As 2025 moves into the second quarter, it is important to understand key trends for contractors in Quarter 1. This knowledge helps in making business decisions for Quarter 2. Waterford focuses on contractor accounting. This includes HVAC, plumbing, electrical work, and more luxury contractors. Because of this niche, we can gather national insight into how these different industries performed and what trends they see regarding material costs and revenue.
In this blog, we will focus on four different industries. We’re looking at interior janitorial services, electricians, and plumbers because they’ve had similar trends in Q1, HVAC contractors, and some general contractors who do all types of work. These trends are for Q1, which covers January 25 through March 25. We plan on continuing this trend of blogs, so we should release them around the second or third week following that quarter.
Luxury Industries: Cleaning & Landscaping
To start with more of the cleaning industry, quarter one was not great. We consider more optional contractor work such as cleaning, pressure washing, and landscaping “luxury.” These industries tend to decline after periods when people spend a lot of money, such as Christmas, so quarter 1 was affected by that.
The good news is that at the end of March, revenue started to rise. People want to do spring cleaning. They want to clean the inside, wash the outside, and maybe get some landscaping services to freshen up for spring. A lower revenue is a reasonable standard for quarter one.
Unfortunately, the start of the year often has less luxury tractor work. This is due to more uncertainty in the economy than in past years. It seems we will see less growth and revenue this year compared to previous years.
Electrical and Plumbing: Stagnation
Electrical and plumbing revenue has been very stable overall. Regarding material expenses, we’re not seeing the massive increases we had previously. Those are also staying very stagnant, which is a benefit. Sales, however, are not seeing significant decreases, but we’re also not seeing major increases.
This stagnation is likely because we’re seeing some economic uncertainty, and people do not want to spend money on doing the kitchen renovation or the remodeling of the bathroom of their dreams. They’re doing more required work on their home but not going above fixing necessary items. Year over year, we see a very slight increase, such as 5%. It’s probably coming from more overhead cost cutting measures than actual trend changes.
However, there’s nothing against practicing cost-cutting and financial management at any point. Having that efficiency will help strengthen the business no matter how the fluctuation of outside factors affects the business.
HVAC Industry: Weather Wild
We start seeing a lot of volatility instead of stagnation in the HVAC industry. A lot of our clients had powerful Januarys. However, if you look at the climate across the US, you will see cold weather even in places that don’t usually see more frigid temperatures.
For example, New Orleans had snow, which is highly unusual and will lead to more service calls on that heating system than in prior years would have seen. Many of our clients doubled their sales year over year and had great numbers, which we should not budget off of, but it was a great January.
February and March did not go the same way. The weather was better than it had been in multiple years. It didn’t get as cold or stay snowy, which did cause quite a drastic drop in profits.
To directly quote one of my clients about February, “It kind of sucked.” And unfortunately, his financials reflected that statement.
It’s not unusual for the quarter-one channel to look great, but this was probably one of the worst years-over-year comparisons we have seen. We started seeing some decent increases toward the end of March, especially in the last two weeks. Some of our clients doubled their sales in the previous two weeks of March compared to the first two weeks. Hopefully, this trend will continue into quarter 2.
As we get into that spring cleaning, just like with the more luxury contractors, people will start doing things more like those RSA calls, getting those service plans set up, and just tune-ups for moving into the summer months. HVAC is so weather-dependent that if we end up having the warmer temperatures we in South Carolina have seen at the beginning of April, it will likely be a good summer.
General Contracting & Construction
We have seen a cool down for general contractors in the construction industry, especially if you are working in custom home building. It’s focused on a slowdown in mid-grade to semi-custom homes, which will probably lead to fewer sales coming in.
However, those are two particular buyers, which means these construction companies still have a lot of work in the wings, just not in those two types of homes. Again, a lot of that falls to the economic uncertainty that we’re seeing, which makes people not want to buy homes and, even more so, do not want to commit to a custom build. There is a much bigger risk in making a custom build than just purchasing. There are no significant increases, but we expect a decrease throughout this year.
Looking Ahead: Q2 & Some Expectations
As far as looking into what we’re going to see in quarter 2, there’s no way that you have missed all of the emails, all of the marketing campaigns, and everything relating to tariffs. How the tariffs will affect pricing is yet to be seen, but supply houses are reaching out and letting you know that their prices are likely to be impacted. By the time we go over quarter two, these effects will likely already be in play, so it’s something to watch out for.
One particular thing has come up in the HVAC industry this year: there are multiple deadlines depending on your state or where you’re at and how businesses can use their older inventory. However, a new refrigerant has come out, so you cannot install older units. Please look into your state’s regulations, and if they allow you to continue installing, make sure to move that inventory. I would even recommend making it a marketing tactic where you say hey, I have these units, and they’re being phased out at X price.
These new refrigerant units are going to have a huge price jump, which is going to be a real shock to the install market; you’re using this to your advantage and saying hey, before this price jump goes up, buy a new unit your unit is 7 years old and its lifetime is getting close you should jump on the pricing before it goes up.
On the other hand, you can look at those who are conscious of having higher quality items; you can push those new refrigerant units onto them instead of those who are more price-conscious.
Hopefully, this gives you an insight into the 2025 Quarter 1; if you’re in the HVAC industry and saw a severe decrease, you are not alone. If you have any questions about what this covers, please reach out to us because we specifically work with these industries and can give you these insights more regularly. We focus on ensuring you know what’s going on with your financials quickly after the month closes out. That way, you can adjust for these things.
Check out our YouTube video Contractor Finances in Q1 2025: Key Trends to Watch with James for a first-hand recap. If you are still determining which plan works best for you, need additional help, or have any questions, Waterford Business Solutions is happy to help. Feel free to call us at 864-351-0852 or email us at Info@WaterfordBusiness.com.
