Sub-20 Branch Cap Model
Size each branch to stay under $20M so central infrastructure can support it without a local management layer
Rather than maximizing revenue per branch, Peterman Brothers deliberately targets Tier 2 markets where the addressable market naturally caps a branch around $15-20M. At that size, the central call center, marketing team, install-management function, and finance stack can support the branch without adding local service managers, field supervisors, or finance staff. The branch runs on three people: a branch manager, a dispatcher, and a warehouse coordinator. This keeps branch-level overhead low and margins predictable. The cap is not a ceiling imposed by the market but a selection criterion when choosing which markets to enter.
- Market selection determines branch ceiling; don't fight it
- Central infrastructure is the asset; branches are distribution points
- Overhead added at the branch level destroys the economics of multi-location
- Tier 2 markets let you win without competing with Chicago-scale players
- Three-person branch staff is the benchmark at full run rate
- Screen markets by size ceilingTarget Tier 2 cities like Dayton, Lexington, Evansville, or Lafayette. The goal is a market that can sustain a business but cannot realistically grow beyond $20M, which is the threshold where you would need to add expensive local management.Pro tipIf the market feels like it could become a $30M branch, skip it. You are not equipped to support that from a central infrastructure unless you add regional overhead.WarningDo not confuse a competitive market for a large one. Tier 2 can still be competitive; the screen is revenue ceiling, not ease of entry.
- Launch with minimal branch infrastructureStaff the branch with exactly three people at steady state: branch manager, dispatcher, warehouse coordinator. All other functions (CSR, marketing, finance, install management, sales management) remain central.Pro tipResist adding a local service manager as a comfort move. If dispatch is overwhelmed, fix the central call-center capacity first.WarningThe $9M Bloomington branch with three staff only works because the central infrastructure is already mature. Do not attempt this model before the central layer is proven.
- Track branch revenue against the $20M ceiling annuallyIf a branch approaches the cap, assess whether central infrastructure can stretch or whether a new market should absorb incremental growth. The branch is not the unit of growth ambition; the network is.WarningA branch that consistently out-earns the model is a sign to open an adjacent market, not to add local management and erode the model.
Peterman Brothers operates a Bloomington branch at approximately $8-9M in annual revenue. The entire branch is staffed by three people: a branch manager, a dispatcher, and a warehouse coordinator. All call center, marketing, finance, and install management functions are handled centrally from Indianapolis. This is the explicit model target for every branch.
Extracted from Owned & Operated ($100M HVAC episode). Chad Peterman described his Bloomington branch doing $8-9M with only three staff as the proof case, and stated the cap as an explicit selection rule when choosing new markets.