Leveraging Tech for Business Growth in Fire Protection with Billy Marshall of Service Trade | NPFA

Filmed on the show floor at NFPA, Paul Giannamore sits down with Billy Marshall, founder and CEO of ServiceTrade, for a wide-ranging conversation on creating value in the fire protection and life safety trades. Billy traces his path from early-employee days at Red Hat to building ServiceTrade out of a fire contractor’s homegrown software, then lays out his operating playbook: grade and fire your worst customers, price for the value you visibly demonstrate, and treat recurring service revenue as the asset that drives the business. The two close on where artificial intelligence is headed for service contractors — Billy’s “risk terminator” framing — and why he’s long the trades.

Paul Giannamore:
Well, Billy, it’s great to sit down with you. I’ve got a ton of questions on value creation today, but before we get into that, I want to talk about how you got to where you are today.
Billy Marshall:
Well, thanks for having me, Paul. They say that necessity is the mother of invention, and in late 2009, it was necessary for me to find my next opportunity, because I’d been fired from the last two, including a company I founded. I was fortunate that I was sought out by an entrepreneur by the name of Joe Dunn, who had a fire contracting business called DunnWell. They had innovated inside that business with some technology that made it easy for the customer to see the value they were adding with their kitchen exhaust cleaning and with their suppression work. The business was doing really, really well at a hard time, so clearly they were doing something right. I looked under the hood and said, well, this is an interesting innovation — this idea that you can show your customer something that, generally speaking, feels like voodoo to them, but that you’ve actually added value.
Paul Giannamore:
So they built their own software. Is that what you’re saying?
Billy Marshall:
They did. They had built a system that had them stand out in the market. And Joe’s interest was, gee, maybe there’s another business here other than the contracting business. I came from a software background, and he said, would you look at it and tell me if you think it’s interesting? So I looked around the market. Building Reports was actually in the market at the time, but there wasn’t a lot of other tools for the contractor to maximize the value of their labor force or to maximize their relationship with the customer. It was just accounting applications, construction accounting applications. And I said, well, there’s definitely a need. How do you want to set this up? He said, why don’t you join us here while you build a team out? And I did that. In 2012, we sold that business to CentOS, and CentOS became the first customer of a new company called Service Trade. Service Trade basically exists to help contractors use technology to become more important to their customer and to grow their business — which is your value creation story.
Paul Giannamore:
Well, if I remember correctly, prior to this, you were a software guy. Did you start your career at Red Hat? Is that where you started?
Billy Marshall:
Well, I started my career with GE, but I got into the software business in 1998 with Red Hat, and I was an early employee at that company. Of course, I think most people know the story — huge success story, open source software. One of the biggest transactions in software; sold to IBM about six, eight years ago for about $34 billion. So, great success story, and I was there when it was a little $5 million company. I kind of cut my teeth in software in the infrastructure space. But I got the bug of being an entrepreneur by being in that early-stage company and all the excitement that it generated when it was doing well. That was part of a great run. And so then I founded a new company after that, had a lot of hype, raised a bunch of money — and it was a dud.
Paul Giannamore:
Well, I guess Red Hat was a dud at some point in the late ’90s, right?
Billy Marshall:
Yeah, it felt like it. And you know, Paul, the world is full of 15-year-old overnight successes. It really takes a lot of work to create something super valuable, and it almost never happens overnight. But that’s okay, because it’s a lot of fun along the way as well.
Paul Giannamore:
So at Service Trade, CentOS became the first customer, right? And this was back in 2012?
Billy Marshall:
September of 2012.
Paul Giannamore:
Okay.
Paul Giannamore:
So then where did you take the business from there?
Billy Marshall:
Well, in 2013 we began selling a generally released product. CentOS kind of had a special version that was part of the old company. We sold 30 customers in 2013, 70 customers in 2014, and about 100 customers in 2015 — almost exclusively fire and life safety customers. A lot of the household names that you’d hear, or you’d see walking around the floor here, have been our customers since about that time. I just saw Tommy Clements from VSC; they’ve been our customer since 2015. I saw the Firetrol guys with their booth over here; they’ve been our customer since about 2016. I saw the folks from Marmic walking around the show here. CentOS is still a customer. And so, you know, in the fire space we probably have about 600 customers now that are fire and life safety customers. We sell exclusively to fire and life safety and the mechanical trades, mostly. And the great news for all of the contractors here is that a space where, when I began, nobody wanted to talk to me — nobody in the capital markets wanted to talk to me about investing in it or funding it — boy, it is covered up with innovations now. There are tons and tons of technology companies aiming their innovations at the contracting market, because they’ve realized it is a really, really good customer base.
Paul Giannamore:
What were all of these companies using back in 2005?
Billy Marshall:
Oh, boy. It was a mix of almost anything. You saw Excel spreadsheets. You saw index cards — literally. One of my bigger customers in Canada had index cards that were set up by month; they would pull out the next month’s index cards, and those cards would tell them what to do that month, literally. And then Excel sheets. You would see construction accounting systems like Sage 300, Sage 100 that would have some add-on for service. And that’s just a poor platform as a basis for service, because the core of your concern for service should be your customer. It’s not how you do your accounting. It’s how you deliver value to your customer, and how you demonstrate value, and how you maximize the value of that customer relationship. None of these systems were set up to do that. They were simply ways to deal with the data around what they had to do to get an invoice out. And your invoice isn’t the most important item for your customer. If the only thing you ever share with your customer is an invoice, the only thing they’re ever going to talk to you about is price.
Paul Giannamore:
A very good point. You know, Billy, my entire life centers around value creation and the monetization of value. So I think you’re a great person to chat with today about how you think about creating value in a fire protection, life safety business. What are some things that owners should be thinking about out there?
Billy Marshall:
Well, in almost any business — like even in my business — there are some metrics that are really, really important. For example, retention. How many of your customers stick with you year after year after year? Your net retention — how much more can you charge year over year for what you do, because they believe in you? What new innovations can you bring to them so they’re buying more product? So they’re not just buying suppression from you; they’re also buying sprinkler, they’re also buying alarm, maybe you sell them Knox boxes. So what can you do year over year to demonstrate to the market that you have a predictable pattern of profitable growth with the best customers in your market? That’s the essence of any business: how well can you demonstrate proof in the past of what’s likely to happen in the future? Because you’ve got a track record of retention, a track record of upsell, a track record of price expansion, and your customers stick with you through that because you’re the most valuable provider. So how do you do those things? Well, number one, probably the start is the way you don’t do it. Let’s start there. The way you don’t do it is to simply show up when something’s wrong, when something’s broken, and the only thing you share is an invoice. That’s the wrong way to do it. So I tell a lot of these folks, I ask them, do you think your customer cares about code? And I’ll give you a hint: they don’t. Your customer really does not care. Your customer cares about risk — risk of business disruption, risk of loss. That’s what your customer cares about. So what is it that you’re doing to demonstrate to them that you’ve got their risk under control? It’s not an NFPA 25 inspection form. It’s not an NFPA 17A inspection form. It’s none of that. It’s the story that you tell them through your work product that shows them it’s not really voodoo, that you’ve got it under control, that you understand their equipment and you help them understand their equipment. Then they’ll believe in you, and they’ll respond when you tell them you’ve got risk with these systems, so I’m going to take these actions and send you a bill for that — but you’re going to be happy to pay it, because you understand what I’ve done to show you your risk and then to take it out. And they will happily pay for that all day long. You can’t beat them over the head with code. You’ve got to show them and educate them on how their systems work, why this is risky the way it’s set up now, and what you’re going to do to make it better. Then they’ll pay the bill, and they’re happy to do it. And they’ll keep you when the next guy comes in and says, hey, I’ll do your 25 inspections for 10% less. Yeah, but can you show me how to avoid business disruption risk? Can you show me how to avoid property risk? And when they look at you and say, what do you mean? — they’ll say, no, I’m happy to pay the premium with my vendor.
Paul Giannamore:
How do you think business owners should think about the recurring revenue nature of these fire protection businesses? And what are some things that influence customer retention? Obviously, what you just said makes a huge impact. What are some other aspects of customer retention?
Billy Marshall:
Well, number one, you should start with: which customers do you really want to retain? Because not all customers are equal. Some of them have a much greater ability to pay a premium for a premium service than others will. They will value that more. So number one, you need to focus on the best customers in your market. You need to have a periodic approach to firing your customers who will not get with the program. In other words, if you have a customer where you’ve demonstrated over and over again that their systems are exhibiting risk conditions they shouldn’t tolerate, and yet they do nothing about it, and then them doing nothing about it creates an emergency for you — where you can’t serve a great customer because you’ve got to be distracted taking care of their emergency — that’s not a good business plan for you. So you need to fire those customers who won’t get with the program, and you need to focus on the customers who will trade capital for labor efficiency on your part. They will trade capital for risk, such that you’re not dealing with unplanned work. It’s very, very difficult to optimize a schedule for unplanned work. Whereas if your work is highly planned and highly curated, you can optimize the output that you deliver with your scarce labor to have the best outcome for your customer and the most predictable outcome for your business. And that’s what the next owner wants. They want a book of business that’s highly predictable, ideally at a premium price point with a premium customer set. So you should always be selling better customers, you should always be firing the worst customers, and you should always be grading them based upon their willingness to get with the program, to take risk off of both you and them.
Paul Giannamore:
You talked about pricing a little bit ago, and obviously we’ve had some significant inflation in recent years. When you look at the customer base of Service Trade — your clients — what sort of price increases are these folks able to push out into the market in recent years?
Billy Marshall:
Well, we have encouraged all of them to be reasonably aggressive with those price increases, because they’re facing increased costs and the customer needs the service. Generally speaking, there is a pretty big imbalance between the amount of demand that’s out there — which is very, very high — and the amount of labor to service that demand, which is relatively scarce. So if your brand can attract high-quality labor, you need to leverage that in the market with premium pricing, because they can’t just get that from anywhere. If you’re doing a great job, you do have quite a bit of pricing power. But that pricing power is only durable when the way you deliver the service is transparent — you’re not beating them over the head with code, you’re showing them the risks they face, you are helping them do capital planning. You know, if you get in front of the capital cycle saying, hey, we should be replacing this equipment, before they’ve actually done their capital plan, there’s a good chance that they might budget you in. So I would say be reasonably assertive about your pricing practices, but you have to have the ability to show the value in the way you deliver the service on the other side. Most of that value comes in helping the customer understand their risk and showing them ways to trade capital for lower labor content, and to trade capital for lower risk. And most of them will do that.
Paul Giannamore:
You know, Billy, yesterday you said something that stuck with me. Just a minute ago, you were talking about supply and demand, and you also mentioned yesterday that you’re long the trades due to this supply-demand disequilibrium. So let’s talk a little bit about that, and what you think long term here in the trades.
Billy Marshall:
Well, I said a minute ago, if you’ve got a strong brand that can attract high-quality skilled labor to you, you occupy a terrific place in the market, because the amount of demand for that labor far outstrips the supply. So I’m generally long on the trades, because I think that’s going to be a durable trend. I don’t think that the supply-demand imbalance is going to be cured in the next 10 to 20 years. I think we’ve got a little bit of a marketing problem, in particular here in the U.S., in that the work associated with the trades has generally not been sexy, if you will. I think it’s becoming more so. I think people are looking at the opportunity to go to work and earn, and some of these younger kids are saying, well, if I like to work, that’s a pretty good career. But historically, the narrative was a four-year college education — and there’s nothing wrong with being educated. I’m very well educated and I’m thankful for it. But educational achievement doesn’t necessarily correlate with economic or vocational outcomes. A lot of these folks are learning that, and I’m even seeing some folks that could be on a heck of a track with top-tier schools and everything actually electing, no, I’m going to go a different route. I’m going to get busy in the market for something that I can be good at — a trade, if you will — and that’s going to be my path. And that path has been super successful for a lot of the folks who are here in this building today. I think that’s going to continue. But we’ve had a marketing problem in the U.S. that the trades were generally looked down upon. People often use the term, I failed into my trade and I failed into my success — I couldn’t get into the school I wanted to get into, so I failed into the trades. Well, it’s a pretty dang good place to be these days. And I tell people, I failed at my last two startups before this, when I was fired from them. Sometimes failure leads to a pretty good outcome.
Paul Giannamore:
Well, you’ve been in this industry for a long time. When you think particularly about fire protection, what’s your overall outlook for this specific industry?
Billy Marshall:
Well, the U.S. leads the world — generally speaking, even the developed world — in the deployment of high-quality systems to minimize the risk of property loss and the risk of life loss. So you have to believe that some of these up-and-coming economies, whether that’s India, whether that’s Brazil, whether that’s Mexico, ultimately are going to rotate into more and more forward, better deployment of equipment and systems and processes and procedures to improve or lower the risk of property and life loss. Now, I’m not sure how that helps the U.S. contractor, because I’m not certain — I think most of the contracting business is local business. But I do think the expansion of those markets will continue, aside from the labor, in the area of equipment and other things, and will continue to create economies of scale, so that ultimately the equipment you deploy will actually require less labor. It has to require less labor, because of the imbalance. It will require less labor to service it and to know that it’s effective. So I would encourage all the folks who participate in this market to constantly be looking for those innovations where the equipment that gets deployed is of a higher reliability, and the codes evolve to where you have less and less labor associated with maintaining reasonably high certainty of safety. I think that’s got to be a trend. And I think the rest of the world coming online will drive some economies of scale and innovations in the reliability of equipment. Overall, the code moves slow. So the code is going to move very, very slowly, but it will move — and it will move toward a place where ideally there’s less labor that has to be deployed to assure protection of property and life.
Paul Giannamore:
He mentioned international growth. How much of your client base at Service Trade is outside of North America?
Billy Marshall:
Almost none. We’re pretty exclusive to North America — Canada and the 50 states. This is the market. This is the big market. This is the market that everybody wants. Most of my competition is landing onshore here from other markets, whether it’s Australia or Great Britain or whatever. Those markets are small relative to this market. This is the big market.
Paul Giannamore:
You’ve been a participant in this industry for a long time. What do you think about the recent consolidation amongst contracting firms?
Billy Marshall:
Well, back to that supply-demand imbalance, it makes sense that if you figured out how to attract labor to your brand that is skilled at servicing this demand, you should want to do more of that. And by the way, the interesting part of this market, too, is that these well-run businesses are running at 35% to 45% gross margin. The revenue is repeatable. The retention is high when they run a good business. Those are Apple margins, right? And if a good percentage of that revenue is recurring revenue, why wouldn’t a capitalist want to be involved in that market? So I’m not sure I see much of an end in sight. Again, I’m long the trades. I think the folks at companies like Blackstone and Audax and KKR and these other places — they’re nobody’s fools. If they’re coming in now, they’re long the trades as well. They’re not coming in such that the seller is the one making money. They’re coming in because they believe that, as the buyer, they’re the ones who are going to make money.
Paul Giannamore:
You know, at ServiceTrade, you guys deal with a lot of firms that are using kind of home-cooked software systems and index cards and all sorts of stuff. I’m curious about when you get a new client that’s basically doing everything in-house and they get on Service Trade — what sort of improvements are they seeing in their business over time after having gotten on the software?
Billy Marshall:
Yeah. So I encourage them to pay attention to essentially two metrics. A lot of them come out of a construction mentality. They’re driven by gross profit. And I’m happy to remind them, you don’t have a gross profit problem in service. You do not. So what I encourage them to focus on is, on a daily basis, how much work is being delivered by your techs — as measured by how much revenue you were able to invoice based upon the work they did the day before. So, are you able to schedule — let’s say for an alarm technician, you should be able to schedule somewhere between $1,500 and $2,000 of work every day. And you should measure that they’re actually getting through $1,500 to $2,000 worth of work every day. So that’s number one. Number two, for the customer contracts you are selling, are you grading your customers? Are you measuring them based upon the way that they engage you to keep their systems in good working order? In other words, the folks who won’t get with the program, the folks who won’t repair the equipment that is at risk and create risk for you and your schedule — you need to rotate them out. And you need to be selling customers who will respond to your program, because you need to have, let’s say, in the sprinkler space, it should be reasonably predictable that for every dollar of inspection you’re doing, you should have at least a dollar of pull-through associated with maintaining those systems. Maybe $1.25 or $1.50. If it’s an early customer that you took from someone who wasn’t maintaining them, maybe that’s even $2. And if you can show a future investor that heuristic that says, look, under contract for inspection I’ve got this number of dollars, and with my customer base you can pretty much count on 2X that from a revenue perspective of planned work — not T&M, not emergencies, planned work — so those are the two things that I encourage them to focus on. What’s the productivity of your technicians from a billing perspective every day? And number two, what’s the productivity of your customers in terms of how much revenue you can rely on from that base? And if you can’t rely on it, you need to sell customers that you can rely on. So how does Service Trade then help folks understand those productivity metrics? Well, we help them measure their business by every element of the business. What does your billing look like for your inspection by service line? What does your billing look like for planned repairs by service line, by customer? What portion of your work was work that you did on an emergency basis that made you scramble your schedule to respond to somebody? Generally speaking, you should be measuring how well your customers are rotating into planned work and rotating out of unplanned emergency work. If they won’t insulate the north walls of their building and they’re constantly having broken pipes, that’s bad for you and them. If they don’t get that north wall insulated when the winter comes around and they get a cold snap — get rid of them. There are plenty of customers out there. Find a better customer.
Paul Giannamore:
But that’s hard for business owners to do, isn’t it? Fire customers.
Billy Marshall:
So we just gave a presentation recently. One of my colleagues, Sean Mims, who was actually a co-author of my second book, Money for Nothing, gave a presentation to this customer base on loss aversion. There’s a great quote from the Moneyball movie where the character playing Billy Beane, Brad Pitt, says, guys, I hate to lose. And I hate losing, Chubby. I hate it. I hate losing more than I even want to win. We are wired to have strong feelings of loss aversion. You’ve got to overcome that. You’ve got to follow the data. And you’ve got to lose the customers that won’t get with your program. That’s a hard thing to do sometimes. Maybe one way to lose them is just to raise their prices to the roof and they’ll fire you, and maybe you’ll feel better about that. But generally speaking, there’s too much good demand out there for you to be servicing bad demand. You can’t do it.
Paul Giannamore:
So one way is obviously raise prices until they walk away. The other one would be to politely let them know you’re moving on.
Billy Marshall:
Sure.
Billy Marshall:
And by the way, a great way to do that is, gee, I’ve sent you all of these deficiency repair quotes. I’ve noted that you’ve reviewed them online — because our technology shows us that the customer is actually seeing it and paying attention. If you can’t maintain your equipment, I can’t maintain this relationship. So I’m going to kindly refer you to my competitor, who’s often happy to deal with emergency calls and things like that. They would be a better fit for you.
Paul Giannamore:
Just send them along. You know, you just mentioned your second book. So we’re not going to walk away today without talking about your books. Let’s talk about them. What was your first book?
Billy Marshall:
Well, I didn’t necessarily come into this space thinking that I was going to write a couple of books in order to figure out how to communicate with the contractor on some terms that maybe they would embrace us around. So the first book was called The Digital Wrap. The idea was that all of these contractors spend money — anywhere between $700 and $3,000 — to wrap their truck with their brand promise. That brand promise is typically their logo, their contact information, and some tagline that says, here’s why we’re special. They do that so that during the course of service delivery they might make an impression on a customer, where the customer says, oh, you know, VSC is here — maybe something good is happening. Firetrol is here — maybe something good is happening. Marmic is here — maybe something good is happening. The problem with a truck wrap from a marketing perspective is it’s perfectly targeted, as long as it’s in the service area. But the problem is that it’s fleeting. It’s on your fleet. It doesn’t necessarily make the jump to long-term memory; they don’t necessarily remember your brand. Well, during the course of service, your technician — particularly now in the age of smartphones — is creating a ton of digital records: GPS clock-ins, in-route notifications. They are taking photos of deficiencies. They’re creating inspection records. They’re doing all these things that create digital artifacts. And those, if you can turn them back to the customer online for the customer to review, to respond, to forward, then you have created an impression with the technician’s work online that didn’t require a marketing person to write a blog or anything like that. But that impression is meaningful to your customer. So that’s the definition of your digital wrap: during the course of their work, the technician is impressing the customer with the value of your brand, with nobody doing anything extra. It’s just like a truck wrap. Just do your job, and I’m going to lay my brand promise on you over and over again online. And an online brand impression is much stickier than a truck wrap impression. So we coined the term — gee, how are you going to maximize the value of your customer base by having a great digital wrap? And so that was book one.
Paul Giannamore:
That was book one. Let’s talk a little bit about book two.
Billy Marshall:
Book two — I would often ask contractors, what do you think your customer wants? Do they want a fixed-price contract? Do they want to get their NFPA 25 inspection reports quickly? What do they really want? And they’d throw different darts at it. I would say, well, in my opinion, I think the only thing your customer wants is nothing. They’d look at me, and I’d say, no breakdowns, no system dumps, no false alarms, no equipment failures of any kind, any way, of any type, ever. All they want is like what you hear about the elevator guys — it just works. I don’t want to know anything about it, other than the fact that I’m confident that it works. Well, gee, if all you deliver to your customer is that great nothing outcome, you’re susceptible to the low-price guy coming in behind you and saying, hey, what happens around here? And the customer says, nothing, nothing ever happened. Well, how much are you paying for all that nothing? Kind of a premium price. I’ll do it for 10% less. Well, okay. So how do you become impervious to the low-price threat if all you deliver is nothing? You’ve got to show the customer over and over and over again online all the great work that went into achieving that nothing outcome. They’re not going to go in the riser room with you. They’re not going to walk the NFPA 72 inspection. They’re not going to do that. So what you’ve got to do is virtually show them all the challenges you found when you were there. You’ve got to show them online what you plan to do about it. And so what happens is, when you show them again and again and again all the work that goes into them having a strong assurance that nothing will ever happen, they’re happy to pay a premium for that. But if you don’t show them anything, you can’t charge them a premium. So you’ve got to show them. That’s how we coined the whole idea of Money for Nothing. It was actually based on the Dire Straits song, where you have this comparison between the rocker — Dire Straits — and the blue-collar guy who was saying, gee, why is it that the rockers get the girls? Why do they get the money? Well, they’ve got a better business model than a lot of the blue-collar guys, because they’re selling what makes us feel good. Well, if you show your customer all the stuff you do, they’re going to feel really good about you, and they’re going to pay a premium for that feel-good. They’re going to pay more than just the labor and the parts. They’re going to pay a premium for feeling good about the fact that nothing ever happens here.
Paul Giannamore:
That’s brilliant, because every residential and commercial services business faces the same thing, whether it be pest control, lawn care, fire protection, you name it. If they’re paying for nothing, they don’t want to have the problem. How is pest control — no rats, no roaches? It’s just the absence of a problem, and people start questioning, what am I paying for? I don’t have a problem, why do I have to pay you? And it does make you subject to price competition. So what are some simple things that you talk about demonstrating to your customer — what it is that you’re doing? What are some very basic and simple things that businesses can do to communicate that?
Billy Marshall:
I’m sure anyone who has a teenage child or is around a teenager has noted the popularity of TikTok, as an example. Back in the day, it started with photos — Facebook, photos, photos, photos. Now it’s evolved to video. So the simplest piece of advice I can give you is, get your technicians dialed into the idea that when they see something good or bad, they need to video document what’s going on, and you turn that back to your customer. Those little vignettes will ground them in the reality that you’re facing, and they will embrace that reality with you. If you think you can do it with comments, if you think your techs are going to type out a bunch of stuff, you’re wrong. So just get them — and by the way, this whole generation coming up now is all about video. If you can please just get your technicians to video document the things that are important to the customer, and you can turn that back to your customer, that’s probably the single biggest thing you can do to become more valuable to your customer and to pull them into the story of how you’re delivering value for them. If you’ll just do that, you’ll find they will respond. They will engage with you. They will pay you a premium. You take your car to the shop these days, and at the end of the visit you get a video back from them that says, hey, I’ve got your hood up, I’m looking inside your air filter, it’s a little bit dirty, we’re going to go ahead and change that out. I’ve checked your brakes. And they show you the measurement on the micrometer where they measured the amount of life you’ve got on your brakes. They pulled you in. If they’re doing that, you’d darn well better begin doing it as well. You go to the dentist now — they don’t just show you the x-rays, they show you all the photos of the inside of your mouth. People are becoming conditioned to seeing the story of what’s going on. So if you can do one thing, it’s videos. If you can’t get them to do videos, at least get them to do photos — but videos, if you can get them to do videos, I would say that’s the number one thing you can do to become more valuable to your customer.
Paul Giannamore:
I have a question on that. You talked about how you go to the auto shop, they take a video — that’s their location, that’s their commercial establishment, they’ve got video in there. I do hear business owners get concerned sometimes nowadays, with the proliferation of technicians and employees having phone cameras and so on, about video at somebody else’s location. You’re going out to service a place. Are there any concerns about taking videos?
Billy Marshall:
In some cases, for some locations, huge concerns. You know, there are certain places where you can’t take your phone with you. So you know what? Those are special-circumstance customers. That’s not run-of-the-mill, and those are probably really good customers to have. I would actually engage with the customer in that case and say, hey, let’s figure out how to do what I need to do anyway. Maybe it’s on your private network. Let’s find a way for you to have what you should have while maintaining the security protocols that you absolutely demand. Let’s figure that out — instead of just, you know, I can’t tell you how many times I have customers tell me, oh, my customer won’t do this, won’t do that, won’t do the other thing. I said, well, have you pushed back? Respectfully. Push back respectfully and say, hey, we need to solve this, because I can’t give you the kind of value you deserve if you insist that we can’t take advantage of some technology and some other things. So let’s figure out how to do that. I remember way back in the early days of Red Hat, I had a boss, the COO of the company, who was building a house. Very nice house — the house was $100,000 over budget on the flooring alone. Building a crazy, crazy nice house. And we had this IT guy from Red Hat who was talking to him about wiring the house with Cat5 and all the other stuff. I said, Tim, you shouldn’t do a lot of wiring. You should mostly have everything be wireless. The IT guy said, that’s not secure, somebody will hack that. And I looked at the IT guy and I said, Tim, if you listen to this idiot, you’re as big a fool as he is. I said, everything’s going to be wireless. But yet again, somebody says something, you just take it for gospel. No, no, no. The world’s full of idiots. Push back. Push back. Try to find a respectful way to get them the value they deserve, while you also get the motion that you need to do the business effectively. Sometimes you won’t get any compromise. But a lot of times you’ll find somebody that’s willing to collaborate with you, so that you get what you need in your work motion and they get what they need in their work product that comes out. But you’ve got to push on it a little bit. Sometimes you won’t get anywhere, but you should always, always push and see what you can get.
Paul Giannamore:
Do you have a third book on top?
Billy Marshall:
I do not have a third book right now. But if I did — I just gave a talk at our last Digital Wrap conference. A lot of people, everybody’s talking about AI, right? AI, AI, AI. And I showed them some video clips from the 1984 movie The Terminator. So The Terminator was perfect AI, and James Cameron had to demonstrate that this was actually a machine. I don’t know if anybody remembers how he did that, but what he did was he showed Terminator vision. In that vision there was a bunch of computer text gibberish flashing through his field of motion. Now, of course, computers don’t do that. That was a human. You know, the theater people would call that mise en scène — how are they demonstrating, through what I’m seeing on the screen, the set of circumstances that are being faced? There was no computer mouse then, there wasn’t any of that. So Cameron had to demonstrate that this Terminator was a computer that was ingesting what? Massive amounts of unstructured data, in order to make a decision about the next step he would take to achieve the mission. What was the mission? You remember the mission from the first Terminator? Terminate Sarah Connor. That was the mission. And so Cameron was talking to us about AI in 1984. He demonstrated to the audience, through a set of imagery, that this was a walking, talking AI machine. We wouldn’t call it AI then — it was a cyborg, and blah, blah, blah. There’s one engagement in the movie where Sarah Connor is with Kyle. Kyle’s the guy that’s saving her from the Terminator. And she says, look, I’m not stupid, they can’t make stuff like that now, this Terminator thing. I am not stupid. They cannot make things like that yet. Not yet.
Paul Giannamore:
Not for about 40 years.
Billy Marshall:
And I just looked at everybody and I said, well, 1984 plus 40, that’s 2024 — that’s now. So I said, James Cameron’s brilliant. He’s right. NVIDIA just became the most valuable company in the world. AI is taking over the world. So if I had to lean into a new book, it would be, you know, as a service contractor, you are the risk terminator. Your job is to ingest a bunch of data, structured and unstructured, have a machine get through all that data, and then you make the next decision for your customer about what you need to do to achieve the mission — which is to eliminate risk for the customer. You are the risk terminator. So if I wrote another book, it would be how the service contractor becomes a risk terminator for the customer using AI. That would probably be the topic of the book.
Paul Giannamore:
Well, I love it. Let’s talk a little bit about it right now. I mean, AI is such a complicated topic. We’ve talked to a lot of folks here, and there are a lot of questions, like how does the average business owner use AI in his business? That was a topic of conversation yesterday.
Billy Marshall:
Well, if you go back to that Terminator example, I think AI can become effective if you understand your mission, if you understand what you’re trying to achieve with it. If it’s just technology, then ultimately I think you’ll flop around in it. So first, like I said, I think a great mission statement is, how do we terminate risk for the customer using all the data sources we can possibly get access to and running them through a set of machines — such that, boy, if I had a human, they could spend a thousand hours running through all those same records. They’d probably come to the same conclusions, but I might be able to get to that conclusion in a matter of a couple of hours, with the machines learning and working through it. So I say, number one, settle on what your mission is — like terminate Sarah Connor — settle on what your mission is, and then go look for the data sets, look for the patterns that you would feed to the machines to try to give you an answer that lets you take the next step in that mission. So I’ll give you a couple of areas where Service Trade is innovating in order to do that. This idea that, gee, if you gave a technician three hours to do a review of a particular piece of equipment and all the service history, they would probably become pretty smart about that, and they’d probably know what step to take next for that equipment to be better. Well, one of the things that we’re releasing is that in our mobile app, the technician can pick a piece of equipment and say, will you summarize for me, AI, the last four years of risk, service, and things that I might want to be looking out for? And it turns out it does a really good job of grinding through maybe those 25 service calls, maybe those 400 records associated with that riser, with that alarm system, giving back, hey, these are generally the things you should be thinking about while you’re here, because this has been the history here. And it’ll put that in a short, readable paragraph. But again, the mission in that case is to get the technician up to speed quickly. So if you settle on a mission statement, you can probably find ways to achieve that using AI. I talked about doing video. AI is really good at transcribing that unstructured video data into structured text. And then you can say, gee, take all of the jargon out, take all of the bad grammar out, and make this a high-quality comment for the customer. And AI is super good at doing that as well.
Paul Giannamore:
So you’re saying you’ve got a technician who takes a video, explains the problem, the situation, how it was solved — it’s on a video. The technician’s not going to take the time to type it up, but he can take 30 seconds to do the video. Now the video not only can go to the client, but also AI can interpret the video, remove the naughty words, remove the jargon, and it’s very simple. Here was the problem, here’s the solution, here’s what we did, so on and so forth. AI can clean it up.
Billy Marshall:
The same way a good administrator in the office could clean it up by sitting there and listening to it, AI can do that same exact thing very, very effectively. You just got to convince your techs to do more video. Absolutely.
Paul Giannamore:
Interesting. Now, is Service Trade able to do that at this point?
Billy Marshall:
So we have actually released that capability in what we call early access to a handful of customers, and by September that’ll be fully enabled inside of our platform. And of course, we’re standing on the shoulders of giants. Amazon is our artificial intelligence platform partner, and this is so important to them that, getting this feature done, they actually paid us to put it out there. They spent $80,000 for our engineers to work on these features and put it in our platform, because they understand that once our customers get a taste of it, they’re going to thirst for more and more and more. So we’re going to be writing bigger and bigger checks to Amazon for using their AI engine. This market is so important that the giants are seeding the market to make sure the capability gets out there.
Paul Giannamore:
Well, you know, at your shop there, how does something like this come up? Did you guys determine, hey, we need to be able to process these videos on behalf of our clients, get it out to their customers, we need to find an AI solution — and then you have a chat with Amazon? Is that effectively how it works?
Billy Marshall:
Well, it starts back just a little bit further than that, in that we’ve got institutional investors. They are all amped up about not getting tripped up by AI, and instead being a leader in AI. So they lean on us — hey, you’d better go figure it out, because somebody could upend you if you’re not first. So go figure out how to apply AI to your market. So it sort of starts there. Then we organize the company with resources that are pointed at solving problems with AI. They go out and they brainstorm, and they meet with customers, and they look at other things going on in the market, and they come back with things that we ought to be examining, that we ought to be innovating in. Then you engage your customers and you show them things and say, which of these things seems to be more valuable to you? Which one would be more valuable? Well, you’ve got your own opinions. And that’s generally how innovation works as well. There’s a set of pure research things that occur, then there’s a set of testing that occurs, and then there’s the winnowing process — some winners, some losers. And eventually you end up with durable innovations in the hands of customers who are happy to pay a premium for it. But it started with an investment thesis: if you don’t get there, then somebody else will, and they’ll invest. You’d better have a plan, because if you don’t have a plan, somebody will upend you.
Paul Giannamore:
And ServiceTrade has financial sponsors invested in the business. At the actual fund level, the private equity advisor level — do these firms have internal AI-type groups working with portfolio companies?
Billy Marshall:
Absolutely. So there are two types of partners inside of these firms generally. There are the folks that run the fund, the financial types, and then they will have vocational partners that are responsible —
Paul Giannamore:
Subject matter experts.
Billy Marshall:
Subject matter experts, exactly. And yes, there is definitely a footprint of AI-related, what they would call operating partners, that ride herd on the entire portfolio on what are you doing about AI. And interestingly enough, as I said, 10 years ago nobody with capital really cared a lot about this space. Now everybody cares about it. We’re kind of the belle of the ball in regard to the portfolio management of our customer base from our financial sponsors. And the AI partner basically said, boy, this is an area where Service Trade has an amazing data set to get value out of AI. So they’re very bullish on what AI is going to do with this data set of equipment, repair records, deficiency records, history. We’ve got over 13 million assets in the system that tend to exhibit trends and other things. And historically, if you recall, five, 10 years ago, there was a lot of talk about Internet of Things — IoT, IoT. Well, the problem with IoT is that the signal-to-noise ratio wasn’t great. There was a lot of data and not a ton of signal, so people got fatigued with all that data. I actually think now AI is going to deliver on the promise of IoT, by eliminating all the noise — because artificial intelligence is going to get through all the noise and instead provide the signal of, gee, this piece of equipment in this type of environment will exhibit these types of failure conditions. At this point in its life cycle, it’s time to get it out of the way, instead of waiting for the failure condition to actually show up. So I think AI is actually going to deliver on the promise of IoT that became difficult because of the low signal-to-noise ratio.
Paul Giannamore:
That’s interesting. Let me ask you, in closing, Billy — you’ve been in the space for a long time, you’ve seen a lot of evolutions here, and I’m wondering what you see in the whole sales and marketing arena for your clients, the clients of Service Trade, the guys out there actually doing the fire protection business. How has advertising and marketing changed over time?
Billy Marshall:
Boy, that’s actually a really good question. I encourage our customers, if you don’t have selling and marketing as a core competency, you need it. And they’re like, why? My phone rings, I’ve got more — but the most popular response is, I’ve got more business than I can deliver on anyway. I hear that a lot. And so the challenge that I’ll put out there is, I say, are all the customers you currently have great customers? Are there some that could be replaced by better customers? And they’re like, yeah, there are some customers that aren’t optimal. I said, are you measuring them, and are you classing them as A, B, and C customers? Are you doing that? Have you defined a profile for your A customers? Have you defined a profile for your B customers? Do you understand what makes a customer a C customer? All right, well, if you’ve done that, what would it be worth to you to put on a sales team to profile the A customers and to launch a sales team at A prospects? Go find all the prospects that look like your A customers and put a pitch out there for them to come on board your platform. Fire all of your C customers. Figure out how you point your sales team at your B customers to get them into an A pattern. And how do you maximize the pull-through sales that you have to your A customers? Because if you can build up a great backlog of work, you can build a better schedule. If you can build a better schedule of planned work, you can build more every day for every technician. So it’s very important that you have a sales team building a great backlog of A and B-plus customers, and a backlog figuring out how to get those B customers to become A customers. That is an investment that is absolutely worthwhile, and you need to figure out how to do that. If you do that, you’re even more valuable to the next person. Why? Because you can build up an even bigger book of business that has that predictable pull-through, that predictable return, based upon the number of technicians that you put to work. And of course, you’ve got to get into the business — your marketing should also be pulling technicians into your business, because they see, boy, the people that are operating in this business seem to be very content with their work patterns and very content with the quality of the customers they serve. So your marketing will serve two purposes: not only to attract prospects, but also to attract labor.
Paul Giannamore:
Yeah. I think people don’t often think of that. That’s a very important aspect of it. Well, Billy, listen, I really appreciate you taking the time to sit down with me. It’s been a fantastic discussion. So thank you.
Billy Marshall:
Thank you for having me. It’s a pleasure making your acquaintance. And given the amount of capital flowing into this thing, I think I’d be bullish on Potomac as well.
Paul Giannamore:
Indeed. Thank you, Billy.
Billy Marshall:
Thank you.