As we look forward to 2023 HVAC trends, contractors should prepare for continued HVAC price increases, demand for IAQ, and business acquisitions.
2022 was one for the history books. From record-high inflation to the passing of the Queen, it is certainly one to remember. In addition to world events, we at FTL Finance kept a tab on HVAC trends in 2022.
This past year brought consolidations, acquisitions, smart technology, and price increases to the HVAC industry. Looking forward to 2023, we expect many of the same trends to continue.
1. WE’LL CONTINUE TO SEE HVAC PRICE INCREASES
At the beginning of 2022, we saw price increases ranging from 3% to 20%. Based on current HVAC trends, we’ll continue to see prices rise in 2023. Manufacturers are already preparing customers – Allied Air Enterprises and Lennox Industries announced 8% increases starting January 1, and Trane Technologies will have a 10% increase starting January 9.
Unlike the past few years, supply chain issues and rising inflation won’t be the only things affecting HVAC price increases: starting January 1, SEER standards will change nationwide. The minimum SEER rating will increase from 13 SEER to 14 SEER in northern states. Southern states will see the minimum rating increase from 14 SEER to 15 SEER.
The price tag for these higher SEER systems may surprise customers, even without record inflation. And while we understand you’ve got to make a profit, your customers may be less sympathetic. Consider this: 79% of U.S. adults changed their holiday plans this year due to inflation. What does that tell you about the state of Americans’ finances?
A good way to handle customer objections to higher prices is to help them understand the reasons behind them. Or you could explain that though higher-efficiency systems may be more expensive upfront, they will save money on heating and cooling bills in the long run. And if you offer financing, customers can spread out payments over several years to make it more manageable.
2. HOMEOWNERS WILL WANT ENERGY EFFICIENT HVAC SYSTEMS
Energy efficient HVAC systems are set to become the norm over the next few years. In addition to SEER standards changing, more people are working from home, and respiratory illnesses are going around like crazy. That being said, many homeowners are looking for ways to improve indoor air quality (IAQ).
Homeowners are willing to spend 65% more on IAQ now than they were five years ago, according to the 2022 American Home Comfort Survey. When you’re discussing project details with a homeowner, ask questions to gauge their interest and understanding of IAQ. Be prepared for any questions they may have as well; not all homeowners will know the ins and outs of this upgrade.
If they show interest, you can present a higher-value project proposal that includes IAQ. This can be an expensive upgrade on an already pricy system, though, so offering financing can help reduce that burden for the customer.
3. SUPPLY CHAIN ISSUES WILL LEAD TO HVAC ACQUISITIONS
Ongoing supply chain issues will continue to affect the HVAC industry in 2023. As distributors receive a limited supply, they’ll have to pick and choose which contractors will get it. And they’ll likely prioritize larger contractors over smaller operations. So, what does this mean for your business?
If you’re a smaller shop, there are a few ways you can respond to this trend:
- You can sell your business.
- You can grow your business.
- You can strengthen your distributor relationships.
If you’re looking to retire in the next few years, you may want to sell your business now. HVAC acquisitions aren’t a quick process, so starting now will help you retire when you are ready. Many larger contractors and private equity firms are eager to acquire small HVAC businesses. We’re still in an HVAC labor shortage, so an acquisition could provide you with the resources necessary to attract experienced techs (think: better benefits, higher pay).
If you’re not ready to give up your business, though, you’ll need to keep up with new developments so your business can thrive. Millennials are homeowners now, with Gen Z soon to follow. These generations navigate the world differently and are creating new HVAC trends. For example, 50% of homeowners look online to see if a dealer offers financing. So, if you don’t have a website and/or don’t offer financing, you may be losing business without realizing it. Taking this step can help you grow your business and stay in business.
Finally, strengthening your relationships with distributors is never a bad idea. Reach out to your contacts while waiting for products. Find common interests to discuss. Ask about their weekend. Building a personal relationship will help keep you at the top of their mind when more products are in stock. In the wise words of Michael Scott, “Life and business are about human connections.” Making these connections with your distributors, employees, and customers will put you on a path to success.
HELP YOUR HOMEOWNERS IN 2023
Between price increases and energy efficient systems, homeowners are looking at larger HVAC bills in 2023. HVAC expenses aren’t always planned for, which makes it even harder to afford. FTL Finance helps make these bills more manageable.
Using our project estimator tool, you can offer your customers multiple project and payment options. We recommend the “Good, Better, Best” model:
- Good: the bare minimum a homeowner needs
- Better: slightly more than the bare minimum
- Best: all the bells and whistles
Enter your homeowner’s project options into our tool and choose a loan term based on cost (the larger the cost, the longer the term). Then, based on this information, our estimator will generate an estimated monthly payment for each project.
Most of the time, monthly payments don’t vary much between the options. This comparison helps reduce sticker shock for the customer and shows them they can afford the features they want, even with price increases.