Over the last few months, I have noticed a trend when I have been talking to folks in the HVAC industry. This can be contractors, manufacturers, or distributors. It seems like a lot of folks in every segment of the industry are seeing recession ghosts.
I get it. When things are going well for so long, it is easy to look up and wonder to yourself when the other foot is going to drop. It is a natural human instinct.
And it has been a great few years for the HVAC industry. Throughout the COVID pandemic and the time after (it’s over, right?), the industry has continued to have banner years. Plus, it is hard to turn on the news without predictions of doom and gloom. Spoiler alert … part of that is about getting eyeballs.
“My personal opinion is I really feel like we have tried to talk ourselves into this in a lot of ways. But at the same time, we have to be aware that there are forces out of our control at work economically that will have an impact on us,” said Kevin McNamara, COO of the Climate Control Group.
Are there some headwinds as we get going in 2023? Certainly. Inflation has led to fewer bucks in consumers’ pockets and has also increased the cost of customer financing — which has been a great resource for HVAC contractors as of late. Rising cost of raw materials and employee compensation has manufacturers aggressively handing out price increases while HVAC contractors rightly do the same. Residential new construction is slowing as builders are concerned about what the economic future holds.
But there are some tailwinds, too. The recently-passed Inflation Reduction Act has plenty of tax incentives for HVAC equipment. Uncle Sam will be footing the bill for the installation of some of these renewable and high-efficiency equipment, which should help contractors at the kitchen table. IAQ is still on the minds of the general public and HVAC contractors, both residential and commercial, can solve those problems. And finally, while the upcoming refrigerant change will certainly be challenging, at the end of the day there will be approximately 50 million R-22 systems and 40 million R-410A systems that will have their replacement accelerated.
We might have some PTSD from the last recession. The Great Recession. That was not a normal recession. In fact, on average a recession only lasts about 10 months. An ideal environment? Certainly not. But it is an important process as it means our economy is right sizing itself for future growth.
What is an HVAC contractor to do? Experts say don’t drastically change your approach but just be aware that things might change. If it is any consolation, the good HVAC contractors (also known as those who read The ACHR NEWS) will be much better equipped to weather the storm.
I am sure HVAC contractors learned a lot during the last recession. One good thing to spring from that time including contractors diversifying their businesses. In addition to HVAC, a lot of contractors got involved in additional trades such as plumbing, electrical, and duct cleaning.
Here is hoping that has continued. Here at The ACHR NEWS, we followed the same playbook. This issue we are welcoming SNIPS Magazine into the pages of The ACHR NEWS to help serve the sheet metal industry. SNIPS Magazine has been around since 1932 and we are excited to continue their strong tradition and bring the publication back to print. We are expanding our audience, just as many contractors have in recent years.
As contractors embark on 2023, it is important to keep an eye on the economy without seeing a recession that is not there yet … and might not be here for a while. And if it is coming soon, use it as an opportunity to gain market share and put even more distance between your business and its competitors.
“I think service companies as a whole should take a more conservative approach in 2023,” said John Conway, Redwood Services COO. “I am not saying don’t grow or take your foot off the pedal. Keep your foot on the pedal, but keep your head up and looking around because it might be a different kind of year. And I think the smart service companies will have a great year and people who are not paying good attention to their business can struggle.”
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