February 2024 Newsletter

A Word from our President

luke 2024

by – Luke Parthemer-Fenix Heating & Cooling

Another wonderful month in Kansas.  Only in Kansas is can be -4 degrees one week and 60 degrees another week in the same month.  If you were not able to make it to the meeting last month, you missed out on some great information about the changes that our happening to our industry coming this year whether we like it or not.  Tom Roberts did a great job explaining the rulings and regulations that are changing with the new AL2 refrigerants.  The fun or frustrating  thing in our line of work always keeps us on our toes depending how you want to look at it.  Tom if you are reading this, thank you for presenting again for us.

On a different note, Stoney from MABCD with be presenting this month for us. This is also an 1 hour code CEU.  We would love to have everyone come join us to learn from and quiz Stoney on any new or changing codes.  But be nice to him, we would like to have him return next year 😊

Don’t forget your business card for a chance to win $100!!!!!!!!

Please feel free to email or call Luke at (316) 945-4842 or lukep@fenixheat.com with any concerns or questions.



January’s General Meeting

Thank you Tom Roberts for the great information you brought to the meeting, we had 21 in attendance. Tom did a great job explaining the rulings and regulations that are changing with the new AL2 refrigerants.  Big congratulations to Kennth Baty from Reddi for winning $100!!!

Hope to see you @ future meetings!! All general meetings are held on the 3rd Thursday of every month except August & December.


2024 Meetings

 
February 15th        Stoney W/MABCD, 1hr code
                               @ Scotch
March 21st             Key Refrigeration, 1hr non-code
                               @ Scotch
April 18th                WTI @ WTI
May 16th                WSU Tech @ WSU Tech
June 20th               Darrell Bogner, 1hr non-code
                               @ Scotch
 
Reminder to RSVP on website @  kccaks.com

This list is subject to change due to speakers not able to make the date we have selected for them.

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2024 is Likely to be Even More Challenging for HVAC Contractors

Get Ready For a Bumpy Ride

By Matt Michel

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SHIPMENT CLIFF: 2024 brings even more challenges than 2023. (Courtesy of Unsplash)
January 6, 2024

In one of the Harry Potter movies, Potter is on the “Night Bus.” A talking, shrunken head warns to hang on because it’s going to be a bumpy ride — just before the bus shotguns forward, narrowly evading disaster after disaster. It might be a metaphor for the HVAC industry in 2024.

Over 2023, the replacement market felt the impact of the shipment cliff. This is a reflection of the 40% contraction in industry shipments that occurred from 2005 to 2009, with 2010 remaining flat. It should be no surprise that AHRI reported double-digit declines in air conditioning and heat pump shipments through October. Replacements declined for the simple reason there were fewer systems installed 15 years ago.

Adding complexity, the general inflation that hit the nation is mild compared to the escalation in HVAC replacement pricing. It started with manufacturer price jumps during the supply chain disruptions of COVID. Then, we had SEER2. Prices jumped again.

Another factor is the private equity impact. Private equity jumped into the industry with both feet after witnessing the industry’s phenomenal growth during 2020. Superficially, it appeared that HVAC was immune to decline. People had to have HVAC. We had a record year when the country was shut down. Private equity has dry powder sitting on the sidelines that they wanted to invest. HVAC looked like a no-brainer. The land rush to acquire good contractors was on.

The finance guys driving most private equity funds quickly realized that the bigger money was in change outs. Accordingly, they pushed their general managers to pursue them aggressively. At first, it worked like a charm as deferred COVID replacements from 2020 spilled into 2021 and price increases hid the initial impacts of the shipment cliff in 2022. Fewer change outs for more money resulted in top line growth and less installation labor. Record profits resulted.

There was nowhere to hide in 2023. Contractors who joined the private equity world were under intense pressure to sell more replacements. Digital advertising was bid up. The rest of the industry saw more, fierce competition for few replacement opportunities. 2023 was a tough year.

Guess what? 2024 will be even more challenging. Equipment prices will jump again with new refrigerants. Even with the better financing vehicles available today, many consumers will cough, sputter, and opt for repairs over replacements. 2024 will see the chaos and uncertainty of a presidential election in a deeply divided America. Most non-government-supplied economic indicators are screaming recession.

The pressure of private equity general managers will intensify. At the same time, the founders who sold their companies are beginning to leave. When they leave, some of the best techs will walk. With the need to refinance debt at higher interest rates, some private equity funds will seek an off-ramp and sell to bigger, better financed firms. Others might fail outright. Private equity will begin consolidating.

So what about the independent contractors? As long as they don’t panic and try to save their way to prosperity, they will be fine. The truth is independent contractors can handle an economic downturn. A deep recession is a 3% decline in economic output and typically short-lived. Contractors handle bigger swings in demand every year as part of normal seasonality. They can weather the storm.

While a service-centric approach is unlikely to be taken by most private equity ventures, independent contractors can focus on making money from service. It will lower marketing costs and lead to more repeat business, ultimately leading to higher-margin replacements.

Independents can also run rings around larger competitors in their markets. They can do it by ingraining themselves into the community. They can join service and civic clubs, building networks among community centers of influence. Most of these meetings are over lunch or breakfast. If a contractor is going to eat, why not eat with the most connected people in the community?

Independents can also advertise in unconventional ways with affinity marketing where, for example, donations are made to a charity for every service call, provided the charity markets this to its patrons. Independents can utilize radius marketing and other direct mail programs that are out of favor with the digitally inclined millennials running centralized marketing efforts with private equity.

Independents can also work on their culture. As management guru, Peter Drucker noted, “Culture eats strategy for breakfast.” Great strategy must be executed well to be effective. Great culture is self-executing.

Another opportunity for independents is to expand their offering by adding satellite operations for geographic expansion, adding new products like connected home products, and so on. If they have not already done so, this is the time to roll out performance pay and other incentive programs that reward people like they were owners in the business.

There is no question that 2024 will be challenging. Stay out of the polarized political fighting to avoid alienating half of the buying public. Watch overhead and cut only fat, not meat. Look to acquire new technicians from private equity owned companies that lose their founders. Finally, do not panic. It will be a tough year or two, and then the replacement market will begin a decade-long run where every year is better than the year before it.


Funny Photos


risk management corner

The Occupational Safety and Health Administration (OSHA) Top 10 list accounts for the most frequently cited standards following inspections of businesses and worksites by federal OSHA. This helpful list can be used as a guide to learning what common risks to watch out for, and accessing vital information to help avoid devastating — and costly — work injuries or fatalities.

Each year, OSHA posts their Top 10 violations after the month of April to allow the prior fiscal year’s inspection data to finalize.1

In the fiscal year 2022, the Top 10 included:

1. Fall protection(C)
2. Hazard communication
3. Ladders(C)
4. Respiratory protection
5. Scaffolding(C)
6. Control of hazardous energy (lockout/tagout)
7. Powered industrial trucks
8. Fall protection training(C)
9. Eye and face protection(C)
10. Machinery and machine guarding

Is your business operating safely?

OSHA inspections across the nation are completed at both the state and federal levels. In 2022, over 69,000 OSHA inspections have occurred, resulting in more than 133,000 violations.2 Knowing that these risks exist — and that there are plenty of safety resources to help mitigate them — what will you do for your business to avoid becoming a part of these statistics?

Federated Insurance® provides OSHA Top 10 information on mySHIELD®, and offers access to additional resources, such as sample safety programs and training content to help identify and reduce worksite health and safety hazards. Reach out to your local Federated® marketing representative for more information.

1. https://www.osha.gov/top10citedstandards. Top 10 Most Frequently Cited Standards. Accessed 11/20/23.
2. https://enforcedata.dol.gov/views/oshaLab.php. Data Enforcement. Accessed 11/20/23. (C) Construction Standard instead of General Industry (according to OSHA)