Podcast Summary: To The Point - Home Services Podcast Episode: How to Handle Tariffs & Price Increases Like A Pro with Leland Smith and Aaron Gaynor Release Date: April 29, 2025
Introduction
In this insightful episode of "To The Point - Home Services Podcast," hosted by RYNO Strategic Solutions, Leland Smith engages in a compelling conversation with Mike Barnhart of Service Champions. The discussion centers on navigating the complexities of tariffs and price increases within the home services industry, with a particular focus on HVAC, plumbing, electrical, and roofing companies. The episode delves into strategies for managing price adjustments, the significance of membership programs, training methodologies, and operational efficiencies—all pivotal for fostering business growth in a competitive market.
Handling Tariffs and Price Increases
The conversation begins with Leland addressing the challenges faced during the COVID-19 pandemic, highlighting the difficulty in implementing timely price increases. At [00:00], Leland confesses, "During COVID we screwed this up. We got behind the eight ball. We fell short on making price increases quickly." This admission sets the stage for a deeper exploration of effective pricing strategies.
Mike Barnhart shares his approach to price adjustments, emphasizing the importance of benchmarking against competitors. At [02:20], he explains, "The first thing we would do is the prices we're getting that are going up, is it in line with what everybody else is getting." By ensuring their price increases are consistent with industry standards, Service Champions maintains healthy margins without alienating customers. Mike further discusses his technique of presenting price hikes positively to the sales team, stating at [05:48], "I would always walk into our sales meetings... and I say, guys, this is an exciting day for you. Every one of you guys in the room just got a raise."
Leland reinforces the necessity of proactive communication by detailing his method of informing the entire management team about upcoming price changes ([04:21]). This transparency ensures that the organization is prepared to implement adjustments swiftly, thereby safeguarding profit margins.
Memberships and Club Programs
Transitioning to the topic of memberships, Leland commends Mike for his expertise in developing successful club membership programs. At [07:41], Mike elaborates on the foundational role memberships play in generating consistent revenue: "Every club you sold was $500 or more... two tune ups you're going to get next year." This strategy not only stabilizes income but also minimizes marketing expenditures by securing repeat business through club members.
Mike shares the impressive growth of Service Champions' membership base, noting that "65% of our revenues came from the club base" ([09:00]). He emphasizes the critical role of high-quality tune-ups in convincing customers to commit to memberships, stating, "I'd rather you sell a $19 a month club member than a $40,000 job." This approach fosters long-term customer loyalty and ensures a steady stream of work for the company.
When discussing acquisitions, Mike highlights the importance of robust membership programs in potential targets. At [11:05], he notes, "If we were wanting to buy a company, that's one of the first things we look at how many club members they have." Ensuring that acquired companies maintain strong membership bases guarantees continuity and enhances overall business value.
Membership Fulfillment and Metrics
Leland probes deeper into membership fulfillment, seeking Mike's insights on key performance indicators. Mike responds by outlining the metrics Service Champions uses to evaluate membership success. At [13:21], he explains, "We had about an 80% renewal whenever a cancellation came up. Even if they called in wanting to Cancel, we were 80% convert them back into it." This high renewal rate underscores the effectiveness of their membership fulfillment strategies.
Additionally, Mike underscores the importance of monthly credit card payments in maintaining consistent revenue streams ([14:25]). By automating payments, Service Champions reduces the administrative burden of managing renewals and minimizes the risk of payment defaults.
Training Programs and Building Teams
A significant portion of the discussion centers on the pivotal role of training in building a competent and efficient workforce. Mike recounts the early challenges faced when hiring technicians who were unaccustomed to Service Champions' pricing and service standards ([20:51]). To address this, the company developed a comprehensive 14-week training program designed to instill the company's values and operational procedures.
Leland emphasizes the transformative impact of such training programs on business success. He shares a success story of a young technician who, after completing the training, achieved remarkable financial milestones ([26:11]). Mike corroborates this by detailing the career trajectory of another high-performing technician, highlighting the potential for significant earnings through dedicated training and effective sales strategies ([26:42]).
The training program focuses not only on technical skills but also on customer service and sales proficiency. Mike stresses the importance of role-playing and real-world scenarios in preparing technicians to handle customer interactions effectively, ensuring that they can sell memberships and services confidently and competently.
Operational Efficiency vs. Pricing
Towards the end of the episode, Leland raises a critical issue regarding the balance between pricing and operational efficiencies. He questions, "At what point do we stop covering all the inefficiencies inside of the operation with price?" ([27:20]). Mike responds by asserting that Service Champions has consistently maintained high operational efficiency, negating the need to rely solely on price increases. He attributes this success to rigorous management practices and continuous quality control, stating, "We focus on it every day... If a manager comes and says we need to fire this guy because he's not doing the work, I would always ask what did you do?" ([28:00]).
Leland concurs, emphasizing the necessity for businesses to periodically evaluate internal processes to identify and rectify inefficiencies instead of masking them with price hikes. This approach ensures sustainable growth and long-term profitability without compromising service quality or customer satisfaction.
Conclusion
The episode culminates with a reflection on the intertwined nature of pricing strategies, membership programs, and operational efficiencies in driving business success. Leland and Mike underscore that while price adjustments are essential in response to external factors like tariffs, maintaining internal efficiency and fostering strong customer relationships through memberships are equally crucial.
Notably, both speakers highlight the significance of training and culture in sustaining high performance and adaptability within the organization. Mike's anecdote about the technician achieving unprecedented earnings exemplifies the potential rewards of investing in comprehensive training programs.
Overall, this episode provides valuable insights and actionable strategies for home service companies aiming to navigate economic challenges, enhance customer loyalty, and achieve scalable growth through effective pricing, membership management, and operational excellence.
Notable Quotes:
- Leland Smith [00:00]: "During COVID we screwed this up. We got behind the eight ball. We fell short on making price increases quickly."
- Mike Barnhart [02:20]: "We would just raise our prices accordingly to keep our margin. What we wanted a 58% gross margin."
- Mike Barnhart [05:48]: "Every one of you guys in the room just got a raise. Prices are going up."
- Mike Barnhart [07:41]: "Every club you sold was $500 or more you didn't have to spend in marketing for the two tune ups you're going to get next year."
- Mike Barnhart [13:21]: "We had about an 80% renewal whenever a cancellation came up."
- Mike Barnhart [20:51]: "We found the first four or five years in business when we hired a competitor's tech they just wouldn't work out because they weren't used to selling at the prices we're charging."
- Mike Barnhart [26:42]: "A smart kid, clean cut. He did what we taught him. He did it well."
This comprehensive summary encapsulates the key discussions and insights from the episode, providing a clear and detailed overview for listeners and non-listeners alike.