The home services industry began 2022 with strong growth due to the home renovation trends from the previous year; however, factors such as rising material costs, labor shortages and inflation resulted in a slight decline in new work being scheduled in Q2 and Q3, according to Jobber’s Q3 Home Service Economic Report. The report also noted that the category as a whole is still outperforming most categories in terms of revenue growth.
Though contracting businesses were impacted by the previous factors listed, median revenue benefitted from rising prices, the report explains. While the contracting segment experienced the lowest growth rate in new work being scheduled compared to the other home services segments in Q3, year-over-year growth in revenue is still around 6% to 8%. At the start of 2022, businesses achieved a 15–20% year-over-year increase in revenue growth, dropping in Q3 as a result of a slowing economy, the report reveals. Despite these trailing headwinds, industry experts are cautiously optimistic as they look ahead to 2023.
While single-family new construction is slowing, there is a continuing demand for retrofit and remodel applications in both residential and commercial markets, according to Uponor’s Brett Boyum.“Although new work scheduled experienced a slight decline year-over-year last quarter, it’s important to acknowledge that this is a measurement vs. last year, and both 2020, as well as 2021, had extremely high growth due to home improvement trends spurred by the COVID-19 lockdowns,” said Abheek Dhawan, vice president of business operations at service scheduling software and app provider Jobber. “The factors that are causing this slowdown include supply chain issues, labor shortages, material costs and inflation; all of which together result in a softening of demand for contracting jobs. We believe this shift is the industry normalizing following a major uptick in home improvement projects during the pandemic. All that said, the Leading Indicator of Remodeling Activity (LIRA) by the Joint Center of Housing Studies still projects strong growth ahead for many quarters.”
According to Brett Boyum, vice president of marketing and offerings for Uponor, while single-family new construction is slowing, there is a continuing demand for retrofit and remodel applications in both residential and commercial markets. Commercial new construction is also expected to grow in 2023.
“We are seeing a slowdown in residential new construction due to the surging interest rates that have doubled since the beginning of the year,” he says. “However, home improvement and remodels are still going strong in most areas of the country, and we anticipate that will continue into 2024. For commercial, that outlook remains positive with the potential for strong growth over the next year.”
PHCC — National Association President Dave Frame, fourth-generation owner of Bob Frame Plumbing Services in South Bend, Indiana, notes that the nonresidential construction markets are expected to do modestly well over the next five years, with commercial construction expected to lead the way.
“The Infrastructure Investment and Jobs Act (IIJA) provides new funding for infrastructure projects, including for water infrastructure, weatherization and Western water infrastructure,” Frame says. “The bill favors increased activity in the transportation, communication and manufacturing sectors of the construction industry.
“Residential construction is predicted to continue to contract because of the impact from rising inflation and higher federal interest rates on potential homebuyers; however, low housing supply will help prop up some new development,” he adds. “For remodelers, both NAHB and NKBA confidence indices in November show businesses cooling, with remodelers’ sentiment remaining flat. Looking ahead, homeowner remodeling and repair spending is expected to decline sharply by the middle of 2023 due to continued supply chain issues and rising material and financing costs.”
Abheek Dhawan, vice president of business operations, Jobber.
Brett Boyum, vice president of marketing and offerings, Uponor.
Dave Frame, president of PHCC — National Association, and owner of Bob Frame Plumbing Services, South Bend, Indiana.
Because of a possible looming recession ahead, PHCC has been advising its contractor members to start thinking about how they can position their businesses to come out stronger than they are today, Frame states.
“In some cases, diversifying their business could be a viable option beyond streamlining operations, and managing risk and cash flow,” he says. “Areas for potential growth include indoor air quality (IAQ) assessments, bundled service and equipment agreements, and increasing heat pump equipment installations.”
In addition to the IIJA, the Inflation Reduction Act of 2022 (IRA) is also anticipated impact the plumbing and heating industry next year, most likely by boosting heat pump sales.
“In the last few years, we have been seeing a trend toward electrification and new legislation, including the IRA, will kick that trend into high gear,” says Goncalo Costa, vice president of regional business unit for Bosch Thermotechnology. “Because of electrification and decarbonization efforts, it is becoming more difficult for fossil fuel-burning systems to be installed in a number of areas across the U.S. Several tax rebates and incentives are popping up for most HVAC systems that add something to decarbonization efforts, including even some natural gas products in the very high tiers of efficiencies. But that said, the category of heat pumps will clearly be the winner moving forward. Even a mid-range heat pump will include huge incentives. Contractors who can align their offerings with this trend and make the information on how to take advantage of the incentives available to their customers should have a great 2023.”
M&A outlook
Over the past year, there have been an extraordinary amount of mergers and acquisitions among plumbing and HVAC businesses.
“Interest rates were at an all-time low, therefore business acquirers had the opportunity to finance money at a rate that has not been seen for some time,” explains Brad Williams, managing director of The Beringer Group and a columnist for both Plumbing & Mechanical and Supply House Times. “The owners of the selling companies saw an opportunity to sell while there was uncertainty, but while valuations were high. I also believe that after 2008, a lot of owners have been looking to exit, but the 2010’s allowed for prosperous times for business owners, and owners were looking to recoup the dividends from their business during this time.”
The heat pump category will be a clear winner moving forward next year, notes Bosch Thermotechnology's Goncalo Costa.
Many of the transactions that took place this past year are of note because they were bought by private equity firms.
“Private equity has moved and diversified from only doing deals in the hundreds of millions of dollars into doing deals in the lower middle market,” Williams notes. “Private equity investment philosophy is to borrow the money and yield the best possible return, therefore investing in HVAC and plumbing contracting companies ensures that they have a safe return on their investment. Plumbing and HVAC contracting companies, although they are impacted by recessionary times, are much more inelastic.”
Williams fully expects the volume of M&A transactions to continue into 2023. “Our firm helps in assisting not only businesses that are for sale but also businesses that are looking to plan for strategic options without selling. We are the busiest we’ve been in five years on both the selling side and assisting with transitional planning. I recommend contractors contact a group like ours to better understand the valuation of their business, look at tax mitigation strategies to reduce the net proceeds of their sale, and give adequate time in the transition of their business.”
Market disruptors
According to Costa, one of the biggest market disruptions next year will be the new U.S. Department of Energy (DOE) efficiency regulations for central air conditioners and heat pumps, which go into effect Jan. 1, 2023.
“Most manufacturers have been spending 2022 reengineering their products to meet those requirements,” he says. “On top of new levels, the DOE is also changing the testing procedures and standards for determining those efficiencies. This is happening all at the same time. The challenge for contractors is the questions that will inevitably arise regarding whether they can even sell products made previously and how they should install them properly to ensure they meet the new efficiency requirements. It will likely and realistically take the industry through Q2 to get all the wrinkles smoothed out and on track.”
While efficiency has increased significantly so has the usability of the products, notes Taco’s Greg Case. The Taco 0018e features Bluetooth technology that links directly to a mobile app which allows one to see and control system performance, run diagnostics and look at the history of the pump. A contractor can virtually look inside the pipe and know the most efficient settings based on real-time feedback, alleviating the problems of over-pumping.
Frame points to the uncertain economy, inflation at 8.2%, rising federal interest rates, continued supply chain challenges, sustained elevated demand, historically low unemployment at 3.7% and labor shortages as the disruptors impacting p-h-c contractors’ businesses. “Continued weakness in leading industry indicators have caused many to predict an impending recession, and according to Fortune magazine, three-quarters of Americans believe the economy is already in recession with credit card rates hovering around 18% and home mortgage rates exceeding 7%.
“If interest rates and inflation remain elevated, an overall slowing of the construction industry will continue,” he continues. “While the Federal Reserve needs to mitigate inflation by reducing demand in a way that does not drive the economy into a significant recession, the industry must seek ways to increase supply and stabilize prices. This will mean nearshoring and reshoring U.S. production and distribution of p-h-c parts and products, which will help create jobs, stabilize price volatility and potentially cut the nation’s trade deficit.”
Goncalo Costa, vice president of regional business unit. Bosch Thermotechnology.
Brad Williams, managing director of The Beringer Group and Plumbing & Mechanical and Supply House Times columnist.
Greg Case, chief product officer, global, Taco Comfort Solutions.
The increasing frequency of state and local natural gas bans have the potential to be perhaps the largest market disruptor in 2023. Most recently, the California Air Resources Board (CARB) unanimously voted to approve a proposal that would eliminate the sale of gas-powered furnaces and water heating appliances by 2030. This growing trend will have broad implications across the plumbing and heating industry.
“One of the biggest disrupters is the increasing frequency of bans being placed on new fossil-fueled permits in municipalities from coast-to-coast,” says Greg Case chief product officer, global, Taco Comfort Solutions. “Of course, the shock wave is part of the leading edge of the beneficial electrification movement but as an industry, we need to react to these political and regulatory moves with equipment and systems that can still deliver the required performance. This trend only seems to be accelerating as we move into 2023.”
Mark Chaffee, vice president, governmental affairs and commercial and industrial product management, Taco Comfort Solutions, adds that the federal government — along with some state and local governements — are the driving forces behind the electrification movement. “Billions and billions of dollars will be invested in this forceful trend over the next several years. This has greatly impacted all facets of the fossil fuel industry," he says. "Areas of growth will be electric technologies, like Taco’s System M air-to-water heat pump, all facets of solar energy, storage (both thermal and electrical), as well as all other alternative energy sources.”
Christian Geisthoff, vice president of corporate development, Viega, notes that the bans will have some impact on natural gas, but the decline will be slow, taking place over the next five to six years.
“There are certain states that explicitly allow the use of natural gas, and for the residential and commercial side, I think it will stay for a while,” he says. “The impact to the plumbing and HVAC market is going to be how we start to innovate a little bit more. Companies like ours can innovate to make sure that we have the right products available and those that do will be the ones to lead in those areas later on. Regardless of the medium, we still need to run pipes to heat the building and carry water throughout the structure. You still need sprinkler systems and drain lines. It’s important that we have the products that contractors need.”
MCAA President Robert Bolton, president of Arden Engineering Constructors, LLC, in Pawtucket, Rhode Island, stresses that the industry “needs to embrace the new technologies that are maximizing energy efficiency, such as heat pump technologies and geothermal.”
Technologies that will add installation efficiencies to help with the labor shortage and provide a cost-effective, sustainable solution to contractors, engineers, builders, and building owners will see growth. Solutions such as BIM services and prefabrication will continue to see growth due to the incredible efficiencies they provide, Boyum says.
However, Frame notes that increasingly restrictive natural gas bans will present both problems and opportunities for PHCC members. “PHCC will continue to advocate for a balanced energy portfolio that offers affordable solutions for consumers. In fact, many jurisdictions are passing fuel choice bills, which prohibit local governments from initiating similar natural gas bans.
“Certainly, natural gas bans will continue to be a game-changer to business-as-usual for those who install and service fuel piping systems and fossil fuel appliances and equipment,” he adds. “For example, the Inflation Reduction Act of 2022 emphasizes production of heat pumps and ‘provides significant incentives for low- and moderate-income households to electrify their homes, replace furnaces, boilers, water heaters and stoves that run on fuel oil or methane.’ Contractors can leverage this opportunity to install and maintain covered components as well as clean energy retrofits for manufacturers. Significant federal money is slated to be available to help with this transition and PHCC members should be positioning themselves as the contractor-of-choice in this developing market.”
Key challenges in the new year
Unfortunately, the labor shortage and supply chain challenges from the past year are unlikely to magically disappear as we head into next year.
“Because of this, contractors should continue to elevate their businesses using technology to ensure they are getting the most value from all their investment, and providing the best service for their customers,” Dhawan says. “With labor shortage and disruptions to the supply chain impacting project timelines, contractors will need to be extra diligent to ensure customer satisfaction. Shortages and delays can understandably cause customers to experience frustration. By using proper operations management software, businesses can stay organized and become more efficient, communicate with homeowners throughout the process and get paid quicker. This is the best formula to ensure their cash flow is strong and new work is always coming in via referrals.”
Julian Scadden, president and CEO of Nexstar Network, sees challenges with both prospective recruiting of skilled tradespeople and the retention of existing employees.
Mark Chaffee, vice president, governmental affairs and commercial and industrial product management, Taco Comfort Solutions.
Christian Geisthoff, vice president of corporate development, Viega.
Robert Bolton, president of MCAA, and president of Arden Engineering Constructors, Pawtucket, Rhode Island.
“It’s imperative to build a culture where your employees have a purpose and a passion, where they want to stay, to grow and continue to make a difference,” he says. “Knowing this, we have invested resources to develop solutions specifically based on our members’ needs. Nexstar is strategically expanding our services in this area to include Leadership Pipeline assessments, Executive Recruiting services and an annual Employee Satisfaction Survey with evaluation and forward-thinking counsel. Throughout the year, we facilitate workshops and training in these areas while offering guidance to address and tackle these challenges proactively.”
Frame also points to rising costs and the continuing labor shortage as the greatest challenges facing contractors in 2023.
“Deteriorating personal finances due to higher prices and lower buying power are driving lower consumer confidence, and causing project delays and deferments of large purchases,” he explains. “An economic slowdown could help take some pressure off these issues, but contractors have been looking for skilled workers for several decades, and the existing workforce median age is 55. Since contractors will continue to train their workforce, the need to tap into federal and state funding from programs such as the Workforce Innovation and Opportunity Act, Pell Grants, state Association Work Force Boards and the Carl D. Perkins Act will increase and incentivize employee investments.”
As a manufacturer, Case points to supply chain woes as the biggest constraint in day-to-day operations.
“Though it’s easing up a bit with some low-tech commodities, such as steel and copper, our supply chain challenges — for the most part — remain,” he says. “They got their start at the beginning of the COVID-19 pandemic, and those challenges haven’t abated. Key trouble areas are electronic components, especially semiconductors; with those, we’re having big issues getting product. Tied to this — price increases on some commodities seem to be leveling off, though they’ll still be a large part of the story through next year.”
Regis Saragosti, CEO of SFA Saniflo North America, agrees, saying the industry has seen increasingly long lead times, material shortages and a continuing imbalance between supply and demand. “One of the biggest challenges is our inability to forecast effectively, which has led many industry leaders to make business decisions without enough information or supporting data," he says. "It's a dangerous exercise, but Saniflo remains aware of our responsibility regarding supply, and we're ready for whatever 2023 may bring.”
Combating inflation
Rising inflation and material costs remain a big challenge heading into the new year.
“Many of our customers are trying to maintain the margins they’ve agreed to in their contracts,” Geisthoff notes. “They are much more price-conscious. Contractors are getting more flexible with sourcing materials — if the cost of copper goes up, other materials may be more attractive for that project as they decide which costs they can pass on to their customers. Contractors are also trying to retain their existing employees to minimize costs for hiring and training new employees.”
Julian Scadden, president and CEO, Nexstar Network.
Regis Saragosti, CEO, SFA Saniflo North America.
Trey Northrup, leader of LIXIL Americas.
Chaffee notes that in most instances, contractors will pass along price increases to their customers.
“One way to help offset the challenge of increasing prices — and widespread supply chain challenges — might be for contractors to beef up their efforts to encourage customers to invest in seasonal maintenance plans, and to get their customers to allow earlier pre-season service appointments,” he says. “This will help to accomplish a couple important things. First, it gets installers in the door before heating or cooling season demands are at their highest. Secondly, it allows installers to get their orders in for materials and equipment — with wait times that are longer than they’ve ever been. This allows the required materials to be received and installed before the heating or cooling season starts. The earlier service appointments will help accomplish that.”
Training also factors into this, Chaffee adds.
“There continues to be a lot of new technology on the market,” he explains. “Each new entry creates some impact in the learning curve for trade pros. Often enough, new technology comes with an app, and may also have some impact in system control strategy. Those factors should encourage installers to be more active with training, usually available not just at the factory but at wholesalers, through sales reps or on-line.”
Contractors should get educated on the coming change in efficiency requirements as well as understand how the IRA will play a role in the industry and their businesses, Costa notes.
“The best way to minimize this impact will be incorporating efficiency solutions, such as design services, BIM resources, kitting options and prefabrication capabilities to keep projects as streamlined as possible,” he says. “In fact, Uponor has started offering all these services and solutions to help customers ensure order optimization, reduce job-site waste, and deliver greater installation efficiencies.”
According to Scadden, the most basic action a contractor can take is to re-evaluate their price book on a quarterly basis, if not monthly, to ensure they are priced correctly for the services they provide.
“Taking that a step further, we’ve seen contractors invest to rebuild their inventory infrastructure,” he notes. “One example is our member shop GEN3, an independently owned electrical business in Philadelphia. The key to their success is linked to an investment in planning, pivoting and adapting to their environment. What they have done is impressive in retrofitting an inner-city warehouse near their offices that is now dedicated space for inventory and supply management. They’ve refined the way they plan, purchase and track materials with guidance from our inventory coach. Ultimately, they have a better line of sight into their P&L statements when they can pre-pick, stage jobs, process returns, and track inventory consistently.”
The PHCC Business Intelligence department is monitoring rising material costs and inflation very closely, Frame notes. “Businesses that thrive during this time of volatility will be those that recognize opportunities to grow their business," he says. "The PHCC Business Intelligence team reports that ‘The US Department of Energy's current energy-efficiency standards place stringent requirements on central air conditioning replacements, which will likely continue to necessitate the replacement of outdated equipment… Green building practices will likely lead to growth in the commercial replacement or retrofit market, and thereby boosting revenue for HVACR manufacturers over the next five years.’
“Additionally, the proposed Airborne Act will incentivize commercial building owners to conduct IAQ assessments, upgrade HVAC/air filter systems to meet ASHRAE Standard 62.1-2019 and a MERV rating of 13 or better for their properties and certify under a proposed EPA certification program that their properties meet IAQ standards. $130 billion has been authorized under the Infrastructure Investment and Jobs Act (IIJA) for IAQ improvements to school infrastructure and represents opportunities for contractors,” Frame adds.
New opportunity awaits
The previously mentioned IRA includes a variety of tax credits that presents an opportunity for residential plumbing and HVAC contractors as well as their customers.
“Time will tell if the name of this bill that was signed into law actually reduces inflation,” Bolton notes. “However, there are some provisions of the act that promote cleaner energy, which is needed if we are to truly combat climate change. These will provide more job opportunities for the plumbing and heating contractors in the area of water conservation projects, upgrading to more efficient furnaces and new heat pump technologies.”
Taco’s System M recently won the coveted 2023 AHR Expo Innovation Award for Sustainable Solutions. The air-to-water heat pump technology for heating, cooling, and domestic hot water production is perfect for homeowners who want to reduce their carbon footprint, Taco says.
Frame notes the IRA will be the driving force for transitioning to electric products.
“That is not great news for contractors preferring to install and service fossil fuel appliances and HVAC equipment,” he explains. “The increased incentives to convert buildings will, however, provide an avenue for many consumers to make the switch, and hence, hire PHCC contractors to do the work. It is yet to be proved that the needed large scale renewable power capacity can make this work. While the IRA has billions of dollars available, that funding is just a down payment on the needed infrastructure that can make renewable power the dominant energy source in America.”
According to Trey Northrup, Leader of LIXIL Americas, the IRA is poised to reshape both the commercial and residential real estate markets, “with green incentives aimed at boosting eco-friendly projects."
“This means, by extension, plumbers will face surging demand among residential, commercial and industrial property owners, at a time when water contamination and severe droughts are already plaguing many parts of the country,” he says. “These factors will work in tandem to further exacerbate the already significant shortage; however, there are some short- and long-term measures the industry can prioritize to alleviate its effects, including promoting the growth of the industry and the proliferation of green jobs over the next five to 10 years; enhancing training standards to keep pace with the increasing demand for water efficiency and sanitation solutions; and increasing new talent into the profession starting at the high school level.”
Geisthoff notes that many are viewing the IRA positively, and that it provides opportunities for the industry, such as using hydrogen instead of natural gas.
“It’s hard to forecast what will come, but there could be opportunities to change a lot of pipes for new media for new applications, particularly in domestic energy,” he says. “There’s always an opportunity for the industry when there is investment in that kind of infrastructure in all the sectors where we operate. The concern or caveat would be whether or not we have enough of the product. Can we get materials at prices we can afford? When it comes not just to companies like Viega, but also to the customers we serve, the Inflation Reduction Act should have a positive impact as a result.”
Costa agrees the legislation presents a big opportunity for the market. “The entire industry is trying to understand how the law will be reflected in the tax code, which is still unclear," he says. "When clarification is available, it will create a very significant source of revenue. Incentives for every type of technology such as high-tier boilers and natural gas systems will be available. But again, heat pumps are coming out as the winner with the highest incentives. Contractors should know that the incentives are written to support low-income families, who can now consider a mid-tier heat pump system that can deliver significant cost savings month after month year after year.”
Boyum anticipates rising material costs and inflation will continue to be a factor in 2023. For contractors, the best way to minimize this impact will be incorporating efficiency solutions, such as design services, BIM resources, kitting options, and prefabrication capabilities to keep projects as streamlined as possible, he says.
Chaffee also notes the IRA will offer huge money.
“We’re talking about tsunami impact — $369 billion for energy efficiency and carbon reduction,” he explains. “It will involve every single funding mechanism in the market. Yet there are a lot of unanswered questions, and some of those questions stem from an inability to provide answers because most government agencies were not prepared to receive this kind of increased funding. After all, the federal government can make pronouncements that will have broad effects, yet the statements sometime come well before the myriad details that allow precise answers — like how do I get my share of the money? Stay tuned; the answers are evolving but will certainly span direct rebates, tax credits, green infrastructure spending and more.”
Case adds that contractors shouldn’t forget about the historic $70 billion funding that was part of the IIJA, specifically directed toward water and wastewater projects.
“This will be transformational for America’s water systems and touch every corner of the United States,” he says. “Many of these projects are funded through local state revolving funds and are permitted and in the queue just waiting for this money, so these are projects that can have an immediate impact. One of the caveats of this funding is that there is a 10% set aside for ‘green infrastructure,’ which efficient pump and pumping systems was a specific call-out example of what applies. So instead of rewinding that 20-plus- year-old motor or ordering parts for the water pump, now municipalities have the money and incentive to upgrade these pumping system with the latest energy efficient technology.”
Recruiting for the trades
With the labor shortage remaining one of the largest challenges facing the plumbing and HVAC industry next year, the focus turns to how to recruit the next generation of skilled trades workers, specifically how to attract more women and minorities to fill the gaps.
“Organizations like MCAA can encourage women and minorities to join our industry and welcome their perspectives when they do,” he says. “MCAA started a Women in the Mechanical Industry (WiMI) initiative in 2018. As part of that, I attended the Tradeswomen Build Nations Conference in Las Vegas this past October. It’s truly amazing to see how many women and minorities are now involved within our industry. However, we must continue to communicate and educate women and minorities on the opportunities that exist in the mechanical trades and in the building trades overall. Union construction provides extensive training, proper job site safety, well-paid jobs, health care, and pensions many of which are in scarce supply elsewhere.”
Scadden stresses that, first and foremost, the industry needs to purposefully extend an invitation to minorities and women candidates welcoming them into the trades family.
Beginning Jan. 1, 2023, the U.S. Department of Energy (DOE) is raising the minimum efficiency requirements for central air conditioners and heat pumps. On top of new levels, the DOE is also changing the testing procedures and standards for determining those efficiencies. The challenge for contractors, Costa notes, is the questions that will inevitably arise regarding whether they can even sell products made previously and how they should install them properly to ensure they meet the new efficiency requirements. It will likely and realistically take the industry through Q2 to get all the wrinkles smoothed out and on track.
“We must share real stories and create relevant marketing materials that illustrate how the trades have benefited their peers and how their personal career choice can change their lives for the better,” he says. “We come from an industry where lifting people up comes naturally; so this is about extending that same sense of brotherhood and sisterhood to those from diverse backgrounds with an outstretched hand and an inclusive invitation. Fortunately, there are strong advocates in place with organizations like women in HVACR — I was honored to join their 20th anniversary event. I experienced firsthand how powerful that invitation was, and it reinforced for me the impact we all can have by reaching out and genuinely supporting others.”
Scadden also points out we need to start having important trade-career conversations earlier. “Talking openly with a broader audience is key. For both high school and middle schoolers, let’s engage students — particularly those from diverse backgrounds — in their formative years with details around the benefits of trade careers," he says. "We support Explore The Trades, a nonprofit tied to Nexstar, that is seeing success in broadening this conversation to include minorities and young women by implementing programs and creating materials to help educate school counselors, teachers and parents as well.”
The PHCC Educational Foundation has seen exponential growth in its apprenticeship programs among PHCC state participants, Frame notes.
“In addition to the need for strong retention efforts, PHCC continuously reminds contractors that minorities, at-risk youths, military veterans and women need to be aware of the opportunity a p-h-c career offers — and without any college debt,” he notes. “We need to tell our story to those who may not see folks in the industry that look like them and show that they too can thrive in our industry. There are bright spots as evidenced by PHCCCONNECT2021 attendees in 2021 who witnessed Karin Dahlin, from Minneapolis Pipefitters local 539 and working at Northland Mechanical in New Hope, Minnesota, win first place in PHCC’s national HVAC Apprentice Contest while sponsored by the PHCC National Auxiliary.
“PHCC has a vast assortment of videos, testimonials, and other career fair resources for PHCC contractors to use to get their story out there,” he adds. “As we all know, this is a wonderful industry, and once people are part of it, they stay.”
Be prepared
According to Geisthoff, the contractors and wholesalers he has talked with are optimistic for 2023.
“Their books are full. Their financing has already been secured. There is going to be some volatility ahead, but the overall picture going into the next year and beyond is a positive one, if you look at it holistically," he says. "It is going to be dependent on how we respond to some of the continued issues that we’re seeing, whether that’s inflation or margin crunch or labor shortages. But, I do think contractors are going to have to look at their fixed and variable costs and I would expect some of them to make adjustments based on their services offered.”
Taco’s SmartPlug brings a new level of control for domestic hot water recirculating systems. With the ability to save homeowners up to 12,000 gallons of water per year while saving energy, the patented SmartPlug technology learns hot water usage patterns and delivers hot water only when needed, Case says.
He adds that contractors should ensure their supply chain is set up and they have enough products for jobs. “It’s also a good time to look at your internal processes and see if there are things you can streamline," Geisthoff says. "Are there components you can outsource? Look at the projects in your pipeline — make sure the pipeline you build out is secure and solid. The supply chain is still a little bit broken after COVID-19. Prepare and have a plan to get the products you need when you need them, but also have a plan B to make sure you can fulfill on the work orders you have. And finally, invest in your employees. We’re still facing an historic employment situation and the ratio is almost 2-to-1 between job openings and applicants. Investing in them will encourage them to stay with you for the long term. Provide additional training so they are up to date on the latest standards and construction practices.”
Case is confident there will be unprecedented growth in the building energy performance market. “Contracting firms already in this market will see the biggest impact, but there’s plenty of opportunity for more to participate," he says. "No doubt, education and training will have important roles to play. Ultimately, trade pros will want to work smarter, not harder to implement these new technologies for their clients. Most installers are already stretched to the max, especially considering the impact of labor shortages. So, it only makes sense that — with targeted education and training — installers can shorten the learning curve, and move into the fast pace of this new energy efficiency-driven work better prepared.”
According to Boyum, ensuring a solid workforce that has the proper training and support will be key to meeting the challenges of 2023. ““Also, investing in new technology, such as BIM services, as well as incorporating kitting and prefabrication solutions, will help contractors and other industry professionals become more efficient and profitable,” he notes.
Saragosti encourages contractors to have a plan of action and set up a marketing strategy to ensure more business.
“Know your target markets and listen to their pain points,” he says. “Customers will choose the company that comes up with the best solutions. Make sure yours are at the forefront of their minds. We are very excited about 2023. Yes, it will be challenging, but nothing we have not seen before. It will be difficult, but not impossible. We've developed a strategy that will allow us to get through a potentially tricky year in the best possible way. We are definitely ready for what is to come.”
