In 2020, the world seemed to collectively hold its breath. As time went on, families, businesses and communities alike slowly started adjusting to a new normal. However, economic concerns were front and center. Now, almost a year on, research shows widespread economic damage across multiple industries and across America as a whole. However, research also shows a possible post-pandemic economic boom. Aside from the initial pandemic economic difficulties and a particularly grim period for the New England and Mid-Atlantic regions, the HVAC market nevertheless experienced large-scale recovery in 2020. Or as KGG’s Founder and Managing Director Ken Grubbs would say, it was a miraculous success.
That miraculous success included growing demand for the HVAC and IAQ industries; demand that is continuing into 2021. Homeowners, facility managers, public buildings, offices, schools, hotels and many more are focusing on evaluating HVAC systems and seeking IAQ solutions. They’re counting on HVAC professionals for recommendations, answers and products. With over forty years of experience in the industry, and a firsthand perspective, Grubbs offers an original take on what 2021 likely holds for the HVAC world. Here are his answers.
HVAC + IAQ in 2021
Do you have any overall predictions for what you think this year will look like for the HVAC industry?
Oddly enough and even counterintuitively, most of the forecasts are incredibly strong for the industry. And just based on the most recent track record, that also surprised us all, I’m inclined to believe it. It looks like the industry is going to do very well in 2021 and beyond. Housing is strong, the dollar is strong, the traditional indicators are strong. But it’s more than that–it is strangely strong. Everyone is very pumped, everyone’s excited, everyone’s finished up 2020 with a record-breaking year. Even in the face of incredible unemployment numbers, housing is right on track and that’s exciting news for us.
So, business is good for every part of the industry–manufacturers, distributors, contractors, reps and so on?
This is very timely, because this is a really critical point. Just in the last few weeks, there has been an onslaught of price increases. It happens every now and then, but hasn’t happened like this in a while, this is pretty big and it’s the confluence of some troublesome issues. So raw materials are always a big deal. Steel is a big part of that, and steel is on the rise, strong. At the same time, a lot of our trade comes from Asia and that’s via containers. You pay x amount of dollars for a container to come from China or Vietnam or anywhere else, those container costs have tripled in the last six months. You add raw material increases to container increases to traditional labor and packaging increases, and the industry is getting hit hard with price increases.
Now the gut reaction to that is that it’s troublesome, but it’s one of those deals where tide raises all ships–we’re all getting hit with it. No one is going to have an unfair economic advantage over the other, so in a weird sort of way it just raises the level of revenue. It’s inflationary, because that’s not good news that all prices go up, but no one is going to get hurt by it. I think that’s going to even actually help at a time that we were already strong, now we’re going to be stronger just because the numbers are going to be bigger, just because of price increases. So, it’s an odd and unusual time.
Current HVAC and IAQ industry projections are good, but as you know, remote sales and social distancing continues. What do you wish companies, businesses or contractors in the industry were focusing on?
I think one of the biggest problems we are facing is just how to navigate this. A lot of these [impacted] industries, most of our industries, are about relationship and face-to-face contact. Even from a contractor’s point of view, it’s that relationship of getting into the home. From a regional salesman’s point of view, it’s that relationship of getting in front of the contractor. A lot of our customers and a lot of people in this industry have brick-and-mortar, almost retail-ish storefronts. A lot of them have been shut down. Everyone’s trying to re-navigate that world.
One of the most trusted organizations in the industry did a big survey recently and learned that distributors are going to be counting on less traffic in their showrooms. Some of the showrooms look like a retail store, they look like a Home Depot with rows and rows and rows of things. They’re accustomed to counting on traffic in the store. Well, that’s going to be down, so they’ve got to rethink how to use their sales team. So–I guess if I wish for anything, I hope that we all wisely start to sort of re-purpose, if you will, or rethink the role of a salesman.
As a short example–at a time when revenue is up, expenses are down. What I mean by that is: no one is traveling, there’s no hotel expense, there’s no airline expense, there’s no car rental expense, so a lot of the salespeople in our industry have had to completely rethink how to contact their customers because they can’t go see them. In my own case for example, I haven’t even flown in a year and I have customers all over the country that I haven’t seen in ages. So, what do I wish for? I wish that, I hope that everyone can re-navigate the role of a salesman without hurting anyone in the food chain.
What are you personally suggesting to your Reps or the distributors you work with to achieve this, to help rethink the sales role?
This phenomenon that we just described–where we’re suddenly being forced to use zoom and other things for meetings and conferences and reduce the actual face-to-face time that a salesman has–unfortunately a lot of organizations have almost begun to question the whole role of the salesperson. Almost to the point of “do I need them?”
If it’s a big company with 100 sales guys working and all of a sudden, they’re not traveling, not going anywhere and not acting like they normally act–then it becomes do I need them or, do I need so many of them? Maybe when things were “back to normal” again someday, maybe their role changes dramatically, maybe they don’t need so many salesmen. And I think that’s a big mistake. I think that the salesman’s role has changed but that it’s just as important as ever. I think every one of those customers that counted on contact with the salesman still counts on that contact, it just has to be different.
Industry and market projections are really good for the next year and even decade. All that anyone talks about is how this industry is booming. Do you notice that demand in specific regions or states more, or is it across the country as a whole?
The sunbelt has always led the way. The sunbelt, literally that swath of the country that is the southern states, from California through Texas to South Florida and even at the coastal bit–that’s where the bulk of new construction is. Those are always the strongest states and they always do very well.
The first half of 2020 was a disaster for the New England and Mid-Atlantic area. Anything within 500 miles of New York just was crushed. The New England market even shut down for a long time, so that was very noticeable. We assume it [was] just the proximity to NYC. Although it’s not considered the epicenter anymore, [NYC] kind of was the original center and almost by association, New England just got crushed. The good news is that 2020 bounced back dramatically and saved us all. I don’t think the sunbelt states ever got hurt like that and of course then when the bounce back came, [sunbelt states] enjoyed it obviously a great deal better than the New England area.
The home service business industry, and this would apply to all regions, whether that is HVAC or plumbing, solar, etc., is also really booming because people are spending time at home and noticing things about their spaces that they wouldn’t have before. That demand is across the nation, suggestions on how to capitalize on it?
You know, it’s funny. So, yes, but my suggestions are the obvious answers. In other words, you just have to be smart enough to capitalize on it. You just have to adjust the way you do business and realize [increased demand is] exactly what’s happening.
It’s funny though at the same time that there’s more people at home noticing things and wanting to do things and work on things, there’s also a threshold of people that are leery of having people in their homes. There’s a funny little trade off to go with that. I think those two things go hand-in-hand. The company, the contractors that are going to be the most successful in 2021 are the ones that have figured out how to navigate that. If I was in the contracting business, I would make a big deal out of all my people wearing masks, all my people wearing booties, all my people wearing gloves and lysol-ing everything we touched when we were in your home.
But also, of course capitalize on the fact that more people are staying at home now. There’s no question about that. Everyone’s at home more, everyone’s adjusted to a new way of living. It’s been over a year. There are people who haven’t even seen their grandchildren for a year, so it’s a bizarre time and it’s up to the contractor to figure out how to navigate that. I don’t think I have a strong suggestion as to how to do it. I think digital marketing is going to come into play stronger than ever before.
Because it’s such a tumultuous, but also optimistic time for the industry, what would your suggestion be for someone getting started?
Well because so many people are staying at home. And because our homes are tighter than a drum. And that goes all the way back to the years in the ‘80s when there was the energy crisis, and homes started being built so tightly that there’s no fresh air getting into your house. You’re just breathing the same air over and over again. Now you’ve got people in that house more than ever, the air is horrible, it’s stale. Someone called it a container of harm in one of the more recent talks that we did [KGG’s RepTalk Podcast Series]. So, the point is that smart contractors are going to take advantage of the fact that indoor air quality products, as simple as good filtration, are sky rocketing.
We always say that a contracting company has a personality, that they’re kind of known for something. Some contractors are known for being new construction contractors, some contractors are known for being high efficiency contractors–they just install the best of the best stuff, some guys are custom home guys, some guys focus on zoning systems. Well, we know that some guys focus on indoor air quality systems and we think that it is an incredibly good time and a great opportunity to sort of rethink your contracting business and get more into indoor air quality. It helps you set your organization apart from your competition, which in the contracting business is a huge thing. It’s finally selling something that actually matters in a noble way rather than just selling energy-efficiency and selling comfort. That is what we’ve done for the last many many decades, sell the comfort and energy-efficiency angles. Now, they can actually sell health. In doing so, they set their agency, their contracting company apart from the competition. And at this point in time, [IAQ products and services] are also incredibly profitable.
While the contractor is in the home, taking care of whatever reason they were called into the home for in the first place–maybe it’s a system change-out, maybe it’s a compressor change-out, maybe it’s just as simple as putting freon in the condensing unit outside–while they’re there, they can talk about upselling products. Products that really aren’t snake oil, they really are going to help people. And they can make that service call turn into a profitable call. There’s really never ever been a better time and never will be again a better time than right now, to get into the indoor air quality business for those reasons.
Perfect, last question. The scientists and academic experts who are producing research and commentary and suggestions on how to deal with current concerns and indoor air quality, are also saying be wary of the snake oil salesman. What is your response to that?
First of all, that was predictable. Any time there’s a surge in any market, there are going to be short-sighted people who figure out a way to take advantage. It doesn’t matter if it’s air conditioning or cheeseburgers, whatever industry you want to talk about, if there’s a bizarre surge in market demand, there’s going to be a surge in the guys who figure out some sort of snake oil way to do that.
There’s really a couple of easy answers. Of course it behooves the homeowner to be responsible and do independent research. I also think it can create an opportunity for the contractor to sell around the issue. In other words, indoor air quality solutions come in a huge variety. If the homeowner is wary about something in particular, there is always another IAQ solution to mention that they might be more comfortable with. And take the time to educate on indoor air quality–that goes for every level of the industry. Finally, make sure you partner with people that have been doing this for years. Indoor Air Quality existed before the pandemic and will continue post-pandemic, there are plenty of people like us who have been involved long before 2020.
HVAC in Focus
The emphasis is on HVAC and IAQ like never before. Numerous forecasts, reports and projections are all in agreement–estimating rapid expansion and continued growth for the HVAC industry in 2021 and beyond. According to one report, the global HVAC industry will grow by $68.8 billion at a CAGR of 7% between 2021 to 2025. KGG consulting can help your HVAC, IAQ or home service business grow this year. Now is the time to capitalize on the increased market demand.