Secrets to Service Champions’ $500M Success with Leland Smith

We were going to be the most expensive, but we were going to pay our people better than anyone else.

And the quality of work had to be there. We couldn't cut corners.
If anything, we would overdo it to do extremely quality work. And customers never complained.
And, you know, they saw the quality and, you know, there's Bentleys and Mercedes and there's Hondas out there. and too many of the people in our market that I see are half our price,

but they do half the quality. They don't do anything that we do.
And that's the difference. We insisted the quality was there, even in the tune-ups.
Our tune-ups were at least an hour and a half. And pulling blower motors, pulling heat exchangers, all of that, the quality was there.

And how we taught our people to get the customer involved to see the quality

so they would buy into that fact that we're not cutting corners, we're not just collecting money.

Welcome to the Home Service Expert, where each week,

Tommy chats with world-class entrepreneurs and experts in various fields,

like marketing, sales, hiring, and leadership, to find out what's really behind their success in business. Now, your host, the home service millionaire, Tommy Mello.
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Now let's go back into the interview. All right, guys.
Welcome back to the home service expert. I've got the man, the legend himself, Leland Smith.
He is based in California, Southern California. He's the founder and chairman of the board at Service Champions, plumbing, heating, and air conditioning.
The man is a legend. It's a pleasure to have you on the podcast, Leland.
Great to be here, dude. So where do you want to start? I mean, what does life look like for you today? Tell us a little bit about the journey of where you're at and what you're looking forward to.
Well, it's been a lot of fun getting here. And in my third sale, I sold in 19 to an equity group and 18 months later, we sold again and it was bought by you know the current Odyssey investments great group and I'm currently the chairman of the board but I was the CEO for about a year or so then Frank DiMarco came the CEO and they put me in the chairman of the board position so it's it's a good group I think we've got a phenomenal operating team that's unbelievable we're performing well it's nice to be around people like that.
So it's a good group. I think we've got a phenomenal operating team that's unbelievable.
We're performing well. And it's nice to be around people like that.
So successful people is a good thing. Yeah.
Now, I know Frank well. I keep bumping into him everywhere I go.
Yeah. And he's very energetic about the business.
And unlike the founders, they still got to go do a lot of work for them to get what they want.

Yeah.

Because you already had two turns.

Very lucky that I did.

So Southern California, you know, I know they're doing what's called, is it called seed clouding?

I just heard stories that the season isn't as long there and it's a real, it's a hard place to operate,

in particular HVAC plumbing. Lots of competition, lots of laws that make it

harder to actually be a good owner. What is your take on it?

Not true. Not for us.
I think you've heard I've always had a group of people, four or five

owners that were always larger than me. And Kevin Comerford up north, he and I always had a

Thank you. you've heard, I've always had a group of people, four or five owners that were always larger than me.
And Kevin Comerford up north, he and I always had a group. And if I was 10 million, we were hanging out with 30, 40, and $50 million.
And when I closed the first time in 19, we were 50 million, but our group was 80, 90, 100, and 120. And they were mainly back east.
And they always would say, if we don't have weather, we're not making any money. We only make money four months out of the year.
And they couldn't understand what Kevin and I were making money every month out of the year. And we're in California.
There's no weather. I mean, 80 degrees out here, they're dying.
And back east, 80 degrees is springtime. And it was all an attitude that we had that we were a service repair company but we called ourselves a maintenance company because clubs were the most important thing so when september came and the weather went away for us here we were still busy our guys would run three calls a day when we were slow and they run three maybe four when we were busy but we were always constantly busy and we were never slow and so whether i think kevin has a saying that whether it's whether you do it right whether you treat your customer right whether you do quality work that's the weather the weather for us here in california made no difference to us And they just couldn't get it back east that 12 months out of the year, we made money every single month.
So it's really an attitude how you approach that. What do you like to make? If I remember right, it was somewhere in the line of 21 or 22 percent.
Yeah, when we closed on 19, it was 25 percent 25 i'll just tell you what do you

tell you a quick story about horizon which is part of a great guys mark mark

aiken and dave geiger were a huge part of my success being with them and they

were we were close we were 50 and they were 100 120 and they just said so

before i did maybe a month or so but um they were good guys, and I even forgot your question now. Yeah, so 25%, you said.
Oh, 25%. I'm sorry, I was talking about them.
There was a meeting that we had, and we're 50, and they're 120. And Frank DeMarco tells me the story that Dave put it on hold and He goes, how in the hell can Leland be in half our revenues making the same money we are at 120 and he's at 50? And it was just the philosophy that Jim Aprons taught me in 1992.
And we really applied it strongly in 2000. We started Service Champions was we were going to be the most expensive, but we were going to pay our people better than anyone else.
And the quality of work had to be there. We couldn't cut corners.
If anything, we would overdo it to do extremely quality work. And customers never complained.
And they saw the quality and there's Bentleys and Mercedes and there's Hondas out there. And too many of the people in our market that I see are half our price, but they do half the quality.
They don't do anything that we do. And that's the difference.
We insisted the quality was there, even in the tune-ups. Our tune-ups were at least an hour and a half.
And pulling blower motors, pulling heat exchangers, all of that,

the quality was there.

And how we taught our people to get the customer involved to see the quality

so they would buy into that fact that we're not cutting corners,

we're not just collecting money.

And they'd get involved in the club membership.

And we saw we had like 25,000 club members.

And I always tell people, every club you sell is two tune-ups you don't have to market for and our marketing expense for a tune-up is like 242 so that's over 500 when you sell but we don't have to market and currently then and now our marketing expense is about five percent and we're well over 110 million. Your marketing as a percentage of revenue is 5%? 5%, maybe 5.1.
That's incredible. We're still running.
I love it. What do you feel about loyalty these days? Because I still have the people I started the business with that still work alongside of me for the most part.
But I feel like HVAC and plumbing, it's like a lot of guys go to the next bidder. Like whoever's going to pay me more this summer, you know? Well, that's the key thing.
Again, Jim Abrams taught me that we adhere to it totally when I was in operations. We pay better than anyone because we charge more.
I'll give you an example. The last two years, I've had two sales guys make $1 million in commissions.
They didn't sell a million. They earned $1 million, and they were selling close to $7 million.
They're awesome. The other guys below them are in the $700,000, $800,000.
They're making really good money because one of the key things we do, again, we learned this from Horizon, Dave and Mark. You got to ask for it.
So if you're out just for a piece of equipment that you're replacing a furnace or condenser, we insisted that every single time the first time, got it from Dave, offer a water heater because we do plumbing. We sold 47 water heaters the first month only because they offered it.
And our price was almost twice what our competitors were, but we did a good job. Then we got to a point now that we're offering water heaters.
You have to offer ducts, replacing ducts, insulation, and they're even offering water softwares now.

But you've got to offer it on every call and let the customer tell you, no, we don't need that now.

Because they're never going to tell you, hey, I want to change my ducts for me or put insulation in for me, any of that.

They're not going to do that, but you've got to offer it.

And if anything you ever want in life, you've got to ask for it. And if you don't ask yeah they're not going to give it to you especially when it comes to money and that's one of the greatest things horizon taught us that we've glided across the board we got to offer it and let them say no i don't want that and one out of four of the water heaters we sold 47 unbelievable and then the ducks is the same thing we're, 40% ducks on every job when we walk out.
And they're not looking for ducks, but we're bringing it up to them. We require the tech to take seven pictures in the attic, bring down to show the customer.
We've even got a video on YouTube that shows you properly how we're going to seal your ducks. And I'm told when they see the video that sells them on it.
So just to see what we're going to really be doing. Hope that helps.
No, I've taken scrupulous notes here. When you start adding departments, when you first started out, I'm sure there was either HAC or plumbing or electric that was like the biggest amount of money.
How do you get all these new departments? Because I've seen you do it. I've seen Dave do it.
I've seen Paul Kelly do it, where you just offer more to your clients. And for me, I've always thought, I've seen you guys do it, but it's not as easy as just adding a bunch of services.
Because you still got to get the supplier agreements in place. You still got to get the technicians trained up.
You still got to be able to turn over a lead that other department. What are some of the things not to do when adding departments? Well, I just say, I don't know what not to do, but I can tell you what to do.
Tell me what to do. There are two to do.
When we started with heating and air conditioning, still are strictly residential, no commercial, no new construction.

I like to sell it on Monday, install it on Tuesday. Tuesday night, we collect.
And Wednesday, I see a job cost report. I wanted to make sure that it was sold right and just understanding.
But when we started, we were only doing day one. We did direct mail, still do still do and we were doing tune-ups and from tune-ups we taught the guys how to turn duct leads equipment leads insulation leads and there's a lot of training because we train every single day and eventually later on we were four we did tuesday wednesday thursday friday but we trained all the time and do.
I think that's a critical part. You get your techs in the room, if it's clubs, and we got guys that were selling 60% and 70% of their jobs clubs.
We'd have them talk to the other techs. So it's called teaching techs.
I mean, I might be in there monitoring it, but I wouldn't be teaching them anything, but I'd find out who didn't sell yesterday why and jim you sold 70 tell him what you would do so that would be the club side but the departments you're talking about i think the first department was ducks and that's i mean when i was in college i was putting installing ducks my father had a company and i knew how easy it was because i was a skinny guy in the attic. All I was doing was blowing.
My brother was throwing it in the box. So not a lot of talent.
So you can teach somebody in a week or two. And right now they're making like a hundred thousand just insulation blowing it in, Texar.
But it's not that hard. It's expensive to buy the truck.
So what we did first year, when we hit a million in revenues, up to a million, we had subbed it out. And the company we subbed it out to was half our prices.
So we made 50% by subbing it out. But once we hit a million, we bought the truck and it's a $40,000, $45,000 truck with a generator on it it and then we also added what we call a whole house attic removal we go in and suck all the insulation out seal all the joints for the rodents put the insulation back in and do radiant barrier about an 18 000 job not a lot of skill to teach these guys we're installers there's a lot of skill and techs are a lot of skill but we did it ourselves and brought it in and i think when i sold we had seven trucks or so doing insulation and they could do a couple jobs a day ducks the same thing it's not a lot of talent you got to do it but you got to be in the attic all day and in our training room we have a built-in attic that's about eight feet off the.
And we put them in there their second week of training at about 120 degrees for two hours to make sure they know this is your job. You're going to be in the attic all day.
It's going to be hot. And we'll lose a couple of guys once that happens.
But to develop that department, it's a matter of getting your pricing. We were at eight run would be about $8,500, about $ dollars a run and we wanted to be the margin around 70 gross margin and we paid the tech who turned the lead five i overdid our sales people to get them excited about insulation paid them 20 and those jobs were eight to up to $18,000 that they could make good money on.

But again, that part was fairly easy. A basic truck, buy the ducts.
You just got to go out there and have an installer teach them how to seal it. In fact, if you look on YouTube, about 17 down now, there's a YouTube has Eric Asensio showing you how we would install the ducts and how we would sell it.
And once they show that, I think I said earlier, once they show that to a customer,

they were really bought into the quality that they're going to be buying.

And so I hope that helps a little bit.

How important is it to use financing?

How much do you think that that made a difference in making that,

whether it was a hot water heater or the ducts? How much of the business was built off of, we call it promotions, but financing?

Financing to me is absolutely huge. We were running about 70% of every job financed.
And the theory is, even if the guy's got money, they don't want to write a $40,000 check.

But they might buy into a $263 monthly payment.

And as we acquired companies, we would see companies that had no financing or 10 or 15%.

But as we taught them, sell the price, offer everything.

Don't just do a $15,000 air conditioning, offer a $40,000 system that has ducts and insulation and water heaters, everything. But don't say 40 first, talk about the payment.
And we've restricted our guys to payments that you couldn't use any financing, it costs more than 5%. We didn't want the 20%, the 36, all the crazy stuff.
But you can sell by the payment then then you can tell them the price. And we found out every company we did that with sold more, the more they use financing, the more customers will let go and sign up instead of letting go of all their cash.
Yeah, I've noticed that too. I want to go back to training a little bit.
You decided to train every day, then you went to four days a week. Did any of your operations team or any of the management say, we're too busy, we've got too many leads coming in? There's a fine line there, and I 100% agree.
Train, train when you're done with train. Train, train, train, keep training.
But how do you work that out with capacity planning? Well, when I was in operations, typically the training was between seven and eight o'clock in the morning. And it'd be very specific.
It may be maintenance checks about clubs. It may be about service checks, about turning leads.
But we did training every day. And my feeling is, if you don't do train and you're focused on just running the leads, you're not going to make any revenues.
You want to teach these guys when they run those leads, how to generate revenue, how to generate leads, how to sell products. But if you're not focused on that, you just want to run the lead, you're not making money.
So you've got to make them really good. I would say like a doctor.
You don't not train a doctor who's going to operate on your brain because you just he's got two more operations that day you want to make them really good. I would say like a doctor, you know, not train a doctor who's going to operate on your brain because you just, he's got two more operations that day.
You want to make sure they're trained to do it right. And the benefit of the company is you've got to keep your installers busy.
You got to keep your, you know, all your crews busy and you owe it to them. So you need to learn that.
And I have a saying that I always told the techs that I don't make a dime unless you make a dollar my life is about you making that dollar so the training was getting them to make more and more dollars and if we didn't do the training for these two guys that made a million dollars last year they wouldn't make it a million dollars they might have made a half a million or whatever but if they made a million imagine how much money we made off of it because we trained them properly And then back to the clubs, that was the most important. If anybody was under 50% of clubs, they were in that day training how to get better at it.
Under 50%. So you sell a club and what was the secret? Because you were involved in the training, at least observing it.
Right. Some of the guys call it a protection plan.
Some of it, you know, you're building a fence around the client. What do you think is the key to selling every single client a club? The key is, in my opinion, is we market primarily for tune-ups when it's not hot or cold.
So when the weather's gone, we're flooding direct mail tune-ups. The tune-up has to be done correctly.
The customer's got to buy into what you're doing and they've got to see it. So when we train this 14 weeks, we train them how to get the customer out to see what you're doing, share with them what you're doing.
And they see that. And most of the time, customer goes, nobody's ever done that before.
So they see the value of it. And they see, you know, we educate them about the electric company, the manufacturers all require this twice a year.
All it does is save you money. And since you're a maintenance customer, in the middle of the summer, if it goes out, you might have to wait two weeks for another company.
We're going to be there the same day for you. And you sell that product the entire time for me, where you park your truck, where you read them at the door, you're building value in everything you have.
And you want to sell that club. And even the call taker, when they take the call, one of the questions they ask, who's your normal maintenance company? They always go, I don't have one.
You don't. Oh man, that's the best thing.
We's your normal maintenance company they always go I don't have one you don't oh man that's the best thing we are the best maintenance company out there make sure you ask Bob about that when he when he arrives about our maintenance program then we dispatch them to it the same thing Mrs. Johnson John's on his way oh by the way I know you're not a you don't have a maintenance company be sure to talk to John about the maintenance program and you'll find half of them will ask them about the maintenance company before they even get to a maintenance program before they even get to it.
So you're always talking maintenance, maintenance. And I would tell you my last year in 19, 65% of our revenues of the 50 million came from the clubs, the maintenance customers.
Those were every day. We never sent a guy home early for any reason.
They always had work. Do you feel like over 10 years, when anybody talks about a club or a membership, they say, you got to make sure you're asking the customer about equipment age over 10 years, you're dispatching to better guys to do better turnovers.
Yeah. We always ask the 10 years older are your sales guys.
We call them either a selling tech or a turning tech that's going to turn the lead to a salesperson or a salesperson. But the one through nine, we're doing millions off ducts and insulation off guys right out of the class.
There's so much there that people don't even talk about. Our competitors don't do insulation or ducts, but they go out and learn how to do that.
We pay them 5%. Like I employed Christian Corrin, who's 21 years old, went through the class.
In the first nine months, he made $100,000, like turning leads. 21 living at home.
Next year, he made $130,000. Next year, he made $150,000 and bought a house bigger than his parents' house.
Now he's married with the baby and he's making a lot of money knowing nothing coming in, only listening to what we're telling him to do and how to go in there and do the tune up right, communicate right, be well-groomed. We're very strict about this right here, you couldn't work for me no beards in the field no tattoos clean uniform always put an extra uniform in the truck so their shirt got dirty you changed it shirt tails have to be in just really clean i think i mentioned also you know these guys in training when we do the interview i'm the last one and i would i've got two gorgeous daughters if one of my daughters was in the house alone with this guy my first thought was what would she think would my wife buy from this guy and i just really in the training is all about hiring personality you cannot teach personality you can teach the technical but a guy's got to have a great personality to walk into a home, talk, communicate, and get to this customer, understand what they're doing and ask for the order.
You don't get them all, but if you don't do all the good stuff before you ask for the order, you're always going to get them. Did you find a little honey hole as far as where to recruit from? Like people say discount tire, sometimes it's restaurants and to get the

bartender or bus boy. Is there any spot that you're like, this was the spot to go to find great people to come work for service? You've done it nearly now, almost 20 years of it.
I know 15 years before I sewed, we had a smaller class, maybe six, we got up to 20, maybe 10 years ago, But we'd get 20 and we'd start the class. But every single week we recruited.
We were looking for new techs. Even if the class just started, the next one's not going to start for 14 weeks.
We would have 25 to 75 people come in. And I did the first ones at the end of it.
I wasn't doing them. But the whole thing was to get these guys in there and women and sell them on the company.

We sold them how great Service Champions was, how well we pay, stories about guys.

Then we asked each person in the room, stand up and give me two or three minutes about yourself.

Explain us what you're doing, what you're looking for.

And we'd have four managers in the back.

And that was the interview, your first interview when they stood up. Then we'd make a note of who we're going to keep there that day in the interview and it was just a group thought about what would this guy's personality work and again if we had 20 in a class like i said we'd lose two the first week when they were all played two in the attic we probably probably lost another two, but out of 20, we'd keep 10 every 14 weeks.

And that's where we built our company because we've always had techs.

We're always, we're training them to get better.

And that's what made the profit there.

That's what made the clubs 25,000, almost 50,000 tune-ups already ready for the next 12 months for these guys.

So that's why we always had work for them. So the training to me was nobody was doing it when we started it, but I got tired of techs working for other companies, were not disciplined, they weren't structured, they couldn't understand our pricing, they didn't understand how to be clean-shaven, how to talk.
I just got fed up with it. I said, we can train this.
And I got one of our good sales guys became our main, Ray Gonzalez, our main trainer. And we've got two of them now for all of us, all of our locations, but we're training, trying to train all of our techs ourselves.
We do get techs that come in every once in a while that are good, but most of them, of the 20 some salespeoplepeople we have, I think 17 came in as maintenance techs, service techs, selling techs for service, and into comfort advisors. How do you, is there any signs, and this is going to sound bad, but do you look for somebody as far as like, are they in shape? And, you know, obviously eye contact, they tell a good story, they smile.
Those are like givens. But what about just the way they, you know, if they're overweight? Yeah, we've not had much, not even failure.
I've got Daniel Andrade was one of our great salespeople and he was a little heavyset. But he got up in the attics and wrestling and we and we told him you're going to have to do this and that's part of it and we never had any real challenges with as long as we were up front with them and then we trust but verify trust but verify a lot of things that they did get in the attic where they had to take pictures and they had to show us that you were there and he was a good sales guy he worked out really well he's the only one i can think of right now i'm sure we had several other ones but i have no recall of that being a challenge at all do you guys send back somebody to check the work out often that's really what the service managers need to do randomly we always want them to think we're doing every call but we'd like to send them out out.
As soon as the guy leaves, five minutes, knock on the door. Don't announce yourself, but knock on the door.
Say, I'm here just to check the work that he did. It won't take me five minutes.
And one guy, I won't say his name. I love the guy.
It was great. We did that and found out he didn't even change the filter on a tune-up and that's obviously the first thing you do so we

called him and said let's go back and look at a couple more filters and he looked at me and looked at the manager and said no i i should quit because you're going to find i haven't been doing the tune so he'd go to the house park in his car for an hour and a half and come out and close it out so you've got to check again reagan's great saying is trust with verify you've got to have people verifying your installs. You've got to verify your tune-ups, your service, and happy calls.
Just calling the customer. I noticed he was out there today, and you didn't join the club, or you didn't invest in the UV life.
There's a reason you didn't do that. And you'll pick up sales on your happy calls, and And you also find out about guys not doing their work.

I think any company, if you don't think somebody is stealing from you, you're foolish. I guarantee there's people stealing from our company today.
We just haven't caught them. We haven't figured it out yet.
Sometimes it's small. Sometimes it's big.
You never know, but it's happening. But you always got to be looking for it.
You tell me a little bit about happy money promise that allows customers to pay what they think is fair if they're unhappy.

Well, from the beginning, my philosophy is treat your employees like family.

Treat your customers like family.

And I remember, again, I was the only one in the office when I started March of 2000, my third phone call. Man called in and said, I've been getting your letters for years.
It sounds too good to be true. And I talked to him.
I said, I'll tell you what. And the man, the tech gets out there.
If you don't like what he's doing, just tell him Leland said you don't have to pay. And that's been kind of the philosophy is if they're unhappy, I want the call center person, make that customer happy on that call, meaning treat them like family.
If that was your mother calling in or your father, how would you want them treated right now by a call center agent? And you do that. I don't care what it is.
Give it away for free. Give them a discount.
But treat them like family. Now, if you made a bad decision, you'll never get in trouble.
I might teach you how to make a better decision, but you got to treat them like family. And that's where the happy money promise came that they knew if they didn't do it and that customer wanted to talk to the owner, Leland, 100% of the time I'm talking to them, it's going to be free.
And I would thank them for letting me know what our tech did wrong. We'll make sure it never happens to another customer.
And then when I hang up, I would go down the hall and find out who did this, what did they do, bring them in, teach them not to do it again, and teach everybody else not to do this. Because customers never call in to complain just for the heck of it.
Somebody in your company did something wrong and you need to fix it. But the happy money promise was simple.
If you're not happy, we can't make you happy. You don't pay.
And we would give away repairs at no charge. But out of 100 calls, it happened once or twice.
Even on equipment, $40,000 systems where competitors are 20, but cutting corners. One out of two might call and we'll discount it.
I mean, I've had calls with customers that say, just, I tell you what, pay me what you think is fair. And I'll take it because 98 of those 100 will pay our price.
And it's a great reputation knowing that you can say on the phone, especially if they're about ready to hang up, but the call center is on the call. And they say, well, I'm going to call around for a few minutes.
We try to teach the call center people to say, you know what, Mrs. Johnson, I know there's other people out there, but we are by far the best maintenance and repair company.
I'll tell you what you do. If you book it today and for some reason you don't like what it is, just don't pay.
Just tell them, I said it's free. 50% will book it right then.
And they don't get it for free. They're impressed with what we do.
But if you were the cheap guy and you're cutting corners, you'd have a major, major problem with the guarantees that we have. Because I just guarantee you, I wouldn't want anybody to get any work that I wouldn't want from my own family or anything else from these guys.
And I want everybody to be the same. I want them to be happy.
I want them to treat customers fair. And that's what we're about.
When I came and visited you, it's probably been three or four years. You can come back anytime, dude.
I will. I'm going to come back.
Hey guys, I hope you're enjoying today's podcast. A quick reminder, the Freedom event is happening on September 25th to the 27th.
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Aaron Gaynor, the owner of Eco Plumbers, a $75 million business. Ken Goodrich, the chairman of Gettle, a $250 million business.
And Leland Smith, founder of Service Champions, a $500 million business. Listen, you can keep doing what you're doing and hope for the best, or you can arm yourself with the proven strategies I've used at A1 Garage Store service.
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Now let's get back to this episode. You had two guys back to back, about 20 feet apart, and that was your reh rehash team and i think one of them had told me i'm allowed to lower the price 40 to try to earn the business i don't remember the exact numbers but i remember thinking to myself obviously a zero hurts more than a discount but how did you do the math obviously it's just a financial calculation you sit down with a CFO and say, how do we recoup some of this business? We're going to gross profit or whatnot.
But explain to me the methodology behind that. The key thing is sometimes salespeople don't always push hard enough.
So if we knew within seven days that they did not have a scheduled call or a scheduled visit, Re would make that call but they also would make sure they did go back on the visit or they did go back on the phone call or they make the call and their whole goal is to find out mrs johnson what was the reason you decided not to go with this today and it might be price it might be something else but if it's price, we would talk to them, let me get Bob back out again. And let's see what we can do about getting to the price.
Or if they wanted to talk about it, they would try to sell it on the phone and send the guy, the salesperson back out to sell it. My philosophy about the 40% was if we had 30 crews and we got four crews not working tomorrow, I would sell it at cost to keep that family's crew busy instead of me trying to make money and that family's going hungry.
So they knew they could do anything they could to get that sale if that kept that family, that install crew working the next day. It wasn't something they would do all the time.
A lot of times they get it full price, but answer some questions or just get the guy back out for another drop or two. But the key thing, if you're not making the phone calls, you're not learning what's going on and you can pick up sales that you would never have before.
Oh my God. I got so many freaking notes.
And I'm not charging anything. Yeah..
That's impressive. There's just certain things where I hear this all the time.
You train, train, train. You get your rehash team.
You got your money back guarantee or if you're not happy, guarantee. But when I came and visited you, one of the biggest things I realized was how long you guys took to do a tune-up.
And I came back from my 29-point tune-up, and it became 151-point tune-up. And that meant the case came off the garage door opener.
It meant so much more than it used to be. And it was very detailed, and it was really explaining the customer going through the process.
It doesn't last necessarily an hour and a half, but if you do it correctly, it almost takes an hour. Yeah, true.
You know, it's part of also that hour and a half is a warm up that takes maybe five minutes or so looking for a compliment within the house, just getting that communication to let them know that I'm a tech, I'm here to help you. I'm not here to do anything else.
I'm just a nice guy. Tell me what you want me to do and I'll do it.
And then they'll go through everything they can find. They'll bring it all back to the customer and explain it to them.
And whatever they don't want to do, they don't have to do, but this is what I found for you. And it doesn't have to be high pressure.
It's just got to be an offer. Just an offer.
Yeah. And so now do you look in like Service Titan to see if they made an offer? Is that how you kind of keep things? They do now.
Yeah. They always look.
And before the same thing with the other company we had, the dispatcher or whoever's dispatching a crew, they would always look what they offered, what they didn't offer. And if they didn't offer what they're supposed to, especially a salesperson who didn't offer water heater or insulation or water softeners or whatever they would go to the manager and bring the guy in the next day you've got to offer this i'll give you an example frank spear is one of my first sales people great guy we started doing insulation he didn't want to offer it for a year he didn't offer it and he lost his bonuses for a year because i tied 35 000 a month you had to sell of insulation for a salesperson all you gotta do is offer he refused to offer it for a year he didn't even tell me this until immediately i didn't pay attention to it he said in january i started offering my first month i sold 85 000 i've been selling 70 80 000 every month since then and i've got every bonus and i'm making 20% off of it.
All of a sudden he's making more money. But when we do these things, especially when you add a department, we always try to get one or two guys.
I would talk to them, get them focused on it. And they start selling, making the money.
The other guys start realizing I'm not making as much as I can. And we do that consistently.
You'll never get all 20 to do it right away. You get one or two and they show their checks and they talk about it.
You'll get three or four. Then you'll get the others.
You know, I never really got my hands on it, but you used to have a letter and you're kind of the guy that's known for like these letters you send all the time. I mean, how much of, how much you spend on mail? Like of your percentage, if you're only spending 5.1 on marketing, how much of this is letters back to your existing clientele? Originally it was a hundred percent.
We had 400,000 homes in Orange County that were 10 years or older. And we would generally at first hit them about once a season.
And after we got into it, we were hitting them four or five times a season. And I couldn't tell you right now the percentage of it, but I'd say it's a large percent because the one thing that you've got to know when you do the tune-up letters, you have to have a tech that can go out and either turn that lead on the older ones or sell it.

Same with the young ones.

Turn a lead for a duct to insulation where we can sell it.

Because if you go out thinking you're just going to do a $79 or $88 tuna and you're going to make money,

you're going to go broke because each one of those are $250.

You have to train people to turn that lead that can sell.

And that was a key thing. I had fortunate three guys come on board my first year that were making $40,000.
And they were getting a call every other day from the competitor. Second year, they made $80,000.
Next $120,000, $160,000. Now they're all in the $700,000, $800,000, $900,000 income because of the tune-up.
But you've got to have somebody behind that. You've got I have somebody do the tune up right.
As we talk, then you're going to have a guy who can turn it to a guy that can sell it. And that's where all the money was made.
And that's where all the training came in. Because if you got one guy's not doing it, train the other to have that guy train the other to.
They're all happy to make the money. So if that yeah you still believe that um so you're you you've got a comfort advisor so let's just say and i work for service champions and i'm a tune-up technician am i calling a comfort advisor out there if if they don't need a new unit but they might decide they want insulation or the hot water heater? Or is that just me selling it without any help? No, we would, that would be a new trainee.
That's a maintenance check. We have a couple of levels, but they're a maintenance check learning.
They would call the office and the main dispatcher would decide who they're going to send out. Or we have a dispatch that only dispatches the sales people and she's been with me 30 years and she knows who's good who's bad who would be the best for this and she would decide who goes out and we try to get out there that night if we can if we sell it that night we want to put it in the next day and during the during the summer we're never more than one or two days backed up So we try to get to them as quick as we can so they don't change their mind or call somebody else.
But no, that tech would call into the office and the main dispatcher would decide who we're going to send out. So there is another group that we have.
They're called channel managers, which is a salesperson. But he gets three to four guys that runs calls and his job, but there's no lead for him that day.
This had happened with Jim Dodson, my number one guy, first employee. One morning he was at home at 10 o'clock.
I said, why is he doing it at home? Well, we don't have any leads. I said, no, I don't care what it is.
At 10 o'clock in the morning, he's going to be in front of a customer. And we started the training visit thing that he would have a couple of guys for Barbara, who's been with me 30 years, would go and pick a call and send Jim out on it.
And Jim would show up as a supervisor just to look at what the guy's doing. But he's looking to turn a lead and he's teaching the guy that's there as well.
He's watching what Jim's doing to turn that lead. And we would keep those guys with him three, maybe four months and change it out.
Then we got guys really trained well how to turn leads. But Jim is out there selling it.
Most of these guys, when they go out on these training visits, they were closing at 56% of the time. No lead, just a regular call.
a guy who wasn't really good at turning leads. 56% of the time, the leads were turned because we sent a salesperson out there just to observe what he's doing and then turn that lead himself so the other guy had learned.
If I'm Jim, how am I being paid if I turn that lead? So I'm just a new guy out in the field and your dispatcher calls me up and says, Hey, Jim's going to meet you at the job today. Jim sells it.
How does Jim get paid versus the new guy? Everybody gets paid the same. Just as if he turned it, we pay 5% of the sell price to the guy that turned it, but he's there.
He still gets the 5% and Jim gets his full price. So they each make money on it.
You just double pay. They make money.

They're learning.

But the key thing is we're not taking anything from the guy. Again, we want to pay these guys well.
We want them to stay. And nobody's doing this.
Nobody pays the way we do. We rarely lose people.
Turnover is extremely low. It's all about how you treat your people.
I mean, I try to tell the managers, don't expect any respect until you show respect. So you go out, show your guys how much you respect them, how much you're going to help them.
And they, in turn, will start respecting you and start listening to you. If you try to do it the other way, you're going to lose people.
I'm taking a master course here, as usual.

What was your dispatcher who's been

there for 30 years? Barbara Brimbaugh.

30 years. Barbara.

I had a company before service champions

called Palad, Plum and and Heating.

Does Barbara

look for

if they speak Spanish?

Does she look at how old they are? Does she look like if they were military vets what exactly is she looking for for a match she would tell me that i can't teach people how to do this because just what you're saying she looks at everything she looks at the guys how's he been this week has he been selling has he had a personal issue going on is he in a bad mood or we Or we've got this great lead? Somebody else will probably run it. But she knows the people and she generates a lot of sales for us that we might not have had because she's picking the right person.
And the guys don't get upset at her because they know what they're good at. You know, like Dotson's average invoice is around 23,000.
Some guys are 15. So if it's a good system and it looks good and it's 30 years old or so, she would obviously send Dotson over to the guy that's got a lower average invoice.
So it's a lot of factors that she looks into it. But you just got to know what to look for.
And she's done it so long, I probably couldn't explain it to you. I'll get her online sometime and talk to you and she'll tell you.
She could probably write a book on it. No, I'd love to talk to Barbara.
This Double Your Profits in Six Months or Less, the book that you told me all about. And I want to be very careful how I explain this.
It's not cutting your way to profit, but it's staying on top of things. And just not getting to the point where, you know, if somebody needs a stapler, they order 10 of them.
Right. And there's a little bit more accountability.
And I think a CFO does a great job of doing that if you get the right CFO book. Talk to me a little bit about how that book changed the way you were doing business.
This happened before the sale. I can't even remember who told me to get it.
I think it might have been Gus in Dallas, but I read it over a weekend. And basically the book tells you, look at every employee you have and ask yourself, if I fired this person tomorrow, what would happen to the company? And the same with the expenses.
If I eliminated this expense, what would happen to the company? So as I went through there, I found seven employees that had been hired, that weren't doing their job, and they were replaced, but nobody got rid of them. So I went with all the managers, I had the list, and I said, if we fired this person, what would happen? We should have fired him a long time ago.
So I fired seven, I fired my controller and accounting manager replaced him with one person, Daniel Hamm, who replaced it all and did a 10 times better job than what I had. And it was just looking and you got to ask, mainly it's not, well, you can look at the field too, but it's just an interesting look that we were overstabbed by incompetent people by seven and that all went to the bottom line to make profit and then the same with the expenses you're not going to have managers not all the time will look for expenses that we can eliminate that's going to make their job harder and i've told the story before i would sign all checks.
I was there on a Sunday. I just learned what an ACH is.
ACH, what automatic transfer. It's $10,000 to the dumpster that we had out back.
And I thought, okay. Then I looked up and I found out the dump site was 1.2 miles away from our building.
So Monday, I asked Louis Ortiz, I said, take it all out of there, put it in our stake bed,

drive it to the dump site, come back and tell me how long and how much.

It took him 30 minutes and cost $20.

$20 a day, $600 a month, and we were paying $10,000.

So I went to the warehouse manager and I said, I want that dumpster gone right away.

And your staff is now going to take all the trash up to the mile, 1.2 miles. And he said, you know what? We're pretty busy.
I don't think we can do that. Well, next week I fired him and we got rid of the dumpster and we saved $110,000 on one item that everybody knew about, but nobody was looking.
And that's one of the things people call me sometimes a looker, that I was always looking how we could save money, but I never knew what I was going to find until I saw it. Then I knew, oh, that's what I was looking for.
And, you know, even text signing in for meetings. I was finding text signing in at 6.30 for a 7 o'clock meeting.
And you get a couple hundred texts doing that for 30 minutes, four days a week, 52 weeks. That's a lot of money.
And so we made it, you can clock in at 6.55, but you couldn't clock in at 6.30 unless you had worked it. So a lot of money to be saved if you're just looking and ask your question, is this necessary? Like you said, 10 statements.
You know, supplies is 1,000, all of a sudden next month it's 5,000, you want to look and find out why, what happened there. So you've got to be a looker.
I'll start wrapping up some of these questions. When you really think about this training that you do and having guys go meet at the house and bringing guys in four days a week.
It sounds like to me, a hundred percent, this was a hundred percent an investment. There's no way in hell because their conversion rate would go up.
Their average tickets would go up. The customer satisfaction would go up.
You looked at this a hundred percent through the lens of, if we don't do that, we're failing. We're failing the installers.
We're failing everybody. They need to have this.
And you got it at an early enough time that it didn't interfere with the normal schedule. It was like on their time.
They had to show up. That sounds right.
Yeah. The installers, I mean, when we trained our trainers for the 14 weeks, it cost us $15,000 of tech to get him in the field.

But the tech could make us $80,000 his first year, which is in well more so cover his expenses for that.

And now we've got a full-time future tech that's there with us.

So we got 280 out of 300 trained. I would have never had 280 techs if I tried to harm from our competitors.
We would never have grown the way we were. So by having the right person trained in there to understand the pricing and the value of the pricing is a huge investment.
Sometimes the equity groups couldn't understand why are you spending so much money training? Because there's nobody out there that knows what we were doing. We were so structured.
We were disciplined. We paid well, but we expected everyone to be treated the same.
Jim Doxon, the number one guy, I would never treat him any different than a new guy that just started. They made a mistake.
They made a mistake. We bring it up to them, but we want them to get better at what they do.
So the training part, I think, was our biggest success that we did. What do these letters look like that you'd mail out to the homes? Just, it's time for your annual tune-up.
Simple ones. CSG is not in business anymore, but that's one of the main ones that I use.
I've used for years. It just talks about investing $77 in a tune-up for your system.
And there are two pages. There's ways you're supposed to insert the letter and you do a live stamp instead of pre-sorted.
People like Nexstar and CertainPath out there, they have letters similar to that. But we had a tune-up letter.
We have a lead letter that we would mail out. They're really simple, but you've got to – like I was talking to somebody earlier today is that I've heard people say, we need more marketing.
The problem was we didn't need more marketing. We needed a better call center because you can mail these letters out, and if a call center takes 100 of them and books 80 calls, but 20, 60 or 70 cancel, and you only run 10 or 15, it's not the marketing, it's your call center.
But it looks like your marketing has got a problem. So you need to track every call center agent you have on marketing.
How many calls did they take? How many did they book? And more so, how many ran? Because if they don't book it right and don't build the value, you're going to keep on calling somebody else and go somewhere else, and they'll cancel on you. But if you had 10 or 20 call centers and you rated them the same way, you would see where your worst call center agent is and which one's your best and do better training.
Because there are certain words, like I think I said, that one of the key words to say on a call center, who's your normal maintenance company? People don't ask that. And that gets them thinking, oh, I should have one.
So different things like that are building value. You know, it's really not overcomplicated the way you describe these things.
Know your numbers. Look for expenses to eliminate.
Double down on training. Is there anything you did? This will be the final question until my wrap-up questions.
Is there anything you did, you kind of were vague, to attract talent and recruit? One of the words you said is recruit.

Right.

What does it look like to go out and get these classes at the time of 20 people?

I mean, is it just as simple as putting an ad out there on Indeed and Glassdoor and Zip Recruiter and all these places?

Or how do you go get it?

That's pretty much what it is. We would do it every week, no matter the class started or when it's going to start.

And we would build value about your potential to make up to 90 to 100,000 your first year. And just really pause that the HR department would write it, make it look nice.
The key thing was, is getting them in there. If they saw 50 people there, and we would do nothing but build the value of service champions, we wouldn't do anything negative, just tell how great great the company is then we would tell stories or maybe you might even have a maintenance check like christian corn i've talked about making a hundred thousand his first nine months this can happen for for you we've got that and then we have them stand up and that's their interview and that personality i think this is one thing i don't think other companies do.
We hire strictly by personality and we can train the technical stuff.

But you can get a guy that's really technical that can't talk.

We might look at him for an installer because they don't have to do a lot of talking.

They're already sold.

But the personality side, I think, is good for your call center.

You want a really bubbly call center.

You want a bubbly dispatcher. You want people that are treating the text nice in the field instead of being rude.
So you just want a good environment. Like in my case, I loved going to work every day.
I had great people. I had long, my assistant's been with me 27 years.
Gary Rita, GM, has been with me 15 years. I mean, these are all long-term people because they were treated like family.
They were paid better than anywhere else, and they were never looking to go somewhere else. Once they're there for a year and they see the money, if they ever left, they would come back in a day or two.
I had one guy, Angel, left for one day and go, oh, this is nothing like service champion, came right back.

So as long as it's in your heart, you've got to have it in your heart to treat the people,

your employees, and you've got to have it in your heart to treat your customers the same way.

How would you want your family treated and do that?

Brilliant.

Well, Leland, this is absolutely phenomenal.

You're going to be at the Home Service Freedom event And that is in September

25th not too far

From you over there in

San Diego

And it's gonna be a killer event

I can't wait to see you and

I literally got a list

Of all my managers gonna listen

To this one because

They need to hear this

From someone like

I'll do a conference call with them

Thank you. of all my managers going to listen to this one because they need to hear this from someone like this.

I'll do a conference call with them.

This is great. I'd love it.

I'd love it. And then

maybe you could just close us out

with, we talked about a lot of stuff.

I've got one, two, three, four,

five, six, seven pages of notes.

Maybe we didn't hit on something. Maybe

there's something hot and heavy on your mind or just something to leave the audience with here before we depart. I would say the one thing in looking at other companies we buy and seeing even some employees quit and start their own company, their whole goal is they saw what we were doing.
And I would tell people in our weekly all-company meeting that if you're going to quit, you need to bring everybody in this room with you. Because when you go somewhere else, these people aren't going to be there.
And they find that out that people don't care. They're not doing good work.
But I think the most important thing is the owner has to be there and be the leader. I didn't have to do the training, but I would always talk positive.
If there's out of 300 employees at that time, there's obviously employees you don't like, but you got to respect them. One of our top guys, I didn't like him at all.
He gamed me all the time, but I would just write a new policy of the sales plan and get past the game. But I respected his ability to sell and I expected his ability to keep our installers busy and keep the company profitable.
So as an owner, you've got to be there. You can't be a one day two hour guy and come in and complain the next day, how come things aren't working? You've got to be on top of it.
You've got to know everything. You've got to know the people.
You've got to know what questions to ask. And more so, you've got to know what to look for.
Like I said, I was considered a looker only because I didn't know what I was looking for until you started looking. And you just, you'll see things that are happening that are costing you money or costing the tech money.
Or the other side of it, I always would listen to the employees. I mean, if they had a concern, come to my office, tell me.
I either explain to you why we do it or I'll change it. Or maybe we might just disagree, but at least you'll understand why we're doing something.
I would never not talk to an employee. When we were acquiring companies, I think we had almost 2,000 employees and I was still giving up my cell phone.
And Frank DeMarco said, dude, stop. That's way too many people to call you on your phone.
And he was right. But, you know, just being owner of service champions out of the 300 or so, everybody had my personal number.
And I'd give it to customers the same way. I would say, this is the number my children call me on.
So call me on this you'll get a call back but just being involved being there every day i'd be there at seven i'd leave at six or seven and i was always treating them like family and paying them well and treating them well they wouldn't want to leave if they did they saw a total different concept at other companies that i never paid attention any local ones but the biggest thing i think that helped me overall was having a group of four or five other company owners bigger than me that i found in certain paths or different places and we called every tuesday for an hour no agenda just talk you got a problem let's talk about it and we shared financials every month and that that tells you a lot we had one member would not share his financials because he only made money four months out of the year he was back east well he didn't stay in the group but sharing financials you can start looking at that all the companies and seeing people doing something better you see what you're doing worse and start making corrections so in other words surround yourself with people that are smarter than you don't think you're the smartest one in there because you're probably the dumbest surround yourself the smartest listen and learn and i take them out to dinner and buy them the best wine i possibly could ask them a question and shut the f up and take notes and i go back go back and do it and I'd go visit them a month later. So I hope that helps.
Yeah. We call that rip off and duplicate.
I love it. There you go.
But they knew I was doing it. It was all a gift.
This is so good. This is one of the best podcasts I've ever had.
You know, no matter what size you are or how successful you think you are, there's so much just to learn. And that's one of the things.
I'm a student for life, and I can't wait to see you in person. And I'm going to take you up on that call so you can hear the horse's mouth.
You call me anytime, but just know you're never the smartest, whoever you think you are, unless you're learning from somebody else. You're always, always learning.
And you've got to always be learning. There's always stuff out there you need to know.
I agree. Hope that helped.
This was fantastic. You did great.
Very, very, I think. Looking forward to seeing you.
A lot of people are going to learn a lot. I can't wait to see you, buddy.
I appreciate you. Thanks, Tommy.
All right. See you, buddy.
Great day. Hey there.
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