11 minute read
Gregg Hicks
HOMEOWNER ECONOMIC STRESS – WHAT HVACR CONTRACTORS NEED TO KNOW
BY GREGG HICKS
There continues to be a steady stream of news about the economy, inflation, and a potential recession. Inflation is at its highest level in forty years. Real estate values have skyrocketed but have recently tapered off due to increased interest rates. Because of all this news, homeowner confidence is down while stress levels are up.
While we have not seen a serious decline in lead-generation demand, now is still a suitable time for HVACR business leaders to understand the latest homeowner trends and stress levels and get ready to adjust strategies.
Modernize Home Services recently surveyed almost 30,000 homeowners considering major home improvements, including HVACR replacements. We wanted to learn how the current economic environment is affecting attitudes about improvement projects homeowners need so that contractors know how to best serve them.
Below are some findings from the survey, and tips on what contractors can do to keep business flowing.
EMPATHIZE WITH HOMEOWNER STRESS
Homeowners are feeling a lot of stress. 61% of respondents said stress relating to decisions about home improvement is “more than [they] can handle” or “tough to manage.” HVACR contractors can use this information to reinforce the importance of empathy in sales scripts and training modules. This might include instructions for reps to slow down, listen carefully, and respond with positive feedback when prospects express signs of stress.
HOMEOWNERS NEED HELP UNDERSTANDING PRICE INCREASES
In our survey, the stress factors cited most often, had to do with cost – i.e., gas, interest rates, supplies, etc. And 85% agreed, either entirely or somewhat, that “inflationary pricing right now puts the cost out of reach on [their] budget.”
Since most homeowners haven’t experienced this kind of inflation, HVACR salespeople may not always be ready to turn this concern into a selling point. Depending on your ability to control these factors, consider authorizing sellers to lock in some or all costs of their new HVACR products or services once the homeowner signs a contract and makes a deposit.
REFRAME INTEREST RATES IN A LONG-TERM CONTEXT
The second most common source of finance-related stress is high-interest rates, as mentioned by 16 % of respondents. When asked which factors could cause homeowners to postpone or rethink home improvement plans, 82 % mentioned “increases in interest rates.”
It’s important to know how to handle customers who need or want to borrow. Across all trades, our research shows that 77 % of prospects want to finance a portion, if not all, of their project. Consider responding to interest rate stresses by framing today’s rates in a longer historical context, arranging or underwriting your in-house or whitelabeled financing option, and ensuring that reps have current data on rates charged for well-qualified homeowners.
CLIMATE-RELATED STRESS IS UNLIKELY TO DIMINISH
The third-most reported source of homeowner stress was related to changing climate situations, mentioned by 14 % of highly stressed homeowners.
For those in the HVACR business, this signals an opportunity. Increases in global temperatures are not projected to ease up. Help prospects understand that they deserve to live in a home with systems capable of handling higher temperatures, and unpredictable weather. Consider responding to interest rate stresses by framing today’s rates in a longer historical context, arranging or underwriting your in-house or white labeled financing option, and ensuring that reps have current data on rates charged for well-qualified homeowners.
PROMOTE AVAILABILITY
With supply chain issues and labor shortages in the news, homeowners are worried about how long it will take to get their projects completed. When asked which factors might cause homeowners to delay their projects, 72 % of respondents entirely or somewhat agreed that they “can’t find contractors who can even fit [us] into their schedule.”
Especially in HVACR replacements when system failures drive immediate needs, homeowners want contractors who respond quickly. The best performing HVACR contractors differentiate their business by responding quickly to homeowner inquiries. This is called “speed to lead.” Even a delay of fifteen minutes has a significant impact on close rates.
Be transparent about scheduling expectations. Whether equipment delivery and installation start dates are in weeks or months, homeowners are happier when they know what to expect. Quick and effective communication with consumers is always important, but today, when homeowners worry about a lack of available contractors, it is imperative.
Lastly, use this information to better serve your HVACR business – what doesn’t fit isn’t for your business. Surveys don’t always account for loyal customers, outliers, or regional interests. But knowledge is power in any business. The more you can anticipate and manage a customer’s expectations, concerns, and stressors, the more likely you are to react positively and be of service. u
Gregg Hicks is a longtime marketer of home improvement services. He is a business leader for Modernize Home Services and has 20 years of experience in web analytics, SEO, social, SEM, and affiliate marketing. His role as a spokesperson is to explain the value of thoughtful matchmaking between homeowners and home improvement professionals that forges positive and productive connections between the parties.
AUSTIN, Texas, Aug. 11, 2022 — This summer, Modernize Home Services released its annual Homeowner Sentiment Report findings, resulting from a recent survey of more than 23,000 homeowners. Respondents shared their thoughts on preparing for home improvement projects, budgeting, pain points, and more. The 2022 Homeowner Sentiment Report includes a special set of questions regarding homeowner stressors, such as surging prices, a potential recession, supply chain backlogs, and political unrest. The results indicate that 86% of homeowners consider at least one of these factors to be the cause of their stress. Modernize strives to understand how homeowners and their home improvement decisions, are being impacted by recent events. Each year, Modernize conducts an extensive survey of homeowners to provide insight into what drives them to start home improvement projects. These results help contractors better understand their customers to best support them. The results are compiled and compared by trade and weighed against previous surveys.
For more information, visit http://modernize.com
INDIANAPOLIS, Indiana- — July 29, 2022 – Carrier and Bryant have announced the recipients of this year’s Carrier & Bryant Distributors’ Education Foundation scholarships. Recipients will receive funding for their post-secondary or vocational program during the 2022-2023 school year. Carrier and Bryant are part of Carrier Global Corporation (NYSE: CARR), the leading global provider of healthy, safe, sustainable and intelligent building and cold chain solutions. Established in 1981 the Carrier & Bryant Distributors’ Education Foundation was created to commemorate the late William A. Blees for his many years of service as an advisor to Carrier and Bryant distributors. Since inception, the foundation has awarded scholarships to over 400 students. Today, the foundation continues to serve the children, grandchildren and employees of distributors and contractors while also honoring the industry’s founder, Willis Carrier.
To view the 2022 Carrier & Bryant Distributors’ Education Foundation scholarship recipients or for more information about Carrier or Bryant, please visit https://www.carrier.com/residential/en/us/ or www.bryant.com
DiversiTech® Corp. Acquires Big Goose® HVAC Condensate Sensors
DULUTH, Georgia, June 14, 2022 — DiversiTech® Corp., a leading aftermarket manufacturer and supplier of highly engineered components for residential and light commercial heating, ventilating, air conditioning and refrigeration (HVAC/R), announced today that it acquired the Big Goose® line of innovative latching condensate float switches. The switches will become part of DiversiTech’s Asurity Condensate Management system which offers contractors the only full system solution to managing condensate. The patented and patent-pending condensate float switches differ from other switches in the industry in that they feature a latching mechanism that prevents the unit from turning on after tripping until a technician addresses the reason for the condensate blockage. This eliminates the electrical chatter which may cause damage to HVAC equipment. Simply reset the switch with a push of a button. The switches also incorporate a unique float design which is not prone to sticking.
For more information about DiversiTech, go to http://diversitech.com
BY RUTH KING FINANCE
A Better Way to Look at Profit and Loss Statements
If you only look at the monthly profit and loss statement without analyzing the report, you might get lulled into a false sense of security. Monthly data and year-to-date data reports on a profit and loss statement don’t tell the whole story.
GRAPHING THE FINANCIAL DATA
Most business owners receive monthly data and sometimes year-to-date data. If you look at these two reports in numbers, you cannot see the revenue, expense, and profit trends. Only by graphing the data, can you see all that is going on with your business on a long-term basis. Then, you can spot the minor issues and take care of them before they become major crises.
By looking at both the monthly graphs and the trailing graphs you can see what is happening with revenues, gross profit, gross margin, overhead, and net operating profit.
REVENUE VS. SALES
First, make sure your profit and loss statement, is reporting revenues, not sales.
What’s the difference?
Sales are just that – sales. What did you sell? It doesn’t matter whether you have done the work.
Revenues are what you billed/collected for the month.
For example, you could sell a $1,000,000 project. That’s the sale. However, it is unlikely that you will sell and complete that project in a month. If you do, then sales equal revenues. Most likely you will complete a piece of the project each month and bill the customer accordingly.
The revenues are what you bill each month. So, if your company sold a $1,000,000 project and it was going to be completed in four months, the revenues each month would be $250,000. The revenues are what you report on your profit and loss statement…not the sale.
Then, take the data from your monthly profit and loss statement and create two graphs: a monthly data graph and a trailing data graph.
The monthly data graph of your profit and loss statement takes the values directly from the monthly profit and loss statement. Each month represented in the spreadsheet is the exact data that is reported on your profit and loss statement.
Trailing data looks at a year’s worth of data one month at a time. It is calculated by adding 12 months of data and dividing it by 12 to get the month’s data point. For example, the revenue data point for January 2022, is calculated by adding the revenues from February 2021 through January 2022 and dividing the result by 12. You can do trailing data by week (divide by 52) or even by quarter. However, analyzing data monthly is sufficient. Trailing data is typically calculated monthly and considered enough for analysis purposes. However, trailing data needs at least 14 months of data to create an accurate graph.
Here are the monthly P&L and trailing data graphs for a contractor:
Here are the monthly P&L and trailing data graphs for a contractor: MONTHLY P&L DATA GRAPH VS. TRAILING DATA GRAPH
It’s hard to see the condition of the company by viewing only the monthly P&L data graph because of seasonality. Revenues, gross profit, and net operating profits are going up and down. The only constant line is overhead – and overhead should be constant. To accurately determine whether the company is headed in the right direction, look at the trailing data graph as well.
The most important line in the graph is net operating profit. The graph shows in this example, that on a long-term basis, profits are increasing.
The warning sign is that revenues are increasing faster than gross profit. The revenue and gross profit lines are parallel when gross margins are consistent. This graph shows that the company is doing more work at lower gross margins. Pricing may need to be increased because costs have gone up. Or the jobs are taking longer than the bid number of hours, which means that productivity is decreasing.
If you learn how to analyze your own company story, you will be better equipped to fix issues early and succeed in the long term. u
Ruth King has more than 25 years of experience in the HVACR industry and has worked with contractors, distributors and manufacturers to help grow their companies and become more profitable. Contact Ruth at ruthking@hvacchannel.tv or at 770-729-0258.
