High inflation, inventory challenges, a labor shortage, a prolonged shortage of new housing, and other signals point to rough seas ahead for HVACR contractors, but those who are prepared should be able to weather the storm — and even thrive.

That was the message that Talbot Gee, CEO of the HVACR distributors association HARDI, repeatedly emphasized during recent remarks on the state, current and future, of the industry.

“Growth is slowing. Costs continue to grow. Those two things are not going to move in 2023 in any favorable way,” Gee said. “Inventory is going to remain a challenge.”

At the same time, he added, HVACR is getting more complex, making it more difficult for those entering the field, and people — employees — are getting more complex as well.

The keys for contractors, Gee said, will be staying informed and focused, using resources wisely, and grabbing available opportunities.

“For the smart, prepared, intelligent contracting business, you can distance yourself from the competition if you’re aware of these things. Don’t try to ignore them — attack them head on, and be smart about the way you go about it,” said Gee.

Gee spoke in Novi, Michigan, during the HVAC/R Expo a one-day trade show and training event sponsored by the Behler-Young Co., a distributor based in Grand Rapids, Michigan. The event, with 36 educational sessions and more than 100 exhibitors, drew contractors, technicians, trade school instructors and students, and representatives of business services firms.

Despite a crazy quilt of indicators that aren’t all bad — unemployment is low, and consumers continue to spend, for example — macroeconomic signs point to a recession, Gee said.

“This recession doesn’t have a name yet, because we’re not even allowed to call it a recession, even though it’s actually a recession,” he said. Fast-rising interest rates and a housing shortage are contributing factors, Gee said.

“We simply have not built enough houses for too many years,” meaning homebuyers are often forced to sacrifice by overpaying or accepting higher mortgage rates, he said.

Gee said that low unemployment has preceded many past recessions, but that the currently low labor force participation rate, and the fact that many jobs are unfilled, may steer employers away from responding to economic troubles by laying off workers.

“We just went through two years where it takes you forever ... to find a new person or to add new talent,” he said. “So now what might have been an early tactic in a soft economy may be your last tactic.”

Gee offered a number of tips that he said should help contractors get through tough times, including:

• “Communicate, communicate, communicate” in a timely way regarding inventory needs, because supply chain problems and uneven product inventories are not going away. “You have to be pretty transparent about your pipeline” to ensure major projects can be completed, he said.
• Respect employees’ work-life balance, make sure their compensation packages are competitive, and prepare them for products that are increasingly complex. “Especially your fast learners, your newer techs. ... Do everything you can to keep them happy, retain them, grow them, and develop them,” Gee said.
• Use financing programs to help customers pay for their purchases. Companies that use financing grow, on average, at a 30% greater rate than those that don’t, he said, although 26% of contractors don’t use financing at all.
• “If you’re not using the finance, I guarantee you your full-system replacement volume will drop in this environment coming up here,” Gee said.
• Take advantage of the coming incentives designed to push higher-efficiency and electric products, and be visible as state energy offices implement those programs. Companies that are proactive in this area, he said, “will have a huge advantage.”
• Review business practices and figure out ways to respond in the marketplace faster and more efficiently. “Every way you can take inefficiencies out of every process you have, and be faster and better, is going to be a key for 2023,” he said.

Despite the somber economic forecast, Gee was upbeat in his talk, challenging contractors to go out and prove him wrong. Smarts, innovation, efficiency, and technology can win the day, he said.

“The opportunities are not falling off a cliff. They’re going to be there,” Gee said. “You just can’t afford to miss them.”