Jim Kolchin on Building the Future of Contractor Commerce

The new trend now is the B2B2C. It basically allows contractors to build a bundle, Amazon style, really easy, great experience for technicians to go on distributors' website, order a bundle, and then send that out to the homeowner. And then from there, that's where the industry stops right now. The natural evolution is actually to allow the homeowner to pay. And that's where iWallet comes in. Most trade leaders are working harder than ever and still stuck. There's a better way to compete, and it starts with people. This is Blue Collar Smart, hosted by Hugh Hornsby, 40-year trade executive, industry award winner, and the only media voice built for leadership on both sides of the trade. Every episode, one truth, one action, one step forward. Welcome to Blue Collar Smart. This is Hugh Hornsby. I am so excited. I've got my good friend Jim Colchin here, but we want to talk about something that is near and dear to my heart. It's called Blue Collar Smart Built Different, Underdog Proven, Trades Tested. It's the only podcast that goes both to the trade side of the business and the wholesale side of the business. I'm excited today to have a good friend of mine on who is a founder of iWallet. But we're going to, Jim, let's let you tell a little bit about your story. I think you're on your, what, fifth startup. Is that correct? That's right. Depending on how you count. Right. If you count the failed ones, it's actually probably more than that. But, yeah, thanks, Hugh, for having me. I'm Jim. I'm the founder and CEO of iWallet, but I've also started some other companies. I'm also a contractor. I still have an active license called C20 here in California. I'm an HAC contractor. So thank you for having me. So, Jim, when we talk about – so you've had, what did you say, five startups, seven startups? So, but let's take a step back because when we talk about our industry and the HVAC, the plumbing, the electrical side of the business, and even all the other trades, we kind of look at it as being a blue collar industry, a hardworking industry. What I really always loved about your conversation when I first met you was that, you know, you it's not like you got started living in San Francisco, which is where you are now. But I think you got started in was it Russia is where you got started. Right, right. Well, I was born in the Soviet Union and, you know, kind of second generation repairman. I came to this country in 2002 with $200 in my pocket and started my first business about a year into this and grew that from zero to eight digits. and, you know, kind of appliance repair and HVAC is where I, you know, built my scars in the industry. And, you know, I still do it. And iWallet kind of naturally became an extension of that because, you know, typically you do what you're interested in. And, you know, this is where my interest lies in helping other contractors. And now, you know, we're kind of working both with contractors and distributors. We're bridging the gap, the fintech gap, between the contractors and distributors. So explain to everybody what fintech really means. Yeah, so FinTech is a financial technology. What I've realized after starting my own business back in 2003, and I was a Bank of America customer, and they signed me up for this credit card processor called First Data. and every year they would keep raising my processing fees and every year I would look at my credit card statement and really be upset about how much money they would charge me and not understand what can I do about this. This financial technology side of the game has been a mystery to me for many years. and finally I decided to sit down and try to figure it out. And my first kind of stab at it, my first try was a startup called SwipeToPayless.com. Remember those little swipers that came out when we just had our first wave of smartphones? We had little swipers that you would plug into the phone. And I thought, okay, so that's one way to save money if you swipe, the famous card present transaction. Because that's what usually people in the field cannot do is swipe cards. And you get punished for that by credit card companies. And so that was one way. That was one way of doing this. And then as I started to think about this more and more, I realized that this is a whole new world out there of financial technologies. It's not just credit cards, but there's also checks processing. A lot of the people in the home service space take checks. about 30%, in fact, we see on average. And ACH is another interesting platform, financing, so and on and on. So the more I started thinking about this, the more I realized that it's a really complicated world for a typical contractor or a distributor. And we didn't really have anybody of representing blue collars, right? And really didn't have anybody explaining it to blue collars. And that's where I saw the opportunity. And that's how iWallet developed. And that's how it started. Explain to the listeners, because we have people that are both from the distributor side of the business, and we have people that are from the trades side of the business. Can you kind of explain how your platform works for them? And did you start it off with contractors first before you brought the distributors in? Or how did you go about that? Our first product was actually checks processing for contractors. Because you'd be surprised that a lot of people think, well, checks don't exist anymore. But people still write checks, right? And when you have a business with five or more employees, the more employees you have, the more difficult it becomes to collect those checks. And I'm sure it really resonates with the contractors watching us because those checks need to be delivered. And it's usually FedExed or Dropboxes or they have a little remote scanning machine that they use. And this is something that we solved really well. It's essentially a free checks processing solution when they do credit card processing through us. And that was our first product that we became really successful with. We're now processing over a billion dollars annualized. Say that again? A billion, yeah, a billion dollars. Last month has been a big milestone for us. We grew 16.9% month over month, and our annualized what we call total processing volume, TPV, exceeded a billion. And that's what that – Jim, is most of that the contractor base that you're dealing with? Correct. Correct, yeah. Contractors is exactly who we help And for distributors you know after interacting with many distributors as part of my everyday life being a contractor I've realized that there is another interesting opportunity for distributors. So historically, if you think about distributors, historically, distributors used to take all of the orders over the phone, right? It's in person at the counter or over the phone. And sometimes on napkins. Right. Or by fax, right? We used to have those as well. Yeah. And then in the early 2000s, a lot of distributors started using websites. They registered a website. You know, we had a dot-com boom and people were like, okay, I got to register a website. You know, I have my business card now, right? And then Google showed up and started showing you in Google results that people started doing SEO. Then distributors quickly realized that contractors can order parts off of their websites. So a lot of the distributors started adding what we call B2B capabilities. So a business to business. You could log in to a distributor's website as a contractor and order parts. And then kind of a natural evolution of that, some of the distributors started thinking about helping their contractors sell directly from the distributor's website, right? Kind of the B2B. Explain that a little bit, Jim, how they kind of figured that out. The reason why it came is distributors, especially after COVID, started to realize is that there is an opportunity to sell more, to sell it more efficiently by using digital channels. Right. One of the largest distributors, Wasco, I think we recently seen a press release. They're claiming up to 60% of their orders go through digital orders now. So say that again, Jim, because that's a huge number. 60%. Yeah, Wattsco is like, they are a player. Yes, Wattsco is one of the largest players in the industry. And they're moving the industry in that direction because other smaller distributors, And we just had a great show right at SWA, Southern Wholesalers Association on the Marco Island. We met a lot of smaller distributors and more and more of the smaller distributors are starting to understand the importance of digital. For some, it's a priority. And I think you heard that a lot at SWA. There were certain ones that were like, hey, we're not there. But there were other ones that said, we're definitely going in that direction. I think Hidjoka was one of the ones that said, hey, that's the direction we're going. Is that correct? That's correct. Yeah. Some of the leadership that we met at Hidjoka, they totally understand this. And that's the trend that we see. the bigger distributors that kind of have the bandwidth and have the resources to see the trends, they are doing it. The smaller distributors, unfortunately, they're just so busy working in the business, they don't have time to work on the business, right, due to lack of resources or for some other reasons. And so what we're seeing the overall trend now is for distributors to move to the so-called B2B2C model, where they would allow the contractors to basically build a quote. They would help contractors sell the bundle solutions, right? Because that's what it comes down to. When you're a contractor, you go to a distributor's website. This is something that most of the people don't think about. But there is a whole industry out there called UX, right, user experience, which distributors don't think much about. But the user experience for a contractor, when you log into a distributor's website as a contractor, you see a whole bunch of SKUs and model numbers. And, you know, go try to navigate those thousands and sometimes tens of thousands of SKUs and go try to find something that you really need. And some of those SKUs are not even online. Right. One of the problems that we see, some of the partners that we work with, the data companies, are saying that, you know, manufacturers sometimes submit those spreadsheets that are not even normalized. So distributors cannot even add all of those things that they sell to a website. So there is no easy way that UX is really difficult for a contractor. Explain UX again, because from a contractor standpoint, it sounds like there might be a disconnect, at least right now, between the contractor and the distributor. Can you explain that a little bit? Yeah, yeah. So the, you know, the contractors and distributors, they kind of live in their own worlds, right? Distributors, they don't, most of the distributors, they don't fully understand digital. And they just think, well, let's just focus on finding good contracts, you know, putting out a product on our website. And the contractors will figure it out. Right. And it's such as distributors, by the way. Manufacturers also think the same way. Contractors will just need to figure it out. We'll make it happen without really asking contractors because contractors are not that easy to get a hold of. Contractors are busy, right? They do their own thing. They work in their own businesses. and then what happens is there's a bunch of software that's built by manufacturers and distributors that is not really a good fit for the contractor to use and then the manufacturers and distributors get frustrated and say, well, how come contractors are not using it the way I want it to use? We've built it. Why are they not using it? Well, that's exactly what we're trying to solve. is we're bridging this gap. Can you kind of have a conversation on how you're trying to solve that? And because I know it's almost like, I was calling you the Wayne Gretzky of hockey. You know, he always said, you know, he went where the puck is going to be. And right now, I think there's a lot of distributors that are, you know, the puck is right there with them, but where the market's going. And we know it's going there a lot faster than we realize. How does iWallet work with a distributor to kind of bring, maybe do a partnership? Do you do maybe pilots and partnerships? Or how do you go about that? Yeah, yeah. So what we've built, what I was mentioning earlier, the new trend now is the B2B2C, right? It basically allows contractors to build a bundle, Amazon style, really easy, a great experience for technicians to go on distributors website, order a bundle, and then send that out to the homeowner. And then from there, that's where the industry stops right now. That's where the natural evolution is actually to allow the homeowner to pay. And that's where iWallet comes in. So the next step is once you send that bundle out to the homeowner, iWallet would add a payments solution, card check, financing, whatever have you. and would allow the homeowner to pay and place the deposit on the equipment immediately and really expedite the process. So, you know, we like to kind of say it's the Home Depot experience, right? So you know Home Depot has the resources but we really want to bridge that And Home Depot has the people and the staff to understand that But we want to build it so that even smaller distributors would have Home Depot experience like all better that they would provide to their contractors. Right now, I think the biggest challenge that yet may be the biggest challenge you have, you got to tell me, is that a lot of those smaller contractors just aren't, you know, the digital side of it is not something they've spent a lot of attention to. How are you working on that? And are you looking for small distributors maybe to do some type of partnership or pilot with their marketplace? This is still early days. And we're definitely looking for new distributors, kind of early adopters that would understand the importance of bridging this gap between what contractors want and what distributors offer. And our goal is to really improve the digital experience. Because that's the lag that this industry has. And we see like even some of the best distributors out there have really low, like in a 10 to 20 percent range, adoption of digital technologies where the world is moving much faster. And, for example, we know that most of the technicians and contractors out there have smartphones, right? 95% of them have smartphones, yet only 20% of them order things using the smartphone, even though it would be more convenient for them to do so. And so that gap from 20% to 95%, that's what we're trying to bridge. And that's why we're constantly looking for more distributors that understand the gap and the ones that want to bridge it. Let's go back and talk about that package that you were talking about, because I think that's where a lot of times distributors get kind of confused on how that works. Does that package start with them? Is it more HVAC than plumbing? Or have you really figured out, you know, when you talk about packages, what that really means? The packages could be for both for HVAC and plumbing. As an HVAC contractor, I can tell whenever I would order a furnace, you would always need some other things along with the furnace. A lot of times, it's great to also, if they have an air conditioning system, it's great to order a pad for the condenser and the condenser itself and the disconnect box and the thermostat and the whole thing. Same for the water heaters. You're not normally just ordering the water heater by itself. You order a whole bunch of other things, the valves and everything else that usually the counter people are supposed to be trained for. But there is a shortage of salespeople out there, the shortage of people that really understand what a bundle is. and as a result, it's a poor experience for the contractor because if you're missing one valve, if you don't have a thermostat, you can't install the whole system. So it's a bad experience for the homeowner, bad experience for the contractor. You're wasting a lot of time. The contractors are complaining then, well, who's gonna reimburse me for that missing part, right? Because I just spent two hours for my guy to be there to sit at the store to wait for that part to arrive. So there's a huge disconnect. And we make it easy to create those bundles. We make it easy to track the availability of those bundles. And overall, we make the net promoter score, what we call NPS, for the contractor much higher. As a result, contractors will sell more and they will buy more from you. So it's a win-win for everybody. I would think, Jim, I think there were 800 to 900 private equity companies that were bought by private equity in that HVAC model, probably a lot more. And when you take a look at what's going on with PE, private equity, and the biggest thing they're trying to do is to create systems and put themselves in a position to, you know, just streamline and maybe even wrap companies in together that this type of product would, the PE companies would have some interest in that. Yep. The PE companies actually seem to have a lot, they're a lot more organized, right? Especially, you know, some of the biggest ones. And they have different models. Some models that are, the distributors are not so excited about because, you know, PE firms are a lot better negotiators than, you know, mom and pop shops. Right. And PE firms definitely do things in a bit different way. Where we help those companies, you know, they already have, a lot of them would already have what we call a self-serving branch, right, where there are a lot of parts that sit in their warehouse and the distributor becomes an extension of them, right? So they have their own set of solutions and problems. What we help those PE companies with is we help them with our typical accounts receivable solution. That's where we help the PE firms. Now, there are also PE firms that play on the distributor side, right? So those folks should be able to benefit from our package solution. So our package solution is primarily designed for the smaller guys on the distributor side. And it is like 60%, if you think about it, 60%, I've heard this number, 60% of the contractors out there have five employees or less. right it's not all pe firms there are a lot of small really small businesses out there they're the ones that need help and they're the ones that struggle with the current status quo and you know with the current experience that you usually get from distributors and that's who we are out to help you've got a really nice audience out here and as as you talk about what you're doing and you want to move this thing forward, how do people get a hold of Jim? And how do they, if they're interested in doing a pilot of some sort, how do they get a hold of Jim Colchin and iWallet? That's the way usually distributors would start, right? They would usually jump on the demo with us. My email is jim at iWallet.com. or you can go on our website, iWallet.com and find the contact information there. And then once we show them the demo, once they see, you know, if they like it, then we can do a pilot, usually for a couple of months. And if all goes well and they see that the traction is real, then we'll roll it out to their whole, you know, distributorship, however many locations they have or however they work. Yeah, and I would think if you take a look at distributors, and I know small to medium-sized distributors that are really trying to figure this out. And I think when you take a look at the market this year, it's pretty flat for most companies. And, you know, I would think that companies would be able to really take a good hard look at this. But it I guess the other question I have is that you got the bundle that works and that works for the distributor How does the payment plan that you already have in place with iWallet does that work for the distributor as well We don't replace, usually we don't replace distributors' own payment system, right? Whatever they have, that's a common misunderstanding. Whatever they have, they can keep. What we come in, what we help is we manage merchant services to the contractors. So distributor doesn't have to worry about creating credit card processing accounts or checks processing accounts for their contractors. We handle all of that, including customer service on the back end. So it's really a plug and play. and the way it works is a contractor would create a quote, send it to the homeowner, the homeowner would accept it, pay for it, and then immediately a part of the payment will go to the distributor. And usually it's an ACH transaction, so you don't have to really sign up for anything new. It would just fund your bank account. And the other half of the payment would go directly to the contractor. So we have the capability to split the payment and make it seamless. And so the actual payments processing is actually done on the contractor's end. And that's what iWallet handles. That's what we specialize in is payment services to contractors. And, yeah, distributor would just get their portion for the equipment. And so one of the advantages for distributors, of course, is that they wouldn't have net 30s and net 60s anymore, right? Which is like a 200-year-old technology. Say that out loud, Jim, because that's not a small deal. That's a big deal. Say that out loud. So no more net 30s, no more net 60s. DSO, daily sales outstanding, is something that the C-suite distributors always fight with. And right now, I think it's over 40 days on average in the HVAC space. but with this technology, you're getting rid of this old paradigm that was actually invented by Danson Broad Street, right? Business credit. And I was going to say, a lot of those aren't net. A lot of those are like 2%, 30%. And so now you're really talking. And you have to finance it, right? You have a lot of money outstanding and it's really expensive to do business this way. So you save a lot of money. Jim and I have had a lot of conversations. And the one thing I love about what's going on over at iWallet is that they're a little bit ahead of the curve, but the curve is catching up. And when you said that WatchGo was doing 65% of their transactions off the internet, I kind of thought about going to Starbucks and, you know, how many people are just using their phone to order their product off of Starbucks and they never even go in there. So, I mean, that's just the direction of where the market is going. And, you know, Jim, congratulations. And by the way, seven startups, I don't care how many you have. If a couple of them failed, congratulations. Congratulations. That's a big deal. I got to thank you. Growing up in Russia, you did not have an idea that this was a direction that you were going or maybe you were. Can you talk about that? No, yeah, it's I'm really grateful to this country for allowing me to open up my entrepreneurial capabilities. You know, this is the best country in the world to be an entrepreneur. And while I've had some business ideas growing up, it's really an amazing opportunity to do a change, to create new things. And yeah, it's just the beginning, right? I still have a lot of ideas and it's exciting to change the world from here. So when I was a kid, I was diagnosed with epilepsy at a young age, and my mom used to always send me upstairs when I would go complain about something. And she said, hey, take this yellow pad, fill it out, come back and tell me what you're going to do differently. And so I want to ask you that question. What is your yellow pad moment that you can share with the audience? that is a moment that you feel like really changed your world and could change somebody else's? It's probably, you know, just learn to be grateful for things. And once you are grateful, once you realize, you know, how much better our current world is comparing to the previous 2,000 years or, you know, 10,000 years. and then you start thinking, you know, what can I do to make this world even better for the future generations, right? And, you know, the more you think about this, then you kind of develop this muscle of seeing things that other people might not see. and that's where you really start changing the world. I love that you said it was a muscle because I think it is a muscle and a lot of times that's between your two ears, right? That's right. That's a great statement. The last thing that we usually do is that there's going to be a lot of people that listen to this podcast and then a lot of times when the podcast is over, but they say, boy, I wish I would have asked Jim this question. Is there something out there that you'd like to share that maybe when they turn this thing off, they said, man, I wish you would have asked this other question. Do you have something that you can share? Enjoy what you do, you know, and be grateful for what you have. Yeah, and I love it. And the one thing I know about Jim is he surrounds himself with some pretty incredible people. and um jim i i want to say thank you for for joining us um the the time that i've spent with you um you know you're just an amazing person and what you've been able to build is pretty incredible um thank you for for coming on to the blue collar smart podcast built different you know underdog proven and trades tested you are a true underdog and um congratulations for that. Jim, if people want to get a hold of iWallet, and what's the best way for them to be able to do that? And we'll make sure we put it in the show notes as well. Yeah. So the best email would be hello at iWallet.com or shoot an email directly to me. I'm Jim at iWallet.com. That's awesome. And if anybody needs to get a hold of Jim, you can definitely come through me as well. Just want to say thank you, Jim. And I love what you're doing. It may seem a little slow right now, but for those of you that are out there that are looking for a partnership and possibly a pilot, you know, reach out to Jim. I think he's willing to work with you. And it sounds like, Jim, you've got plenty of contractors that are using the iWallet as far as the payment program. So with that being said, I just want to say thanks, Jim. And I want to say thanks to the audience and have a great day. Thank you. Thank you for having me. Thank you, Hugh. I appreciate it. Every great trade organization was built by someone who chose people over price. Blue Collar Smart exists for that leader. If you found value here, subscribe and share this with the operator who's ready for the next level. Built different. Trades proven. Hugh Hornsby, Voice of the Trades.