While Dunbar has focused primarily on the data from the once-a-decade census, HARDI’s Brian Loftus looks at topics like expansion or assessing replacement equipment demand and thinks the Census Bureau’s monthly data might be even more valuable.

Both men make a good case, and the good news for contractors is that no choice is necessary. Not only are both types readily available, but as a taxpayer investment with free access, census data is priced to fit any budget.

Population & Permits

How many people? That question, the most obvious blunt instrument in census data, still packs considerable power. Loftus said that contractors and distributors might feel silly for keying in on such a simple number, but they shouldn’t.

“Population growth will support valuation levels. It will support demand,” he explained.

“You can be early and wrong in a location, or with an expansion, but if the population growth is there, you will catch up. Population is key.” But if population growth is a key economic driver, what drives population growth? As it turns out, one can make a strong case for STEM jobs, not for their own sake but also for the jobs they attract.

Offering an example, Loftus recalled a BusinessWeek article from a few years ago that looked at Huntsville, Alabama, which was developing a strong base of NASA jobs. Looking at the data now, Loftus sees that those three counties have since experienced that state’s best population growth.

Building permit data, another piece of the Bureau’s monthly data, can offer its own insights. Loftus helped one distributor weighing a potential coastal location versus one further inland. The member discovered that while the coastal area had seen steady annual 10 percent growth in building permits, recently the permits had in fact started to taper off.

Other metrics or observations would not necessarily have triggered any concern.

“It can tell you early, before things start to turn,” Loftus said.

Repair/Replace Demand

One of the industry’s key suppliers told Loftus that their favorite indicator was existing home sales. The idea is that when potential buyers see the “rusty box outside the back door,” it would discourage them from buying because that would become a likely “extra” expense early in their ownership.

Therefore, the supplier believes, healthy home sales trends equate to people looking to replace the unit to improve the outcome of the home sale.

Related, Loftus continued, job growth or stagnation will have an impact on consumer confidence, which in turn affects repair-or-replace decisions. Loftus cites a 5 to 7 percent replacement rate as a “soft” but historically reliable annual number for the overall market. Contractors who see the job market start to plateau in their service area can anticipate a tilt toward more repairs and plan or market accordingly.

Loftus relayed one project in which a distributor sent 10 years of monthly sales data for all of his locations in the state. Loftus compared the sales growth in every location with the employment changes in those locations, and the resulting lines “were almost a mirror.”

Regardless of whether the metric is population or job growth, knowing which area(s) are stronger or more vulnerable has additional value moving forward. Loftus said that weaker areas will be the first to slow down and also the last to recover, “whereas somewhere more dynamic might see something more like a hiccup if there’s an economic downturn, and then they’ll be the first to keep going.” He gave the example of a stronger area dropping from 3 percent growth to 1 percent growth, while a weaker area might go from 1 percent growth to 3 percent decline and then take a few years to get back to where it was.

Look Underneath Income

In Virginia Beach, ACCA member Commonwealth Heating & Cooling’s use of census data drives home the value of deeper local knowledge as opposed to broader headlines or trends. Dunbar does check the monthly data a couple of times a year, but he leans more heavily on the data gleaned from the decade effort.

In Dunbar’s case, the area includes roughly 1.7 million people at last check. He learned that there are 420,000 individual condos, townhomes, and homes in the area, with income data making further breakdowns even more useful. The area’s more particular characteristics include significant retired and military populations.

“We have whole neighborhoods of retired people who moved here from other parts of the country,” he observed. Many of them may have only a quite modest visible income via Social Security.

“On the surface level, you’d think, ‘stay out of there.’”

However, Dunbar continued, “what it doesn’t tell you is that these people could be sitting on half a million dollars in CDs” or other retirement assets. Factoring in other categories of data to “look between the lines” in the data can uncover pockets of promise.

“They’ve got the cash if they need a new hot water heater.” Demographic age breakdowns, age of home information, location, and other categories can assist a contractor like Dunbar with teasing out different neighborhoods worth marketing attention.

For Dunbar, much of that attention goes out in the form of coupon postcards and Val-U-Pak materials. With his enhanced granular knowledge, his company “dropped out of newspaper and Yellow Pages years ago,” as direct market efforts have paid off. Once Dunbar pinpoints where he wants to go – down to which individual streets – he puts a standard plan in motion.

“I can turn out a mailing for a neighborhood in 24 hours,” he said. “I have one tall truck with my billboard on it.”

Once he knows his target street or neighborhood, he will “run the truck up and down it, then the letter, and then the cold call.”

Commonwealth’s sales staff’s compensation is now based on how many cold calls they make and how many closings they make from those calls. Dunbar recognizes that very few people in the industry are taking that approach.

Of course, laying the foundation through his data analysis and billboard and a batch from his half million postcards each year can warm up some of those cold calls considerably. Perhaps the best compliment regarding his census data use is that it allows Commonwealth to succeed with this uncommon model.

“I only have 18 employees,” Dunbar said. “I’m not a big hitter out here. But I’ve concentrated on being profitable.”

Count The Competition, Too

Another unheralded benefit of local census data is the view it can offer into the competition. Census data told Dunbar that around 3,600 licensed contractors serve those 1.7 million people.

However, he knows that many of them have other day jobs, particularly in commercial or institutional settings, and then look to work in this area after hours and on weekends.

“What I’ve learned by looking at these stats is that about 3,500 will not touch a duct system,” he said.

“They’ll only replace what’s there. They don’t have the time, energy, or know-how to size a system properly and put it in.”

That knowledge can also influence how he pursues business for the better.

“Do I win ’em all? No. But I win more than I lose.”

Census data can also temper enthusiasm about circumstances that seem more favorable at first glance. Dunbar pointed to his area being No. 1 nationally in bringing in young people.

In reality, that figure is misleading since — unlike the Huntsville scenario where STEM jobs drew other new jobs organically — so many of them are being sent to Virginia Beach by the military.

Related, Dunbar’s local data indicates that a given home changes hands every 39 months on average. That might seem attractive with regard to the “rusty metal box” theory from the supplier mentioned earlier. However, the military lifestyle of more frequent moves may diminish the impulse to preemptively “spruce up” the home with a new unit, and it may also tamp down the appetite for system replacement among new buyers when they could be headed elsewhere themselves in three years.

Starting To Sample

Either way, incorporating census data can sharpen a contractor’s vision and improve the odds for key decisions.

At HARDI, Loftus and team have done custom projects and worked one-on-one with member distributors. They have also worked with manufacturer reps to understand a particular area’s strengths and weaknesses better. They have also participated in members’ dealer meetings to convey insights directly to contractors within the structure of routine scheduled events.

Once a contractor is interested in using census data, the only cost is time and attention to mine the information effectively, whether on either a small or large scale. Loftus recommended putting a toe in the proverbial pool and trying to integrate a couple of basic data points into business planning.

He summarized the kind of difference census data can make, whether deploying a limited marketing budget or evaluating a potential acquisition or expansion.

“You can go on your hunches, or you can confirm your hunches and move forward with confidence. It really works.”