Episode 75: The Leland Smith Blueprint to a $500MM Service Champion

Leland Smith, Founder and CEO of Service Champions Plumbing, Heating & AC, is one of those names that continues to receive mention on To The Point. It’s no surprise, either, as Leland has a well-earned reputation in the home services industry. Where others look for shortcuts, he has made a name for himself and his company for doing things the right way. Alongside Frank DiMarco, Leland Smith gives us some great insight into why this approach has allowed him to grow his business to $400mm and counting.

Hands Off, Numbers On

As a child, Leland’s father worked on antique cars. Of his siblings, Leland was the one who simply didn’t seem to take to tools. Unlike many of our guests on To The Point, Leland didn’t have that “magic touch” when it came to mechanical skill at an early age. It just didn’t come naturally to him.

Leland would go on to earn a degree in Business Administration from the University of Kentucky, and work as a staff accountant for American Standard. His goal was always to work for himself, but he didn’t really know how or what that would look like. During this time, he got his real estate license, but that didn’t take either. Still, he was regularly traveling out to California, where his brother lived and worked for one of Leland’s uncles doing plumbing. When his brother invited him to work with them, Leland was a bit hesitant, but decided to switch career in 1979.

After a year working for his uncle, Leland started his own company, Allied Plumbing & Heating. In the late 90’s, Leland had grown the company and sold it to a consolidator. After a few years working for ARS, Leland would start Service Champions Plumbing, Heating & AC in 2000.

Service Champions

Leland may not have been great with the tools, but he had the business side of things down. From numbers to processes, Leland understood that doing things correctly was the key to success. The name Service Champions is deliberate, and Leland wanted his company to truly be “champions” when it came to their services. In order to achieve this, he knew that he would have to have the best team of technicians in the area. If you pay your technicians well, you can demand that they take care of your customers really well, and set the bar very high in terms of how they perform. Even to this day, the goal is to take care of the customer better than anybody else…and then some.

In the beginning, it was just Leland in the office, two technicians, and two installers. It wouldn’t take long before Leland’s formula turned into rapid expansion. Service Champions would grow to 40 million, then 280, approaching 400 million today, and sights set on 500 and beyond. Leland has done this without some secret, unique process. The blueprint is pretty simple, and it all starts with doing things the right way.

No Secrets, Just the Right Way

Leland will tell you right from the start, there’s no secret sauce. What sets Service Champions apart is simply easier not to do. Most contractors know what to do, but the amount of effort it takes to do things correctly day in and day out is just more work than they are willing to do. From day one, Service Champions has always focused on getting in the home for maintenance, making a good first impression, and ensuring that every process is carried out consistently and to the highest standards.

The big takeaway here is great news for anyone who owns a business. You can do all of these things; success is within your reach. Are you willing to put in the work?

Service the Right Way

Service Champions originally just marketing tune-ups. This wasn’t some 20 minute in-and-out tune-up, either. The way Service Champions did and continues to do maintenance is a lengthy, in-depth 90-minute process. This involves essentially pulling apart the entire system, cleaning and inspecting everything and even waxing the unit. It’s hard to do a proper tune-up, and most people will start to cut corners. It might be the end of a long day, or you’re trying to get 5 or 6 tune-ups done a day.

The reality is, your customer just isn’t going to be impressed with the service if you’re done in a half-hour. When they see you pulling everything apart, laying the different parts out and really doing it right, they are going to tell you they’ve never seen anything like it. It will add value, and open your customers’ eyes to how hard you’re working to ensure their comfort. Are you taking this approach with your services, or are you just trying to get to as many calls as you can?

Sales the Right Way

Just like your services, there is a right way to do sales. You have to be just as consistent, and while there are certainly different approaches to sales out there, there are absolutely some key components that have to be there. You can’t pre-judge your customer based on the house or the car in the driveway. You have to be ready to spend the necessary time to get to know and understand your customer, or they aren’t going to trust you and be comfortable with your recommendations. Do what you know to do, do it the right way every single time, and you will be successful with your sales.

Training the Right Way

It’s been over 13 years since Leland last hired a competitor’s technician. They have bad habits, they don’t show, and they don’t treat the customer right. The work is the easy part, but doing it right is the part that many struggle with. Service Champions trains every technician, providing a 14-week course where they are taught how to do tune-ups, sales, and everything in between. From how to park their trucks to not putting on the second bootie before the customer opens the door, there is a focus on building value. Service Champion techs are taught things like not touching the thermostat; letting the customer turn it on and tell them what is going on before ever getting involved. Most of this is pretty basic stuff, but it’s a lot of work that most companies and techs aren’t willing to do.

Leland often knows if someone is a great fit within a few minutes during the interview. Are they smiling and making eye contact? Would his wife buy from them, or would his daughter be scared of them? You can teach the technical, but the personality has to be there from the start. Service Champions technicians come out of this 14-week school making 80-100 thousand a year, and sometimes more. Next year, they expect to train 1,000 new trainees in their 3 regional training centers in Southern California.

Customer Treatment the Right Way

Leland knows that in addition to treating your employees the right way, customer fulfilment is the key at the end of the day. Service Champions offers 8 promises to their customers, each designed to give peace of mind. Some are pretty basic, and others go a bit further. The key promise is the Happy Money Promise. This is one of those money-back promises that many companies make, but they don’t really mean it and are quick to haggle when called out. Leland and his team just won’t leave the house or hang up the phone unless the customer is happy. Service Champions technicians and employees are empowered to make decisions on their own in the event a customer is unhappy. Leland will back them up, so long as the customer is happy with the result.

You aren’t in the business to debate your customers. If they are upset, your priority is finding out what will make them happy. That doesn’t mean not having a dialogue, and it doesn’t mean you have to give out systems for free (although Leland certainly has), but the bar for customer service is so low that simply listening and doing what it takes is way above and beyond what they are expecting. It’s showing your customers that they are so important, you are willing to do what it takes to take care of them.

Another thing Service Champions does that sets them apart when it comes to customer service is what Leland calls “Good Deeds for Free”. Their techs are encouraged to find something in the house not associated with heating and air conditioning that will make their customers’ day just a little bit better. Maybe it’s a lightbulb that’s out, changing the batteries in a smoke detector, or just taking the trash cans in. They share these things in their meetings, and it’s not tied to any KPIs or bonuses. These small acts of kindness make a difference, and help build relationships with their customers that keep them coming back.

Growing from 45mm to 280mm

Leland never had any doubt that Service Champions would grow, but he knows they can always do and be better than they are today. When he was at 40 million, he went out and found Horizon Services to learn from Dave and Mark who were at 100 million. Each step of the way, Leland surrounded himself with people who were where he wanted to be, and learned from them to do the same for himself.

In 2019, a PE group approached Leland and offered him a price he thought they might get in 2-3 years. He agreed, and at the time they were at 45 million with 22% profit. The PE group had never seen financials so strong, and were bewildered at how Leland had done it. Together, they set a goal of 260 million and 40 million in EBITDA in 3-5 years. 18 months later, Service Champions was at 280 million and 60 million EBITDA.

From 280mm to 400mm and Beyond

Entering both the M&A world and staying active in peer groups is part of the blueprint to Leland’s continued success. Service Champions continues to grow, and Odyssey, their PE partner, continues to support them. Acquisitions are a daily part of life, and together they continue to write deals and grow great businesses. Not each company is a great fit, and Leland is looking for great companies who share the same values. Leland is determined to ensure each deal is a win-win all the way down the line on both sides, and to create an environment with no losers. He points out that there are a lot of great investors out there, it’s simply about finding the right fit for your and your team.

Leland is very active in peer groups, meeting with a group of companies to share financials and talk amongst each other each week. You always have to find someone better than you. If you’re at 10 million, find someone at 20. If you’re at 20, find someone at 40. Leland is adamant that sharing financials is a key part of this process. It cuts out the BS, and opens everything up. When you can really look under the hood, you have the vulnerability to help each other and really grow.

Consistency is Key

There’s really no secret. Do the right things every day, and be consistent. Deliver the same product to the customer every single time. Treat your customers and employees right. That’s the blueprint for success.

When Leland got to 20 million, he had never run a 20 million dollar company. When he hit 40 million, he had never run a 40 million dollar company. If you surround yourself with the right people and do the right things, you’ll find that hitting your goals is just a matter of putting in the time and effort. Leland is a big proponent of having people come out and visit Service Champions, and helping others in the industry. Whether that’s helping you find a price to understand what your company is worth or visiting the shop to ask some questions and learn a thing or do, Leland is always excited to help others, and to better an industry he has spent his life serving in. Whether you’re at 2 million or 200, put away your pride and reach out for help!

If you’d like to reach out to Leland or Frank, you can email them at [email protected] for Leland, or [email protected] for Frank.