Contractors optimistic, plan to expand service areas: Report

Contractors are bullish on the future, despite looming supply chain and workforce struggles, according to a new report by EGIA shared with Homepros, based on a Q4 survey of over 300 HVAC contractors nationwide.

The big picture: Entering a year of changes, including the A2L transition and a new administration, contractors were asked about their attitudes toward the industry’s future. 

• Note: The survey focused on executives at residential-focused companies with annual revenues ranging from $1 million to over $25 million. 
• 51 percent reported feeling optimistic, while 46 percent remained neutral. Specifically, larger contractors ($10 million+) showed the most optimism, while those in the $1-5 million range were the most neutral.

Some takeaways: 58 percent of respondents reported positive year-over-year revenue growth compared to the fourth quarter of 2023, while 20 percent saw declines. The remaining contractors experienced little to no change. 

• Where’s the map: Regionally, the Northeast and Midwest led with the highest percentage of contractors reporting revenue growth, while the West lagged behind with the largest percentage showing declines.
• On average, contractors of all sizes spent about six percent of their revenue on marketing in 2024, with over half of companies generating $5 million+ in annual revenue increasing their marketing spend compared to 2023.

Threat level midnight: Labor shortages and the rising cost of goods ranked as the top two threats across all revenue brackets, with government regulations coming in third. Notably, artificial intelligence ranked last. 

• Speaking of AI: “Only 40 percent [of respondents] actively use AI, while 45 percent are interested but unsure where to start,” the report notes, adding that another 15 percent marked, “We know we should use it but haven’t had the time.”

Zoom in: Despite the approaching A2L transition at the time of the survey, just 35 percent of executives felt ‘completely’ prepared, while 49 percent considered themselves ‘somewhat’ prepared. 

Heat money: Among financing options, long-term, low-payment plans led the way as the most commonly offered programs (80 percent), followed by zero interest plans (53 percent) and 12-month same-as-cash (52 percent). 

• The most significant difference emerged not between plans, but geographically: Contractors in the Northeast offered zero-interest plans roughly twice as often as those in every other region.
• Of note: Despite financing’s growing importance, cash and credit cards still dominate customer transactions, with financing representing just 20 percent of payment methods across all respondents. 

What’s next: For businesses under 16 years old, regardless of size or location, 56 percent plan to expand their service area within three years, and 30 percent are considering additional verticals like plumbing and electrical.

• Over half of contractors plan to increase their marketing spend this year, regardless of company size. 
• Meanwhile, 52 percent of respondents had “some idea” of an exit strategy but nothing concrete, while 25 percent either haven’t considered selling or don’t plan to.

Full report ($)