Study Shows What to Plan For in the 2024 HVAC Market
ServiceTitan Report Talks About Technican Pay and Service Pricing
Now that 2023 has come to a close, we inevitably look towards 2024 and wonder what the future holds for the HVAC industry.
I must say, this is quite a resilient industry that has had much thrown at it over the last 15 years. It has persevered through the Great Recession of 2008, the COVID pandemic, and supply chain issues that affected all industries.
So what is going to happen in 2024? It just so happens that an interesting report recently crossed my desk — ServiceTitan’s “Charting the Residential Contractor Landscape,” and it gave great insights for HVAC contractors.
As it has been for the last year or so, concerns about an economic recession are making the industry nervous about what the future holds. According to ServiceTitan, when contractors were asked about the biggest risk to reaching their goals, 70% identified an economic recession. Also high on the list were labor shortage, access to working capital, and growing competition.
While HVAC contractors can certainly not control the economy, access to working capital, or growing competition, the labor shortage is something they have somewhat control over.
What I found interesting is where the study asked contractors about pay increases for technicians. The most popular answer was “no plans to increase,” which was at 23%. Closely behind at 20% was a 1% increase. Total it up, and almost half the contractors surveyed were going to give their technicians no more than a 1% increase.
That might work in some industries. But I don’t think HVAC is one of them. There are too many openings and not enough qualified candidates to let that be the plan of attack. With everything your employees are purchasing, from cars to peanut butter, going up due to inflation, they are not going to be satisfied staying at their current compensation.
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The rest of the respondents were planning a significant increase. Of the respondents, 19% said a 2-3% increase, 17% said a 6-10% increase, 16% came in at a 4-5% increase, and finally, 6% were planning to increase wages by more than 10%.
Also interesting was that 23% of the respondents in the survey also said they were not going to be increasing their services prices. That is in comparison to the 28% that are planning to increase service prices 2-3%, and the 23% that are aiming for a 4-5% increase.
If you are trying to find the money to pay your technicians more in 2024, a service price increase might make the most sense. While homeowners are never happy about paying more, much like your employees, they see prices going up on everything else, so an increase in a cost of an air conditioner or furnace is not outrageous.
HVAC contractors should not want to be the low bidder in their town. Hire great people and pay them their worth. Then set your prices correctly so you can hit your profit margin goal. Homeowners will notice, and it will help your company in the long run.
When looking at 2024, it is best to keep everything in perspective. The last few years, since COVID, the industry enjoyed near record highs in the HVAC replacement market. It had to do with a multiple of factors, but it was not going to last forever. Eventually, that turns to a repair market, and contractors need to be ready for that.
It very well might be here in 2024, and it can be profitable for contractors.
How can HVAC contractors better plan for 2024? Based on the information they gathered in their study, ServiceTitan shared these tips.
- With most residential contractors generating revenue from 50% service and 50% new construction work, diversification can help unlock new sources of income.
- Referrals could become a valuable source of customer acquisition, considering that word-of-mouth referrals accounted for 71% of business volume last year.
- With repeat customers driving 58% of work and 39% of revenue in 2022, focusing your marketing efforts on customer retention may offer the best return on investment.
- Outsourcing and technology adoption may be the key to help contractors achieve their revenue generation, growth, and customer retention goals this year.
- As costs continue to increase, new software solutions could help your business streamline operations, lower expenses, and maximize profits.
- Given continued labor shortages, increasing technician salaries could help retain top talent and ensure that you continue to offer outstanding customer service.
