Is your company prepared for another downturn?
One of the most treacherous periods in the HVAC business is when times are good and new construction is booming — just like many of us are now experiencing in many places throughout the country and much of the world.
Why is that? Consider the scenario: Homebuilders, for example, are pulling out of the construction doldrums and suddenly are having trouble finding good contractors to install the HVAC systems in all the new homes they’re selling. Since most of the HVAC people they used in the past have gotten out of the new-construction business and gone belly-up, they’re searching for new companies that can get the job done.
This presents opportunities for growing contracting companies in our business because there is a lot of fast money to be made and it also offers great opportunities for your company if you’re in the new-equipment side of the business.
Immediately, your contractor customers will have trouble finding enough people to keep up with the growing demand because they will be growing so rapidly and expanding their entire installation department, office staff and all the equipment and vehicles they will need.
However, they also will likely be growing too fast for their capital. But not to worry because the future looks so rosy!
The same will be true at your company. You’ll need to expand your stock, hire more warehouse staff, buy the forklifts and grow your office staff and equipment. Good times are here!
Yes, this is great! It will be a time of profits, bonuses, growth and patting yourself on the back. Just don’t lull yourself into thinking this is the way it will always be because the greater the boom, the greater the bust and the companies that prepare for this are the ones that will continue to survive and thrive.
And then the day suddenly arrives when people stop buying new homes and there is an inventory of those already built. So the good-times HVAC contractor suddenly has no business and has to start laying staff off. Then the general contractor goes belly-up, owing your customers money, who then go belly-up owing you money because they are so overextended. I’ve lived to see this same cycle of events repeat itself in every decade. How do you avoid such a fall?
- Make sure your core business is based on the sale of service and repair parts;
- Get involved in helping your customers grow their businesses on the enduring core of doing service work; and
- Host business programs for your customers to show them how to grow financially-stable companies that won’t be overextended when hard times arrive.
Host business programs? YES! Remember that many HVACR contractors entered this field with a technical (not a business) background. So if you’re going to extend credit to them, make sure they understand how to be good businesspeople so they don’t end up owing you money they can’t pay.
Of course, those primarily in the parts-and-pieces business have little to worry about in a recession, since hard times can make your business grow.
On the other hand, there is even more money to be made in new construction during good times. And if this is what you choose to do, buffer your company against the hard times that will inevitably follow.