Join Brent Sonnek-Schmelz and Matt Bernath in this episode of The Flywheel Effect as they examine how recent policy changes affect home service businesses. The hosts explore tariffs on imported goods, supply chain disruptions, and their impact on pricing across the industry.

A key focus of their discussion centers on workforce challenges in the trades. Brent and Matt address how immigration policies create labor shortages, particularly in states like New Jersey and California where many skilled workers have gone into hiding or left job sites. They analyze how these changes could increase labor costs and slow project completions.

The conversation shifts to broader economic impacts, including the temporary suspension of SBA loan programs and its effect on business transactions. The hosts share insights on market adaptations, noting how previous challenges like COVID-related supply chain issues led to industry resilience. They emphasize the importance of business owners focusing on fundamentals during policy change and market uncertainty periods.

Guest-at-a-Glance

💡 Hosts: Brent Sonnek-Schmelz and Matt Bernath

Key Insights

Tariff Effects Less Dramatic Than Headlines Suggest 

Supply chain price increases from new tariffs may not hit consumers as hard as feared. The 60% tariff applies only to factory costs, not retail prices, creating multiple points for cost absorption throughout the supply chain. Manufacturers can renegotiate prices, distributors can adjust margins, and retailers can strategically time inventory purchases. Smart businesses can minimize impact through efficiency improvements and strategic purchasing, particularly in high-end markets where demand remains more stable. Past experience with tariffs shows the industry adapts through price adjustments and operational changes.

Immigration Policies Create Deeper Labor Crisis Than Tariffs

Labor shortages pose a more significant threat to home services than supply chain disruptions. The industry relies heavily on immigrant workers, and increased enforcement has led skilled workers to leave job sites or go into hiding. This workforce reduction compounds existing challenges in finding skilled trade workers, particularly as younger generations enter the workforce in smaller numbers. The situation forces wage increases and project delays, potentially creating longer-term structural changes in how home service businesses operate and price their services.

Market Intervention Often Creates Unintended Consequences 

Government price controls and market interventions typically produce adverse long-term effects despite short-term benefits. Examples like California's contractor pricing limits during wildfire rebuilding show how price caps can reduce available labor and slow recovery. When prices can't adjust naturally to demand, supply often becomes restricted - whether in construction services, gasoline during disasters, or other markets. While intervention aims to protect consumers, it often results in reduced availability of goods and services, creating inefficiencies that hurt the very people the policies intended to help.