Dashboard: Shawn Busse and the $4,000 Hole

[Music] welcome to another 21 hats dashboard I'm here with Shan busy who is CEO and founder of Kinesis which is based in Portland Oregon and works with small businesses on marketing culture and strategy welcome back to dashboard Sean hey Lauren good to be here great to have you here as always uh Sean you recently had a post on LinkedIn that I know got a lot of Engagement I certainly enjoyed I think it was called the $44,000 hole yeah that was that was my lead in that was my hook as they say in the uh in the in the parlament of writing a a LinkedIn Post Yeah tell us about it yeah so I had the unfortunate discovery of getting a h water bill that was $1,300 and uh and I you know I went out to the street and I looked at my meter and sure enough the little the little blue dial on it was like spinning like a Mad Hatter um which if you know anything about water meter that means you've probably got a leak somewhere in your system and it's just gushing Water Somewhere um but I didn't know where it was or at least I didn't know for sure where it was and so uh it was you know time to call the plumber and figure it out and what happened so I had a pretty good idea of where the leak was because they had been doing some construction right next to the meter and um I had actually installed that water line to the house when I had built it about you know 10 years ago or so so so I had a pretty good understanding of what was going on and I was like I'm pretty sure that the construction bumped the meter which then cracked the PVC line which was the supply to the house and so I'm talking to the plumber who comes out and and you know I used Google to find this plumber I didn't use Word of Mouth which I probably should have but I was just sort of desperate um to find somebody and you know they had good reviews and they were a small outfit uh so I was like all right this this seems reasonable I I wanted to avoid like the really big shops um that many of which are kind of owned by kind of outside interests these days so anyway he gets out there and says oh well you don't really want to pay me to figure out where the leak is um if you know it's there's 100 feet of pipe between here and the house you got to call leak detection company I was like okay all right so he charges me $90 for that advice wait did you call him up and say I have a water leak yeah good question so I did and and this is kind of where their system breaks down to begin with is they didn't do any kind of diagnosis over the phone um you know because if I had had a conversation with somebody who knew what they were doing they could have told me oh we we're a plumbing company you need a leak detection company that's a different type of business um so I had to pay for him to come out there and to tell me to hire a leak detection company And So It Begins you know and you know good advice is priceless you know so uh sure enough the leak detection company I called I I called one that my friend recommended and they were great um if do you know anything about Leak Detection Lauren I mean I did not know that leak detection companies existed it's a thing no and let me tell you if I ever start another business I'm gonna start a leak detection business it it is brilliant so they charge you a fixed price they charged me $400 and for that $400 they promised they would find the leak within a three foot diameter circle and sure enough they delivered on that promise they they filled the system with with uh inert gas and then the guy walks around with this really sensitive microphone and headset and listens for the leak um wow yeah yeah it's really cool um and I guess they have all kinds of Tricks depending on the situation but uh they found the leak you know within probably uh 45 minutes or so maybe an hour or two um you know kind of full the full amount of time was probably a two-hour visit um and he puts a flag in the ground says here's where the leak is I think and then he draws a three-foot circle and says you know it's probably two to three feet down I was like not only did he tell me where it was he told me how far down it was on the ground so it's like it's kind of like magic you know yeah yeah so so anyway if anybody's listening and they ever have a leak and they don't know where it is you want to call a leak detection company so anyway to make the short story longer um the plumber comes back out we know where the the leak is now it's it's in the ground same plumber same plumber I called the same plumber comes back out I said yep sure enough it's actually it's within I would say five feet of where I thought it would be so in his defense I probably didn't want to have him pay I didn't want to pay him to dig up you know eight feet of of line you know so it probably made sense to call the leak detection company so you know I show him where it's at he's like oh let me go back to my van and I'll work up an estimate for you and okay great right I I don't think it's that complex of a thing but whatever I go back I go back and really just so everybody understands here's the scope of work he has to dig a hole probably two or three feet in diameter about 2 and 1/2t and at the bottom of this hole is going to be PVC pipe if you know what PVC pipe is like it is really easy to repair uh you're gonna you're gonna repair a PVC ably broken Junction as would be my guess so that's the scope of work I I get back I go go back outside and he gives me a quote and it's for $3,800 to dig this hole uh and fix this PVC pipe and I was just like I immediately like my dinosaur brain gets fired off and I'm just like what the f I mean I'm just like so like just how does he explain that oh you could tell like right away you know he knew he was dealing with a customer that wasn't an idiot you know or or wasn't ignorant of what was going on because I'm like what are you talking about this is this is really straightforward and and then the funniest part was right next to us there's a landscaping crew um working on the landscaping and they're like digging holes they're like literally digging holes and I said to him so basically what you're telling me is I'm paying you your plumbing rates to dig a hole and he's like well this is what the computer told me at charges and and you know maybe we could talk to the main office and I'm just like no no no no why are you why are we having you dig this hole like this should this should be done by you know labor it should be done by these guys and I point to the landscapers and he's like well you know we don't have any apprentices but we're gonna get some next year and and and then I'm getting even more pissed because I'm like oh so now you're making your Workforce problem my problem so right anyway at the end of the day I just like I just walked I literally walked away from him I like I couldn't I couldn't even talk to him any further because I was like this this is insane and uh yeah you didn't engage him no no no did you get charged for a second visit I did not get charged for a second visit I also did not receive a call from the company you know I didn't get I didn't get a call from the owner trying to like sort things out or any so that's an interesting thing too and that he was not an owner he was a he was a an employee so that's an interesting kind of piece about their process too so they're not getting any kind of feedback on how this whole thing went um yeah so what happens then well so I still had a leaking pipe right so um I I do what I should have done in the first place I go to one of the contractors working on the site I said hey you know John do you have a plumber he's like here here's two guys he sends me guys that I can call I call them they're super responsive and you know the one the one guy is like tell me what's going on on the phone which is what should happen for I said is what it is it's PVC I don't know how far down it is it's probably between two and three feet I know it's not any deeper than that because I put it in the trench myself years ago he's like all right I think I can have somebody out there in a day or two uh but anything you can do to make the problem more clear for me will help us and so I'm like got it so I then go to the landscapers next door and hire one of their workers and he digs a three-foot hole finds the leak and it is exactly what I expected it to be um and his plumber came out the next day great guy you know I had done all the like you know the the hard work for him um in terms of the um digging or I hadn't but but my friend had and uh yeah so he fixed it in like I don't know couple hours tops um you know from from moment of arrival to it's done um and he charged me uh 500 bucks every labor materials everything so yeah that's how my $4,000 repair went to a $500 repair so what's the larger lesson here why is this happening what do you make of this man man yeah so there's a lot of lessons here one is um you know businesses when they effectively what Plumbing is is it's a creative problem solving business right it is I I need to figure out what's going on here so I could diagnose and fix the problem and the challenge of Plumbing right is you don't always know what's going on right you don't know why water is coming out the back of your wall or why it's flooding your downstairs and so historically Plumbing has been an hourly billable model right so a plumber would show up and you'd have to pay his or her hourly rate you know 100 bucks an hour 75 bucks an hour 150 bucks an whatever and so that can be a little uh hard if the problem's really you know you start digging behind the wall and you realize oh my gosh it's even worse than we thought and then the dollars rack up and so what the plumbing industry has shifted to in a lot of cases is it's shifted to a fixed rate price based on the situation and then the computer tells the plumber what they need to charge for the situation um so I've got a water heater that's leaking okay that's going to at least $1,500 and the computer is telling them what to do so it's a it's a really big change it's driven by the quote unquote professionalization of the trades and you're seeing this in HVAC you're seeing it in electrical you're seeing it in plumbing and then that is that professionalization is driven both by companies who consult with these plumbing outfits and like teach them how to do this methodology and then it's also being driven by uh investment uh outside investment private equity uh you know even people coming out of college wanting to buy a business and and quote unquote professionalizing it so it's a it's a pretty big change to an industry uh and it has pretty big ramifications for customers for sure it's interesting if you would asked me to describe what went wrong with that first plumber the word professionalization would not have occurred to me right yeah yeah that's their word you know that's the word used by the you know kind of consult side of that industry or or the private Equity side of that industry and it's kind of their belief that well you know we have these knuckle draggers there's really a lot of disdain I think from that kind of group towards the the the crafts people doing it and like well they've never charged enough they need to charge enough do you think your situation was exceptional no no I promise you it's not because I'm wondering are they making more money by charging for the job is charging by the hour you know a lot of us at least where I live have the impression that plumbers charge a lot by the hour I don't know that I've ever hired a plumber any other way and um I would kind of if you just told me you have the alternative you can charge by the job i' I'll yeah let's do that uh I'd like to I want to know what it's going to cost before the clock starts ticking and I wouldn't necessarily assume that the plumber is going to make more that way but you you think they probably do well let's uh delineate the plumber as an employee versus the plumbing business okay sure and so under sort of like the the non-consolidation model of like individual I know a plumber Bob's Plumbing right it's Bob and maybe Bob's kid works there right that's very different than what I'm talking about in terms of these aggregated uh Plumbing um outfits that might have dozens if not even hundreds of professionals working for them um so so it's it's not only the quote unquote professionalization meaning I have systems you know I have methodologies for purchasing supplies I have bookkeeping recordkeeping Etc that was all done pretty amateur Ville if it was done by Bob the plumber and maybe his kid or maybe his his spouse was um running the books so so these these aggregated plumbing companies what they've done is said we're going to protect our downside and have significant upside potential and so what they do is they study the various Plumbing situations and then they price it at the amount that's the um the the worst possible situation and then many times what they discover is the situation actually isn't that bad and then it's huge margin for them like think about this Pro that project I was talking about it you know even if the plumber had done the work right took it took uh the Landscaping guy maybe an hour and a half to dig the hole it took the actual plumber two hours to do the work so two and a half hours talk about his you know his drive out his drive back he charged me 90 bucks for the first one so so you're talking like what five hours of Labor maybe you know so you're talk talking what is that $800 an hour for that situation right now it's possible there could have been something really wacky going on once he dug up the pipe and they probably have in their database that wacky situation and how much time it took and so they're pricing for the wackiest situation in case they run into it but then 80% of the time you don't get the wackiest situation so it's sort of like Vegas The House Always Wins and I I think this is the pricing model that they're building is The House Always Wins model so here's the other thing I find interesting about this you know there's this whole movement that it's funny I think a lot of business owners entrepreneurs aren't aware of this but there's this Searcher community of basically MBA grads who go looking for traditional bluecollar businesses to buy to roll up to professionalize and I'm wondering if you know that's happened a lot plus you have private Equity of course get doing something similar uh so there's a lot of this going on and it kind of is it making the plumbing profession Better or Worse let's see if I want to advocate for it let's say I'll take the other side of the argument or I'll just say let's pretend I'm arguing for the plumbing company I we have historically sort of underpaid the trades forever you know forever that's especially within the last I would say say 20 to 40 years you know the the the the co that that may be true I don't know but nobody thinks that I know people don't think that but if you look closely if you look at like the kind of cars I see these guys driving and the houses that they live in in the neighborhoods they live in plumbers were not making bank you know they they wen't they're not making bank electric it's like a cliche joke you know people people saying uh I should raise my kids to be a plumber I could afford to fix this leak the problem is is and this is the problem for anybody who charges by the hour for their work is that people massively underestimate the amount of time you spend on your business that you're not getting paid so while the plumber might charge you let's say $200 an hour that seems like a lot of money right that's a the equivalent of a $400,000 paycheck uh annually they're not working 40 hours a week on things they can bill for they're driving to and from they're going and buying supplies they're marketing they're doing accounting they're doing all these things so so at the end of the day the hourly rate feels High to the buyer but actually what they take home especially when they after taxes um it's it's really not that much money and and and it's easy to underestimate things like we see this with Uber right where the drivers fail to appreciate the cost of maintaining their vehicle right and once you start to factor that in then they're not making any money at all and so I think a lot of these trades Plumbing construction electrical Etc they've gone for years sort of undervaluing the cost of doing a business the cost of running a business and so so you could argue that this you know kind of sea change of of working is is making it so that they can actually make a decent living and they should be able to make a decent living uh so that's that's how you could argue the other side of it I get it so last question um you make a living helping businesses you you take a holistic approach you me you talk to them about marketing but about culture and all aspects of of running a business suppose that plumbing company that you initially engaged had reached out to you afterward and asked you about it um and and supposed they said to you that they realize who you are and what you do and they want your full thoughts what would you tell them to do differently in terms of running their business yeah so when a customer rejects a price in any business like if if I let's say I put a I've had customers reject prices I've put in front of them usually that's an indication that there's a mismatch of understanding the value of the work being done and I think their mistake is assuming that most customers don't understand plumbing and and probably a lot of them don't and so they can go in and say yeah this is probably you know $2,000 and and because it's often urgent right when you have water coming down your wall are you going to go get three quotes you're just GNA be like hey okay fix it you know and and I think that the price was so far out of the realm of reality and my knowledge set was higher than most it created a real problem for them and so I think that's part of their problem in terms of they're going into it with the assumption that every customer is the same and you're going to have different types of customers and then the second the second thing that I would advise them on is like you've got they should have educated me like what is the worst case scenario you know like if they had said to me oh well you know why this is so this is we have to charge for this because we might run into this situation which would be really difficult you know in which case I would say well I'll tell you what if you run into that situation then you can charge me that for it otherwise you know whatever $2,000 you know so so there's a real there's a real kind of problem there with like the level of Education of the buyer um establishing value for the work they're doing I mean he made so many mistakes in the sales process right but it's not just the level of Education because you don't have to be that smart to realize that $4,000 is a lot of money for that job and probably worth getting another quote before you uh sign off on it right although there is some education in that because I built the house like I knew where things were if I had if I had bought the house and I just knew there was a leak right like let's say all I know is there's a leak it cost me $1,300 a billing cycle right I would be like man I got to fix this which was true the the the problem with my house is that it is literally 150 feet off the street and it has Irrigation in between the the meter and the house so it I literally could have had a leak almost anywhere you know that's interesting and so if if if I had bought the house and I didn't know oh it's PVC pipe and I deduced there was construction and PVC P pipe is fragile if I didn't know those things I I might uh you know be like oh I guess it's $4,000 and just not really know how complex or uncomplex it was and so I think you know they they are relying on their computer systems to like do the do the act of selling for them which is a big mistake um you know so so that's another that's another piece of the puzzle too is like when you start to rely on you know technology to to deal with a human situation you know if if if if the plumber had said to me you know I think it's actually this is what's going on I think it's going to be this he doesn't have to give me an hourly rate but like it's a totally insane main price for what the solution was and so you you've got to be able to articulate to the customer the value of what you're doing and if you can't do that then you don't get to charge that price otherwise you just piss people off that's an important lesson yeah Sean busy is CEO of Kinesis which is based in Portland Oregon and works with small businesses on marketing culture and strategy thank you Sean thanks Lauren have a great week everybody [Music]