, listen, going into this new day and age of just demand is down, inflation through the roof, there’s a lot of skepticism in the marketplace. I think you’ve got to be super disciplined. You’ve got to be a class act. You need to be great leaders, you need to be well rounded, you need to understand where your time is getting spent. If you understand those four KPI’s I mentioned earlier, most of my time goes into marketing. I need new leads and I want better people to come work for us. And so top grading is an important thing, being lean, not hiring for where we’re going to be, but hiring for where we’re at today. I think a lot of people are like, sure, we’ll grow into this, we’ll pay minimums for a while. I think marketing is where most companies are losing.

Tommy Mello
They don’t understand how to optimize their Google, my business page. They’re not getting a lot of consistent reviews. They’re not doing SEO, they’re spending $200 a month. They should be spending five, 5000 a month. They’re not looking at social media, they’re not looking at affiliate marketing. They’re not building relationships on a daily basis with potential clients that’ll spend a million dollars a year with them. So I think the newest, best companies, they’re going to have a really sound foundation on leadership and they’re going to become amazing marketers and they’re going to invest in their brand, they’re going to invest in their people and they’re going to build systems, standard operating procedures, checklists, and they’re going to put themselves out there. More success leaves clues. You got to go visit other shops. You got to get yourself out there.

Tommy Mello
You don’t have to build this business by yourself. I’ve got a good podcast. We do shop tours. If someone wants to come out, we don’t charge for them. We’re probably one of the few elite companies in the United States of America that are running the way we are, and I give it all away. But very few people take the opportunity to do these things. I’ve got a lot of people that did follow the recipe and that are making more money than they ever thought possible, and it’s right there for the taking. All you got to do is want it, and you got to act on your emotion. You got to go through with it. You got to come visit. You got to invest in your brand. You’ve got to invest in checklists and standard operating procedures and manuals and all the things I discuss.

Tommy Mello
And I think business is not easy. I’m going to be honest. Most people should not do it. I mean, if it was easy, one out of ten businesses make it through five years. If it was easy, then everybody would have a business. It’s not easy. And you’re. If everything goes right, you might get a trophy. If everything goes wrong, you’re going to get sued, you’re going to be put out of business, you’re going to go bankrupt. There’s a lot riding on you being successful, and it’s not easy. There’s a lot of pressure.

Logan Shinholser
I want to thank Tommy for coming onto the podcast today. And if you want to learn more about how to elevate and grow your business in 2024 and beyond, make sure to attend the new era of contracting virtual summit on January 24 and 25th. Go ahead. Click the link in the description to learn more about the other speakers, the schedule, and we’ll go ahead. We’ll see you on the other side.