Unfair Utility Competition
The most consistent threat in HVAC is unfair utility competition. It arises from time to time before receding. Utilities are particularly galling because they find ways to subsidize their HVAC efforts with their utility business. Utility work gets marked up and passed along to the rate base. That means you are forced to pay for a piece of your competitor’s overhead! Worse, the utilities are trying to steal your technicians by offering them better pay and benefits, along with steadier work, better conditions, and so on. How can you fight that? You beat the utilities one customer at a time, with more personal service and greater responsiveness. They will take some customers, but only those you are ill-prepared to serve. On the labor side, you may need to up your game. Charge more to pay more. Charge more to offer better benefits than the utility. Utilities are big, impersonal, and bureaucratic. You can “out-human” them.
The franchises come and go. To date, none have established enough top-of-mind nationwide to be a threat. Top-of-mind tends to be a local phenomenon. Even if it’s strong, when the 10-year agreement expires and the franchisee exits the program, the next guy to grab the franchised brand is unlikely to be as aggressive. A franchise is just another local competitor.
Consolidation was once the big bogeyman. Join a consolidator or get run over, we were promised. Today, independent contractors thrive and the consolidators that survive are shells of their former promise. A new consolidation movement has opened up among private equity firms; it presents an exit strategy for those who want one.
The big boxes were once feared as the major industry threat. We watched as they absorbed an additional point of market share for water heaters each year and were horrified when well known HVAC brands showed up in their end caps. The big box stores are good retailers, not contractors. They cannot do the work. So, they partner with contractors, which is not so bad. They are content to grab the low hanging fruit (for them) and contractors are more than happy to grab the rest.
A looming threat is Internet sales. No one has been able to make it work so far, but someone could. The only certainty is the Internet will result in greater transparency. This means contractors have to do a better job showing prospects what they do and why it matters. Again, up your game. Someday there may be a disruptive HVAC business model featuring the Internet. So far, that day has not arrived.
There was a time when contractors feared the companies driving Internet leads. They had massive budgets, incredible sophistication, and Internet leads looked like black magic. For the most part, all the Internet leads companies manage to achieve is dissatisfaction. Most contractors have wisely decided to make customer acquisition an internal skill and not depend on third parties, even if they use third party lead generators on a marginal cost/marginal revenue basis.
Reviews are often seen as all important and a mixed blessing. Contractors obsess over bad reviews. Many consumers use this fact to ransom their words unethically to gain forced concessions by the contractor. Review sites suppress good reviews unless contractors pay a version of protection money. The truth is reviews are primarily a factor when a consumer does not know who to call. This means no positive personal experience, no recommendations by friends, neighbors, or co-workers, and no suggestions from social media. Bad reviews hurt, but they are not deadly and can eventually be buried by positive reviews.
Work Your Plan
Each of these threats is or was serious. And each proved somewhat ephemeral. The biggest threat of HVAC bogeymen is the threat of taking your eye off of your own business. Build it well and the threats won’t matter.
Source : Matt Michel @ Contracting Buiness.