Industry Overview
HVAC More than 40,000 companies compete in this segment of the construction industry, with total revenues exceeding $75 billion annually. Most are small, privately held and operate from a single location with annual sales under $5 million. Larger companies, including Emcor Group and Comfort Systems, work primarily in the commercial field. Revenue is almost evenly split between commercial and residential segments, and players typically compete in one arena or the other. Revenues are further split between installation and maintenance. Commercial companies usually do both, and in many cases, they provide continued maintenance under long-term service contracts. Key Trends in the Industry Among the major trends impacting this segment are: Desire for Energy Efficiency Creates Opportunity - Rising energy prices are driving demand for new, more efficient energy systems, creating demand for HVAC specialists. Many experts believe that price increases will be large enough for consumers to justify the initial expense of switching to more energy-efficient heating equipment. The Environmental Protection Agency recently made its Energy Star Guidelines, a national energy performance rating system, even more stringent. The U.S. also is offering tax incentives for specific energy efficiency upgrades to homes and businesses. Flat-Rate Pricing on Repairs/Replacements – Flat-rate pricing represents nearly 30 percent of the market today, with consumers strongly preferring a single, upfront price before starting a repair, instead of paying for "time and materials." Air Safety Concerns Accelerate – Concern over chemical and biological attacks through ventilation systems, as well as air quality concerns, have focused attention of customers on ways to monitor, improve and maintain air quality in large buildings. Critical Issues Issues of greatest importance to today’s HVAC and Plumbing contractors are: Availability of Skilled Personnel - Plumbing and HVAC contractor employees have special technical or engineering skills, and state certification programs maintain quality but restrict entry into the business. Air Quality – Suits against contractors over toxic mold and poor indoor air quality (IAQ) – particularly in sealed office buildings, which are prone to developing air quality problems – are leading to HVAC contractors being blamed when such problems arise. The number of mold litigation cases in the U.S. has increased more than 300 percent since 2001, according to the National Concrete Masonry Association. Working Capital Required - Because technicians typically carry a large inventory of parts and supplies in their trucks, and because final payments on many jobs aren’t made until after project completion, accounts receivable are often as high as 20 percent of sales.
More than 40,000 companies compete in this segment of the construction industry, with total revenues exceeding $75 billion annually. Most are small, privately held and operate from a single location with annual sales under $5 million. Larger companies, including Emcor Group and Comfort Systems, work primarily in the commercial field.
Revenue is almost evenly split between commercial and residential segments, and players typically compete in one arena or the other. Revenues are further split between installation and maintenance. Commercial companies usually do both, and in many cases, they provide continued maintenance under long-term service contracts.
Key Trends in the Industry
Among the major trends impacting this segment are:
Desire for Energy Efficiency Creates Opportunity - Rising energy prices are driving demand for new, more efficient energy systems, creating demand for HVAC specialists. Many experts believe that price increases will be large enough for consumers to justify the initial expense of switching to more energy-efficient heating equipment. The Environmental Protection Agency recently made its Energy Star Guidelines, a national energy performance rating system, even more stringent. The U.S. also is offering tax incentives for specific energy efficiency upgrades to homes and businesses.
Flat-Rate Pricing on Repairs/Replacements – Flat-rate pricing represents nearly 30 percent of the market today, with consumers strongly preferring a single, upfront price before starting a repair, instead of paying for "time and materials."
Air Safety Concerns Accelerate – Concern over chemical and biological attacks through ventilation systems, as well as air quality concerns, have focused attention of customers on ways to monitor, improve and maintain air quality in large buildings.
Critical Issues
Issues of greatest importance to today’s HVAC and Plumbing contractors are:
Availability of Skilled Personnel - Plumbing and HVAC contractor employees have special technical or engineering skills, and state certification programs maintain quality but restrict entry into the business.
Air Quality – Suits against contractors over toxic mold and poor indoor air quality (IAQ) – particularly in sealed office buildings, which are prone to developing air quality problems – are leading to HVAC contractors being blamed when such problems arise. The number of mold litigation cases in the U.S. has increased more than 300 percent since 2001, according to the National Concrete Masonry Association.
Working Capital Required - Because technicians typically carry a large inventory of parts and supplies in their trucks, and because final payments on many jobs aren’t made until after project completion, accounts receivable are often as high as 20 percent of sales.