Scaling sales leadership to $100M — Ned Arick on first hires, forecasting, and CS

There's no such thing as passive home services revenue. We'll do $200 million next year, and I'm going to be just as involved next year as I was at zero, as I was at 11 million, as I was at 25 after the acquisition, as I was at 120 that we're doing this year. There's none of this like, "Oh, just sit back, relax, let the guys do what they're going to do."

Welcome back to another episode of the Revenue Reimagine podcast. We have what I would say thus far is our most untraditional guest with us so far today, and I am so excited to talk to. Ned Eric is the CRO at Addex. He is a seasoned pro in both startups and scale-ups, having been both sales hire number one and sales leader number one across multiple ventures. Ned's tackled everything from launching a home services company—despite, according to him, never lifting a hammer—to driving Beam Solar to figure-first growth and leading it through a successful acquisition. He also helped rebrand Emerge Companies into Addex Home Services, which we'll talk about, achieving a small $100 million in its first year. Previously, Ned was head of growth at ClosLoop, where he delivered double-digit revenue gains for clients through data-driven strategies and team development. A self-proclaimed data nerd like myself, an early-stage startup expert, Ned has built high-performing sales teams that have driven multiple exits with strategy, systems, staff, skills, and most importantly, relentless drive. Ned turns hustle into results.

Ned, thanks for joining us, man. I am stoked to have you here.

Thanks, Adam. Yeah, thanks, Dale. I actually didn't even realize you were talking about me for about half that time, so that's kind of cool. Listen, man, it's the radio in me. I got to introduce you right, and then you can take that clip and whenever you walk on stage, just play that, dude.

I'm still going to play that every time I walk into a room.

I'm down for that, man. I love it.

Ned, thanks for joining us. I appreciate it. So as Adam was giving you that great introduction, I was starting to think: What's the hardest role? The first salesperson? The first sales leader? Or actually executing and running your own company?

That's a really, really good question, and actually one I've never thought about before. It's probably because I put all of them really deep back in my head, so I never think about them. But I would say it really depends. It's very difficult to be the first salesperson if you're joining a company that doesn't have product-market fit, if the founder hasn't done a lot of the pre-work, right. I can imagine that would be a very, very difficult role to be in. I can say I've been blessed to be in sales roles where, as the first sales leader or first sales hire, I've come into an organization where they had a lot of customer stories already, even if it was friends and family, right. There was a lot involved there.

But I think there is nothing more difficult, personally, than starting from ground zero in a co-working space in Greensboro, North Carolina with your business partner, launching Facebook ads, and seeing a dollar a day go on your business credit card and being like, "Oh, crap, we should probably start making sales because neither of us are making any money."

And then there's nothing probably more harder than hiring people, making sure that they're set up for success. And then there's also nothing harder than hiring people that are going to do good work for the homeowners that you sell to. So I think it's all dependent on how you look at it. But I would say in my career, the hardest thing that I've done is for sure starting with Addex and really just scaling that as quickly as we did, because with fast scale comes a lot of problems as well, right.

So the problems with scale are interesting, but you touched on something that I think a lot of people in B2B software don't think about, right? So as a CRO in B2B software, obviously you're focused on marketing, you're focused on sales, you're focused on customer success. But you don't have that component of physical product or physical service. And I've done physical product, and that's very hard. I think a lot of people don't realize that. Selling software is one thing, but getting this pen from point A to point B is a whole different conversation. But services is interesting. You said hiring the people that are going to deliver great service to your customers. Talk to me about how that affects just your overall revenue mindset when you're building the business, because most transparently, most of our listeners probably have never had to think about it—other than, you know, I hope our software is good and I hope I have a great, you know, customer success person who can deliver. But that's very different than, "I'm going to your home and I have to deliver this service."

Yeah, one of the biggest things that I brought over from software was the customer success aspect, right? And it's interesting because every other day on LinkedIn I'll see someone be like, "Customer success is dead," and I'm like, "Well, we built an eight-figure company and then nine figures from honestly our customer success, right?"

And so we almost started backwards. Like, Alex and I started having conversations with general contractors, installers, electrical board members in North Carolina before we launched the sales process, before we launched marketing. And the reason is, when you are providing a service—and especially when you're providing a service to a homeowner—I mean, you're going into their space and they're expecting you to do a bang-up job. And if you don't, all their friends, everyone they go to church with, their group, their gym—oh, by the way, everyone on Facebook is going to hear that you are the worst company that's ever worked just because you left two or three cigarette butts on their yard. To most people, you'd be like, "Oh, well, that's not a big deal. Clean them up, I'm sorry." No, to a homeowner, that's a big deal.

And so, I would say that what we did really differently than in most cases is we really focused on that backend fulfillment piece, really even before we said, "Hey, let's put in our marketing, sales systems and strategies," and you know, I would even say for B2B software, right: What does your adoption look like? What does your onboarding process look like? What is your speed to value look like? How quickly can you get someone from putting a dollar amount on their credit card or in the invoice to them seeing that first result, right?

We have in our North Carolina and South Carolina markets, when we first started, we had a "Your HVAC is installed in 72 hours or it's free." Wow, right? Because when we first started, it's like, "Oh, we might be able to schedule two weeks out." Well, number one, we're going to lose that revenue, and number two, everyone's going to be pissed off because it's the middle of summer and we need air conditioning. Right? Like, well, you better go put some AC in someone's house. So I think there's a lot to be said around focusing on the fulfillment, understanding what that post-sale process looks like, and understanding, obviously, your whole entire operating model from start to finish. But if you can get the fulfillment down—especially in a service-based business—and really decrease that speed to value, I think every service company wins there.

Yeah, it's you're actually building the company the right way. And I think that's what's wrong with a lot of tech companies. The way they built them, they're just trying to grow as fast as they can grow at all costs. They really haven't thought about the backend of it. They're like—and this is a function of the investment, the investors, the CEOs. Like, this isn't really a function of, "Let's see what the customer wants. Let's figure out what that value is. When we articulate or derive that value, then we can work backwards to it." And in fact, speed to lead, speed to quote, speed to value—all the things that you're talking about—I think people are now realizing in 2024 that if we don't get to those things, either if your tech's not good enough or your service isn't good enough, one, people aren't going to spend money with you, two, they're not going to come back to you. So like, repeat customers—you probably know—repeat customers are so much less expensive than trying to find new customers at top of funnel. So building that backwards, I think, is exactly the right way.

I've never heard you sound so intelligent, by the way, Dale. I'm very impressed.

That was impressive. I should start you. Very impressed. He's looking, he's on a performance improvement plan.

Got it. I got to do better.

Well, at least Adam, you're not firing him before the end of the podcast.

The funny thing is—not to sidetrack—Dale, I forget who it was, but we did have a customer who sent an email. Basically, it was like, they basically said that I worked for Dale. That's the short version. They didn't realize that we're partners. They're like, "Well, I need to check with Dale to see if this is okay." But I'm like, "Dude, I don't work for Dale, and Dale doesn't work for me. We're all trying to help you together here."

It was funny and Dale never lets me live it down. Oh yeah, you should have—it should—well, it's funny because we actually lead like one of us leads the account, and it's inevitable like whoever's leading the account, that ends up happening. But oh yeah, I mean it happens with our lenders and vendors all the time. Like email them and they'll be like, "Oh, we've got to go through this person," and I'm like, "Yeah, that's our—that's literally just accounts payable. I just need you to answer my question." And that's the same email coming to me by the way.

Yeah, it's funny. As you guys were building that backwards model—like not the backwards model, but from customer successive value—do you guys implement on the front end of it? And it sounds like you do, and I think this is where a lot of software companies have a hard time articulating that value and telling them, like, like you said, "If we don't install in 72 hours, it's on us." Like, how do you leap frog that, or how do you make it better? Or like, what's the competition do when you do that kind of stuff? Like are they trying to replicate it?

What does that look like in your business?

Yeah, you know, we do HVAC, roofing, and solar, right? And it's a really interesting market to be in because if you look at our business, you've got solar, which is the wild west, right? There's no regulation. You know, we've got buddies that just literally get a team of 10 guys. They'll go to Lincoln, Nebraska for 10 days, and all those guys walk out with $40,000 in their pockets, right? So it's like this weird, wild west industry where, yeah, you've got to be very forward thinking, right, with what your value proposition is, how you're selling, who you're selling to, being very strategic on the doors you knock or the people that are calling in. And then you've got roofing and HVAC, which are these kind of antiquated markets, and they're markets that really haven't been—the only word that's coming to mind is sexified. That's not the right word, but like it hasn't been made sexy. Yeah, because it really is built by great technicians and great construction guys that don't necessarily know how to build a business. But what they do know how to do is do great work and build great relationships.

And so when we come into a market, it's very interesting for us to have to actually be out chucking his truck because chucking his truck has been there for 30 years. He's got 500 clients who get serviced. He goes out and services at 10 p.m. on a Sunday, right? He's the best price. He's, you know, he goes to church with the people. I think that's what you run into more often when you're a conglomerate like us, and what that's actually sort of forced our hand to do is actually build a rollup model. When we see a guy in a market that's doing really well—roofing, HVAC, things like that—you know what I do love about it is they're always open to talking to us, right? Like I have conversations every day with HVAC owners and roofing owners, just like, "Hey man, what are you doing? Like what's happening? What's working? Like, you know, where are you getting your skilled tradesmen? Like where are you going for that?" And they're really open. But what that also does open the door for us as well is to say, like, "Hey, here's some jobs that we have. Hey, go do these jobs. We'll subcontract to you." And then we start to just consistently give them to them, and then eventually we're, you know, rolling up their company, and they're now chucking their truck by addicts. But you know, to answer your question, Dale, it hasn't been something that we've really had to be super concerned about, right? Because the model really is do good work, build great relationships, scale your business. And scaling your business, really, up until a couple of years ago in HVAC and roofing was, man, you know, your $10 million revenue is a great company. And don't get me wrong, it's still a great company, but once private equity started coming in and there was a lot of this outside money, most of what's happening is these mom and pops are getting rolled up into these larger organizations, and they can't keep their pricing and things like that. So yeah, we haven't really had to deal with a ton of copycat behavior. The whole chucking a truck thing is interesting.

Yeah, yeah. We work with a service company now, and this is the first time I heard it. We were actually just in a meeting with the senior executives and the investor, and they're like, "Chucking the truck," and then you just said it. And so it made me think about that. But what it was sparking in my head was, first, Florida is like the worst place for roofing because, like, we both live in Florida, and like, so does Ned. If you looked at your show prep, you would know that's right. You do live in it. It should be specific now of me. But it's like, you know, it's the perfect area to do HVAC and roofing. So it's like, how do you compete against these little guys? And like you said, they're in church all the time, but it's all about good work. Like I don't, I see people in Florida. Because we're from, I'm originally from Boston, hustle work, like work ethic up there, like you, the contractors, all that kind of stuff. You get down here and it's like, "Where are the people?"

So I think it's easy to compete against some of those guys. We love like our New York office. I mean it's our most efficient market just really due to the work ethic. I mean we could literally call our foreman, and he'll have 10 guys on a roof within five minutes. Like they're all just like, and I mean I'm talking like an emergency job. He's like, "Cool, yeah, we got 10 guys right now." So it's wild to see the work ethic up there.

Yeah, it's funny to me. Like people services is such a different business. Like it really is, right? There's so many components that I think 95% of software people would go to services and have no clue what to do, right? Like you have real margin—like real human capital. Like you have to pay someone to go do this, plus you have an HVAC unit that has a cost. Like there's just a whole different way of looking at P&L. Talk to me a little bit about on that topic. Like what was that transition like, and how did you go from being a successful CRO in the tech world where we all could probably do this with our eyes shut to like, "This has a cost, and these people have a cost. And I still like, great, I could bring these businesses together, but man, profit margin is not 90% here."

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Yeah, yeah. I mean when you look at a good company in home services, you're looking at 15, 20, 25% margin, and you're like you're going to get 8 to 10x EBITDA from a private equity company, right? A typical HVAC company acquisition is 3 to 5, but that's typically because they've got pretty low EBITDA, though, right? So I mean it was definitely a transition, that's for damn sure. Like it was, you know, I'm sitting there like, "Dude, let's just throw a bunch of money at the wall. Dude, I've got the best marketing. I've got the best sales systems, right? We are going to crush." And then like you start to realize, all right, our customer acquisition cost on that deal was $1,350. Okay, we bought the unit for $3,500. Like you start doing the math in your head—not even a spreadsheet—you're like, "Oh fuck, we just only made a thousand dollars on that." Yeah, okay, all right, well, we're not going to grow to a million dollars off of a thousand dollar profit margin.

And so you know, I think that one thing—and I really don't think this matters whether you're in home services or if you're in a software company—if you understand the unit economics very well as a leader, I think you win, right? And you know, I made a comment. I forget who posted this the other day, but I made a comment on a post like, "I really think that the reason that I am where I am is because early on in my career, I just went all in on spreadsheets and math has always come easy to me. And so I just went all in on understanding what one plus one is in business." And like we all know that business truly is math when we break it down at the end of the day, right? It's leads to opportunities to how many discovery calls, the demos, to whatever it is—like it all is math at the end of the day.

And so once I realized, okay, cool, for an average job, this is how much we are going to spend, right? And that changes sometimes month over month. And you know, we started the company in 2021. We were selling like 11.99% interest rates, right? So that's a completely different conversation than what we're talking about now.

We were doing this year at minimum 5.99% interest rates. You know, we're able in 2021 to buy a three-ton HVAC unit for $2,500 one at a time from the warehouse. You know, now we're lucky if we can get it for $4,500 at volume. So there's a lot that just goes into the understanding of the P&L and being able to understand, "Okay, cool, each section of it—like, here's our gross revenue, here are our expenses, here's our cost of goods sold. Here is just like looking at it and being able at the end of the day understand like if we need to be at a 20% margin every job, which is our goal, we have to price it this way." And then from there, you have to understand like, "Well, there's also in home services there's go-backs. Well, I've got to pay a guy to go back and fix that job, right?" So that eats into it. And so you just start to understand your forecast isn't just like, "Man, I think we can get this many leads and make this many sales and we'll be good." You start to forecast the entire funnel, right? You start to forecast lead cost. You start to forecast your cost per meeting, your cost per sit, your cost per sold opportunity, which doesn't necessarily mean customer acquisition cost yet because people can cancel, right? They can cancel within three days with recision across the country. So it's like, "Now what's our cost of progressing a deal based on that cancellation rate?" And then what's our cost per install? But then what's our cost per install plus go-back, right? And what's our—what is the minimum that we can forecast and what's the maximum we accept? So it's a much more—I wouldn't say it's more in-depth, but you just start to think about things a lot more than I did when I was in software. It was like, "Okay, cool, we just need to make a hundred sales in software and we're going to be good. And we have, you know, 80% margins on this, and all we have to worry about is like salaries." Cool. Like now it's salaries, you know, it's benefits, it's our guys on the roof, it's insurance, it's the trucks, it's all of these things that people don't realize. And it's why I wouldn't say like I'm against people saying like, "Hey, go just buy a home services company and you'll be a millionaire." Like I think it's decent advice like, "Hey, go to these unsexy markets and you're going to have some success." The next area is our revenue stream, our home services. There you go. That's actually a pretty cool niche. But I think like what people don't realize is in this model there's so much more than just like buying a company and calling it a day. Like you are a people manager day one. And like there's no such thing as like passive home services revenue. Like, we'll do $200 million next year. I'm going to be just as involved next year as I was at zero, as I was at 11 million, as I was at 25 after the acquisition, as I was at you know 120 that we're doing this year. It's like there's none of this like, "Oh, just sit back, relax, let the guys do what they're going to do." There's a lot of involvement making sure that the systems, process, structure are happening and the SOPs are being followed constantly.

So you would say that a certain company COO, which I also think is something that people just aren't used to, is much more involved than a technology company COO as you scale?

I would say so, yeah. I've definitely worked more in the last four years than I did in tech. And not necessarily from an hours perspective because if you ask my family, I'm kind of a workaholic. We all are from it's the nature of the COO beast, right? Exactly. But I would definitely say from like a hands in the dirt with the guys—literally sometimes with the guys—yes, I am making sure. Because I mean, when you've got guys on roofs, you know, although we've got a head of construction, if we get screwed, you know, if we have OSHA roll up and our guys aren't tied off on the roof, we get fined, we lose licenses. Like that's a big deal. So we've got to always be making sure that the things are happening, whether that be the sales process too. Because like if our guys tell someone in a house something that is inaccurate, especially when it comes to solar and there's government funding involved, that's an attorney general that gets involved. That's not just a bad Yelp review, right? There's legal matters that come into that. And so yeah, I mean, I definitely find myself a lot more in the weeds on a day-to-day basis. And I think a lot of technology COOs would benefit from acting like services COOs a lot more.

Could not agree more. Would you ever go back to tech?

Yeah, for sure. Yeah, but I bet you'd be a lot better too. And I just want to make sure Adam knows that one plus one actually equals two. So I just want to make sure that you got that formula down.

Yeah, I always drop those really smart nuggets on podcasts. That's why people have me—just like rudimentary math. But it's really funny. One of the things that you were saying—because I actually don't think a lot of tech companies understand their cost of goods. Like, I don't think they understand their cost of service. Like they think they're—we were just talking about this with a client and customer acquisition cost. What their real customer acquisition cost is, what is included in that customer acquisition cost. All of a sudden they're looking at churn at the end of it and they're like, "Well, we're not making as much margin as we're supposed to be. We're supposed to be making 80% margin on software." But it's like, "Okay, do you really know when you spin up a new customer on your AWS server what that really costs and how much technology you're using?" Like, people don't know it. I think every customer you go into we try to ask, "What does it cost you to bring on one more customer?" and they can't answer the question. Like they're like, "Oh, it's not much." Like that's all you hear. And the tech people don't really want to tell you on the tech side. And then you're just hiring people. Then all of a sudden, like the margins aren't making sense anymore. But I think because we're working with a service company kind of like what you guys are doing, we're trying to build comp plans and we're used to building comp plans on, you know, 10 or 12% commission rates. But you can't do that in the margin business, right? Because if you're selling a big deal and you're comping them at, you know, 3%, 4%, whatever that looks like on a services business, you're cutting into that margin that has real labor involved in it that you can't really get out of.

So I do think one of the things that you said—the faster companies can get into their numbers, whether they like it—I think the reason why we don't do it in tech is we don't like the numbers. Like we don't like our conversion rates. We don't like our close rates. We don't like our average deal size. Because like, you go and you ask, "What's your average deal size?" "I don't know, it's somewhere between like 10 and 50,000 a year." It's like, "That's not your average deal size." And then ours is $7,172, and you know that right off the top of your head.

And I know exactly what our cost per install is. And the thing is, I'll tell you, this is what I said about like more companies need to act this way. Is where in tech, you really do run into a lot of vague answers, right? Like when I was with Clothes Loop, I worked with founders like all the time. Worked with over 300 founders in my time at Clothes Loop, and they didn't know. And like when you start to dig into the numbers like you were saying, Dale, it's like there's this—there's not this understanding—or they know one part of the business amazingly well and then the rest is just like, "Well, if this is how it is over here, like the rest must be doing well." And I think there's like what I really harped on big time with our organization is like if you guys called up any of my VPs, they could tell you exactly what the conversion rates are of our reps down to like down to that one rep that just started in South Carolina. Right? And the reason is is because we have—in a lot of home services companies, there's silos, right? It's like, "Hey, we've got our services team. They don't really talk to our sales team, who doesn't really talk to our marketing team," because it really isn't a marketing team—that's a third party. But it's like we understand at the beginning of every month the amount of money that needs to be spent on marketing in order to hit our revenue goal and what our conversion rates need to be. And we know on a daily basis—and this is where I think that you know the question of like, "You know, have I done more work in home services?" is like, I'm looking at these numbers on a daily basis, what are the fluctuations daily so that we can be making these decisions? Because we're such a transactional sale as well, right? Someone could come in and we could have $8,000 in our bank account from them by the end of that day, right? And so that's I think the biggest thing that I would say for a lot of tech people is we look at...

Quarters, and I think that was the biggest transition for me. I'm looking at when I first got there, I was like, "Oh, let's look at quarterly numbers," and it's like, "No, if you're looking at quarterly numbers, you're three months behind where you should be."

And I think—we say that even in Tech. We're saying like, at least look at it monthly, because it snowballs. There's a domino effect. Like, that small snowball—if you're off a percentage point now, you're off two percentage points, now you're off four percentage points, and then you're way off. And how do you backfill any of that funnel or backfill any of the close rates? Or know that you've got to give a special deal or whatever it looks like if you wait way too long?

There are so many things that I think—to put a bow on it—that can go from Tech to Services and make Services really successful. But vice versa, so many things on the Services side that those of us in tech land don't even look at that would fundamentally change your business if you looked at things from a different perspective.

I feel like we could spend another 90 minutes digging into this, and definitely want to have you back on the show to dig in more. But we are coming up on this little thing that we call time, unfortunately. I really think we could do a whole series on this, but I digress.

Ned, we'd love to do some rapid fire with you. You cool with that?

Yeah, let's roll.

All right, here we go. Early bird or night owl?

Early bird.

What's the first app you check when you wake up in the morning?

Bible app, actually.

Nice. I'm getting better. Better. This is truly the first time it hasn't been something to the effect of Slack, LinkedIn, email. Personal first, man. I love that.

Yeah.

Favorite guilty pleasure snack?

Who crumble cookies.

Is that a snack?

Yeah, that's a snack.

That's a snack. That's a meal. That's a full day calories. That's multi-day calories.

Yeah, yeah.

If your company were an animal, what would it be and why?

A lion, because we like—literally that's all we do. Just ton of like—that's all of our guys know. My VP of sales development literally sent a video in our group chat today on Slack, and it was like the Spartan, you know, like "Who are we? Spartans." Just so you're aware, home service is a very bro culture. So yeah, we do a lion. I love that.

Ned, if you weren't—I don't want to say if you weren't in Tech, but if you're not in sales, whether it's Tech or Services, what profession would you be in?

Man, I'd be a strength and conditioning coach. That's actually what I went to school for, and I did a couple internships with a couple NFL teams, a couple Division One football teams. And I kind of got bit by the business bug though, and yeah, maybe one day I'll go back. Who knows?

I love it. What do you think about Belichick going to UNC?

I think it's super interesting with NIL. Yeah, I think he's a player developer, right? You've got the Patriots that have won—what, six Super Bowls—with guys that you've never heard of, ever, right? And it's like, that's who Bill Belichick is. He's a player developer, and I think it'll be great.

Yeah, interesting.

Last question, wrapping it up. Dream vacation destination, besides someone's roof?

This is going to sound douchy, but I live where people vacation. Yeah. I love being home. I travel a lot for work. We live at the beach. Like, we surf every day. I love, you know, my kids like love the beach. They serve. And it's just like, we honestly are super blessed. So I would say my dream vacation is like coming home from work travel.

We feel the same way. I lived in Boston in the Northeast for thirty years. I've lived down here now for ten. Feel the same way. I've been all over the world. I'd rather come to this quirky West Coast of Florida anytime.

100 percent.

Yeah.

Ned, thank you so much for joining, man. Where can people go if they're in need of your services? Because everyone listening is going to need services at some point in time.

Yeah, it's ADTX.com, pronounced AD-TX. And you can tell that I come from Tech when we merged the two companies and came up with that name for damn sure. But LinkedIn is where you can find me, and yeah, you can probably Google me and find some stuff. I don't know. Don't look too deep.

Thanks so much for joining, man. We appreciate it.

Awesome. Thanks, y'all. Cheers.