Quarter Two Contractor Trends
As we have now reached Quarter Two, it’s time once again to review the accounting trends we observed for our contractors. The exciting part about Quarter Two is not only that half the year is over, but we start seeing industries like HVAC pick up for the summer months. Now, if you haven’t already reviewed our Quarter One trends blog, you can see it here: LINK.
However, we want to do this quarterly to give you an idea of whether you are meeting your industry standards. These blogs started because our clients would come to us and ask, “Hey, I had a terrible month, am I alone?”
We want to revisit our observations regarding the HVAC, plumbing, and electrical systems, as well as explore additional aspects of these luxury trades, such as cleaning and soft washing. These luxury trades are typically not something that people invest in unless they have some extra cash flow.
I want to add a disclaimer that these observations are based on the hundreds of clients we work with and are generalized observations across the board. These observations don’t mean that your business will necessarily fall into these categories; however, if you’re reading this and have questions about how to adjust your business to meet these goals, please don’t hesitate to reach out to us.
HVAC: Heating up for the Summer
We’re going to start with HVAC contractors because they had such a significant change this Quarter. Many of our clients pushed those service contracts to see revenue beginning in April. Although they didn’t have a lot of heat at the start of the Quarter, it was a very comfortable and cool time.
Perhaps we didn’t notice much change, but as soon as we reached June, there were massive heat waves across the country. These heat waves have pushed the end of Quarter two to perform higher than in prior years.
We’re experiencing those heat waves sooner than usual, so it’ll be a question of whether they persist or if the season ends earlier than usual. It’s something to keep an eye on, as far as ensuring you have the cash flow to get through the slow season. We might be seeing it start early, which doesn’t lead to an early end.
The first two weeks of July are looking very strong again, mainly due to the continued heat waves, so Quarter Three is off to a powerful start, and Quarter Two ended very strongly for those HVAC companies.
Plumbing and Electric: Steady Flowing
Moving on to plumbing, honestly, plumbing and electric did not see significant numbers in Quarter Two. When we look at previous years, people had more cash flow that they wanted to spend on larger projects, such as redoing a bathroom or adding extra chandeliers, jobs that were more wants than necessities.
Now that everyone is tightening their budget, that’s reflected in this year. We’re not seeing drastic reductions, but we’re not seeing significant growth either. Even with that being said, Quarter Two is looking stronger than Quarter One because there was a lot of hesitation and concern around tariffs that have died down a little bit.
Some things we want to discuss regarding options that may help you grow are adjusting your estimates, revising your communication with clients, and adapting to new situations. For example, in the Quarter One blog, we discussed selling techniques and suggested a water heater that could help reduce energy costs for your customers. It’s turned more into a year of you having to show customers the value of what you can bring them, rather than customers seeking you out.
Luxury Trades: Declining on Spending
Moving back to those luxury trade services, such as cleaners, exterior cleaners like soft wash, and even leak detection. We’re seeing decreases year over year, which is directly related to the economic worry. Even landscaping during their peak season is showing where customers are cutting back. The increase in the cost of living and concerns about the economy are affecting where people want to spend their money.
Unfortunately, to combat this, expenses will have to be kept extremely lean, and smart decisions will need to be made. Keeping a pulse on your cash flow is essential so that your company can weather this storm. Unfortunately, we are seeing some businesses having to shut down simply because they haven’t been monitoring their cash flow, and business has dropped enough that they can no longer sustain it. As soon as the economy turns around, these businesses will likely experience growth.
When we look at general contractors, there has been little change, Quarter over Quarter, for 25 years. Again, just like in Quarter One, we’re seeing those higher-end custom home builders still having growth and steady revenue.
However, with the normal housing market slowing down, those mid-grade builds and entry-level homes are starting to have more supply than demand. There’s a lack of new large construction contracts coming through. Keep an eye on how your potential pipeline is performing before making decisions for now.
A couple of other roadblocks that general contractors are facing are increased competition. The two most significant factors we have are shrinking demand and increased competition, making the market extremely saturated right now. Being able to stand out in your marketing and deliver quality are key factors that will help general contractors weather the current situation.
Overall, the best advice we have for our industry is to explain value clearly. And what I mean by that is a lot of people don’t understand the benefit of having higher end materials so being able to sell those at the end of the day and say hey This is why you want to have a train or a Goodman HVAC unit instead of a more general brand is going to help longevity of keeping that client because you’re showing them the quality.
It will also show them the benefit of having those higher-end materials, as I mentioned earlier, with the water heater, by selling them something with a purpose. Even showing the value of something like a Service plan and having that availability to assist with those more minor things would be essential.
Another piece of advice is not to discount the small jobs. We’ve seen many companies fill their time with massive projects, but they often overlook smaller jobs that can help create revenue over time. In this economy, ensuring that you aren’t just chasing the biggest fish will be crucial for maintaining a healthy cash flow and revenue.
Here at Waterford, although we are an accounting and bookkeeping firm, we spend a significant amount of our time disseminating information so that everyone can understand their finances or see what’s happening with other businesses in the same industries. Everyone should understand their finances and not just have them handed over with no explanation.
If you find yourself in a situation where you don’t know what is happening with your business whether it be your cash flow seems to be running out or you don’t understand your metrics so you aren’t sure where your money is going even though your sales are high these are things that we specialize in and would love to help you with.
