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Richard DiToma Plumbing Business |
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Dan Foley From the Field |
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Bob "Hot Rod" Rohr Green Systems |
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Ellen Rohr Business Expert |
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Bristol Stickney Solar Solutions |
Commercial/industrial sector faces 2009
with guarded optimism
By Morris R. Beschloss
PVF and economic analyst
Year-end forecasting usually brings out the pundits, the prognosticators and the macro-economists, who lump together all business and industry into one giant crystal ball! In the $75 billion plumbing-heating-cooling-piping industry, such oversimplification becomes absolutely farcical. This is true first and foremost in our industry’s broad-based distribution and contracting system, which encompasses both plumbing-heating-cooling, as well as pipe, valve and fittings.
Even though the upstream sector of the energy markets has become the focus of highly specialized distribution and end-use installation, centered in the Greater Houston area, a substantial portion of commercial/industrial commodities is still shipped by multi-branch distributors, who combine all aspects of the plumbing-heating-cooling-piping spectrum.
As we enter 2009 with trepidation, there has never been a greater disparity in the fortunes of the two major industry sectors. Under the best of circumstances, the phc industry component can hope for a moderation of the severe recession under which it has labored for the past 18 months. At worst, the fast-growing commercial/industrial sector may face some cooling of the red-hot pace that has brought manufacturers, distributors and end users the greatest boom since the early 1970s.
The following factors hold the answer as to the extent of the success commercial/industrial can look forward to this year:
Barring the unexpected impact of a one-sided restriction of anti-business, anti-trade legislation by a one-sided Democratic majority, the commercial/industrial juggernaut will continue its steamroller throughout 2009 for the following reasons:
All in all, there are only a few clouds on the horizon preventing the continuation of the commercial/industrial surge. Even the credit crunch that has inhibited the inventory development of the sector’s distribution system is thawing out, as greater access to loans, as well as commercial paper availability, are facilitating the optimizing of requisite inventory levels.
Morris Beschloss, a 52-year veteran of the pipe, valves and fittings industry, serves as PVF and economic analyst for The Wholesaler & Phc News.
2009: Staying positive
By Joe Schmitt
PHCC-National
Association President
We’ve really experienced a lot of change in the p-h-c industry recently, haven’t we? From unbelievably high gas prices to a down real estate market and tighter financing, we seem to be getting hit from all sides. And these challenges do not even include those we are facing on an individual basis -- like investment losses, retirement fund concerns and home value declines.
But we’ve heard enough lately about all these “downers.” What I’d like to talk about are the certain-to-be better times ahead. Historically, the p-h-c industry has experienced difficult economic times before, and we have always come through. There are many positive things going on in the industry right now that are worth noting.
The most reassuring aspect of our industry is that we are not going to go away. Our services are definitely needed. I am sure you have seen the American Standard poster that says “The Plumber Protects the Health of the Nation.” Well, that phrase really says it all. Professional plumbing and HVAC/R professionals really do provide a vital service to our customers. And, there is no way our expertise can be outsourced to another country, so that’s job security, too.
As we experience this unsettling period, let’s remember all the positives for our industry and ourselves. First, we can be thankful that not all of our colleagues are suffering. There are some pockets of the country that are doing very well these days. But for those who are not, I encourage you to “hunker down” and concentrate on making your businesses better. Now is the time to take advantage of all the opportunities we have to improve and expand our businesses, and to hone our skills. Then we’ll be “rarin’ to go” when the turnaround occurs, because rest assured, things will get better.
Opportunities do exist
With the growth in emerging technologies in the p-h-c field, there are many opportunities today to branch out into new lines of work. For example, several PHCC contractors have developed an expertise in new areas like solar, geothermal and rainwater harvesting. Many have been very successful, and have even found their new technologies have become a larger part of their business than the traditional plumbing and HVAC/R services.
Opportunities certainly exist for the progressive contractor who wants to add additional growth. The International Code Council has mandated installation of residential fire sprinklers as part of the International Residential Code. Beginning Jan. 1, 2011, all new one- and two-family residences will require sprinklers. This is an opportunity for those contractors who do residential plumbing to get involved with fire safety. Fire sprinklers save lives, including fire fighters’ lives.
There also is the potential for infrastructure renovation work that is part of incoming President Barack Obama’s proposed economic stimulus plan. Sections of the plan encompass construction of new buildings, such as schools and hospitals, and the revitalization of existing buildings, which present business opportunities for p-h-c contractors. Along with new plumbing and hvac systems for new construction, retrofitting will be a key component in the modernization of existing buildings and structures. PHCC will continue to monitor this proposal, and will guide members on how to get involved if the plan is approved.
Green construction also is a growing market. To establish an expertise and credibility in the green arena, many of our members are becoming certified through the GreenPlumbers® program. Beginning in 2009, PHCC-National Association will bring this national training and accreditation program to PHCC chapters across the country. We will be working with interested state and local groups to schedule and promote the programs to members, non-member contractors and potential sponsors.
Now is the time for education
During these down times, PHCC encourages all p-h-c contractors to take advantage of the many educational opportunities that are available. Not only will learning new business strategies and skills help you deal with difficult times in your business, you’ll also be more prepared when things turn around.
For example, consider attending PHCC’s annual convention, “Connect 2009.” The event, which is geared totally toward the p-h-c contractor, will be held Oct. 21-23, 2009, in New Orleans. There will be a variety of educational and networking sessions offered, as well as a new Product and Technology Showcase. We hope all PHCC members will attend, and encourage non-members to participate as well.
PHCC’s sub-groups also are offering educational programs that address the pressing business issues of the day. All of these meetings are open to contractors who are interested in learning more about the groups. The March 3-4 Construction Contractors’ Alliance meeting will focus on “Developing the Leader Within You” and economic forecasting.
The Quality Service Contractors will meet March 19-21 in Daytona Beach, Fla., to discuss “Lean Business Practices: Operating Efficiently and Maximizing Profits.” The Union-Affiliated Contractors will address union-specific issues at their annual Unity Meeting May 13-16 in Kohler, Wis.
So if you start feeling down when things aren’t going according to your business plan, remember to think about the good things that are happening and to take some time to become educated on subjects that will help you now and in the future. Believe me, better times are ahead.
For more information about PHCC, visit www.PHCCweb.org, or call (800)533-7694.
Now is a perfect time to invest in your company
By Patty Frank
Chair, Quality Service Contractors
Tired of all the negatives in the news? Many are asking where do I start cutting — marketing, overhead or staff? My advice is to maybe do a little bit of all three, but be very careful on cutting what actually protects you on the downside. Cost savings should never come at the expense of the ability to accomplish your long-term plans. Here are some positive steps you can take to build your business to help you to be positioned for the turnaround that is coming:
Quality Service Contractors (QSC) members have found that now is the perfect time to invest in your company and your employees. Your employees are the most valuable asset within your company. Keeping them up to date on all the latest in great customer service techniques, sales training, technical training and software makes more sense than doing nothing or cutting everything out.
By providing ongoing training, this will send the message to your employees that you are not going to give up, but rather build for the future. There are many inexpensive ways to provide to your employees. This can be done online through Webinars, in-house seminars, vendor technical sessions or teleconferences.
Employees want to be part of the solution, if given the opportunity. You need to make sure people are still setting goals and working toward them. Employees will want to know how they’re doing and what’s expected of them going forward.
Have you given some thought to reviewing your business operations to search for ways to improve your systems and processes with the ultimate goal of improving your bottom line? The time has never been better to look for ways to reduce unnecessary expenses and improve productivity and profitability.
This can also involve your employees. Ask them if they can think of ways to help the company improve. Of course this also will help them in the long-term by improving the prospect that their jobs and benefits will be there when the economy improves.
Reviewing your financials to see how you compare with industry averages is a good way to determine how solid your company is. Many QSC members utilize the QSC business coaches to help them with this. They can find out if their income and expenses are within averages for company’s their size. If not, then they have good ideas of what areas to look at to improve their bottom line.
The QSC Power Meeting in Daytona Beach, Florida, March 18 – 21, 2009, will focus on all the above to help service and repair contractors weather these economic times. If you are looking for ways to improve your business, you will want to mark this on your calendar.
If you’d like more information about QSC, an enhanced service group of the Plumbing-Heating-Cooling Contractors -- National Association, call (800)533-7694, or visit www.qsc-PHCC.org/.
We’re finding ourselves again
By Barry Bankler
Construction Contractors’ Alliance Chair
Typically, one of the most popular parts of a Construction Contractors’ Alliance meeting are the “State of the Economy” reports given by new construction contractors across the country. Not surprisingly, these have been a bit gloomy lately. In fact, at our last CCA meeting, one member jokingly began reading his last report because he said he didn’t want to talk about the current economic situation.
The outlook really has changed from what it was just a year ago, and there definitely were a few dismal tales at our October meeting. But at the same time, there were many positive reports of how profit margins have improved. We like to think this is a testament to how effective members have been at anticipating what was coming, and how they have made appropriate changes to adjust.
Here are some highlights of what CCA members have been experiencing, how they are coping with down times, and what they see ahead:
Day-to-day experiences
On the residential side, work is off 30% to 90% in some areas. Most businesses have had to downsize. Building permit activity is down. National home builders are halting projects. The situation has been complicated by the fact that many prospective homeowners cannot qualify for financing. Members predict things won’t turn around until 2010 at least.
On the commercial side, the market is still strong in some areas of the country. However, a number of members reported they were starting to feel the effects of the country’s financial instability. For example, some owners are beginning to have trouble securing adequate financing for projects. Others are working harder to get jobs because residential and light commercial contractors are creeping into their markets. Not only does this increase the number of bidders, it adds to the frustration level because in some cases they are “bidding against ignorance.”
Overcoming difficulties
Although there has been some commiserating among members, there also are many positive trends to note. For example, many members are taking advantage of the down time to concentrate on improving processes and procedures that will help them be stronger in the future. They’re also updating software programs; concentrating on improving quality and efficiencies; refining their pre-fab shops; analyzing the field and warehouse operations; and exploring new initiatives, like green construction and the residential fire sprinkler market. Some also are bidding on jobs in other states or entering growing markets in their areas, like hospital work, design/build and performance contracting.
Training has become even more of a priority. Members are investing in training for themselves and their employees. As an example, CCA will hold a meeting for controllers in mid-March designed to help them cope with their responsibilities during down economic times. Many members also are training their estimators and project managers on the latest software programs available.
What’s ahead
Since our meeting in October, the financial markets have taken another turn downward. Credit has tightened even more, and private work requests have diminished. With the prediction that these uncertain economic times will last a year or two more, CCA members are buckling down to ride out the storm. We’ve seen things turn around before, and we know that time is coming again. In the meantime, we all have to make tough decisions to keep our companies moving forward. It’s great that we’re able to keep in touch with our fellow cca members to stay on top of the latest trends and techniques to make our businesses better.
In some groups, misery loves company. In CCA, the fellow members challenge each other to put aside excuses, and lead our company to successes, no matter what the current conditions. During our Winter 2009 meeting we’ve planned a full-day leadership training session to help us be effective leaders of our companies during both the good and bad times. We’ve also scheduled a forecasting session with a professional economist to help us prepare for what’s ahead.
We definitely think there are some positives that will come from what we’ve experienced during these down economic times. Here’s what one member said at the last cca meeting that I think sums up the situation:
“We’re finding ourselves again. We’re far more discerning about what we want to tackle that has expenses related to it. It’s different than the free-wheeling days.”
If you’d like more information about cca, an enhanced service group of the Plumbing-Heating-Cooling Contractors -- National Association, call (800)533-7694, or visit www.PHCCweb.org and click on the cca logo at the bottom left of the page.
Forecast for an uncertain radiant future
By Lawrence Drake
Executive director, Radiant Panel Association
How does one make an industry forecast in times such as these? Although faced with serious obstacles, it is a time of great opportunity. So much depends on a staggering economy and a new administration. What is the most likely scenario? At this point, it is anybody’s guess, so I will make the best one I can. As one of my favorite sayings goes, “plan for the worst and hope for the best.”
It is ironic that people seem to be at their best when times are worst. And, in most cases, we are at fault for creating our own bad times. I think we all knew we were building homes faster than we could occupy them, using credit beyond our ability to pay, overindulging in goods and services, driving fuel guzzling cars and relying far too much on foreign energy.
Yet, we continued headlong into our current crisis until the system couldn’t handle it any more and broke down. Now, faced with the reality of what we have created, we are looking for change.
Change comes when people are pushed out of their comfort zone. When times are good and things are comfortable, no one wants change. If you are sitting in a nice cozy, warm house with a full stomach, you don’t want change. Put out on the street hungry and cold, you want change.
So, I guess I am saying that tough times can be good times, because they can bring change, and some of the changes in the wind are how we use our energy, how we treat our environment and how we design for healthier homes and business places. This is where the opportunity lies for the radiant panel industry.
Here is the challenge. As much as people want change, it has to be affordable. “Green” has become the catchword for much of the change people want, but at what cost? If experience teaches us anything, it is that there is a limit to what people will spend on an ideal. When gas prices and interest rates soared in the late 1970s and early 1980s, the government jumped in with tremendous tax incentives for alternative energy. The auto industry was enticed into making smaller cars, highway speeds were limited to 55 mph, and the government practically paid for solar systems with tax credits. Mother Earth News and Energy Fairs were in. Geodesic domes sprung up like mushrooms and houses all over the country got ugly black boxes tacked to spindly scaffolding bolted to their rooftops to heat water and save energy. We were all going to save the planet, and the government was going to pay the bill.
When Uncle Sam got tired of paying for all this “change” and the energy crisis waned, the public enthusiasm for saving the planet died. It wasn’t that people wouldn’t have liked to build a super insulated, earth bermed, solar heated house; they just couldn’t justify the expense. There were more important things to spend their money on, like hot tubs, upgraded kitchens or third garage stalls for their mobile homes.
So, what does this all have to do with my forecast for 2009? Well, I predict that, as in the mid-1970s, the enthusiasm for the “green” movement by the government and the people will open a window of opportunity for products such as thermal solar and geothermal. Of course, radiant heating enhances these technologies and can hitch its wagon to that rising star. There will also be a flurry of highly efficient heat sources that can take full advantage of radiant heating. No doubt, new government incentives will be created to help jumpstart this frenzy toward energy independence.
How smart will the radiant industry be? Will we design and price our systems to take advantage of the new tax incentives, or will we produce truly affordable heating and cooling systems that happen to be energy efficient? The modern radiant heating system was reborn in the “Mother Earth” movement of the ’70s. It barely survived the crash of the solar industry when the tax credits disappeared. It has struggled for the last 25 years to make a mark in the hvac market.
The industry has been successful in educating the public on the comfort and energy benefits of radiant heating. It has not been so successful in being price competitive with conventional hvac systems and, therefore, remains a niche market product. There are definitely areas and applications in which radiant is very cost competitive. People want radiant heating until they hear the price. Unfortunately, they are willing to tolerate a lesser heating system so that they can spend their hard-earned money on other things that they feel are more important or desirable.
The good news is that the industry is beginning to focus on ways to cut costs, increase performance and become more contractor-friendly. If the industry can continue on this tack and, at the same time, take advantage of the fervor over green technology, without falling into the trap of pricing for the tax incentives, we could see a long-term growth with staying power. Either way, there will be opportunity in the short haul, but not nearly the opportunity that is available to the industry if it can make its product affordable to the majority.
My forecast for 2009? There will be a lot of buzz over solar, geothermal and biofuel driven radiant systems. Some affluent people will pony up and spend the extra to save energy, but the vast majority of people will not. This will provide opportunities for some contractors and products, but I don’t believe it will be a large or sustained market. The housing market may start to recover, providing some relief, but the real growth will come in affordable retrofit systems and some new construction. Commercial construction could see some good growth because radiant in that market can be cost competitive and can also save a considerable amount in energy.
I believe the radiant industry will hold its own overall, but that there will definitely be pockets of decline and pockets of growth. 2009 will be the year that we set the stage for the future. If our industry is wise, it could be a great launching pad for unprecedented growth. If we are lulled into relying on government-subsidized programs, we will remain a small industry in a niche market.
The market for water will be redder, but greener
By Dan Chiles
Marketing VP, Watts Radiant
For 2009, I see huge demand for water. Make it heated, cooled, solar, waste, rain, grey, storm, filtered, firefighting and, of course, ... ice. The ice is for the margaritas to celebrate the income statements for any company smart enough to head for water.
Designers across North America have gone nuts for leed green buildings. The U.S. Green Building Council says that there are 31,000 certified green buildings, 62,000 accredited professionals and a 30% growth rate for green buildings, even in a recession. There will be hundreds of thousands of green building projects on the drawing boards in 2009.
Developers and owners are in green Boy Scout mode: They’re gathering merit badges for the technologies that make buildings more functional. Get past the building shell and, everywhere you look, water delivers the goods.
The engineer says, “Let’s use water-source heat pumps and radiant tubing to space heat and let’s cool from the ceiling, because it’s cheap to operate.”
Tenants want constant domestic hot water circulation to save water and energy and to avoid waiting for their showers.
Moms want a rainwater system for washing clothes in soft water.
Accountants want solar thermal domestic pre-heat because of the 30% tax credit.
The City wants rainwater and greywater systems installed, because they’re facing new epa stormwater mandates and water re-use downsizes detention basins.
The landscaper wants a low-flow irrigation system for the shrubs on the ground and for the plants on the green roof.
The insurance guy and the fire chief love it when fires go out in 20 seconds.
The marketing folks want reverse-osmosis treated water in the break room because, with all the bpa and pharmaceuticals in the drinking water, they’re afraid they won’t look like Jennifer Aniston or Brad Pitt.
Bonus: The reverse osmosis filter makes crystal-clear ice for the margaritas.
Sure, that’s a lot of trades and technologies, but that’s what the telecom guys used to say before they figured out how to bundle services. Now you get your long distance, local calls, cellphones, 3G high-speed data, teleconferencing, internet, cable-TV, movies-on-demand and security services from one obscenely profitable giant Mega Corp. Today that’s AT&T; tomorrow that’s Google and soon it’ll be a pimply 14-year-old kid in his bedroom with an i-phone.
Housing starts are sick and won’t get back to 2006 levels for a decade or longer, if ever. If you like the idea of bundled water based services, you won’t be crying. Tract houses in Vegas weren’t customers anyway. The market in 2009 will be smaller, but smarter. Wilder, but wetter. Redder, but greener.
Engineered, value-added and integrated water technologies are waves of opportunity for smart companies. That’s why most companies won’t get it and why I predict I’ll be saying the same thing again in 2010.
But I’ll buy a cool, tequila-enhanced drink for anyone who proves me wrong.
Hydronic dips ‘n’ swings:
To survive and thrive, be smarter than the
average Bear Market
By John Vastyan
Owner, Common Ground
trade communications
Raise your hand if you think the economy stinks. Alright... a quick hand-count confirms it: we’re in a recession. But wait -- the story rests with the folks who don’t agree.
You could Read All About It! in every newspaper and magazine, seek enlightenment on network news, or tap every dot com resource on the Web. Yet for every poll taken, for every source of intelligence, there’s a contrarian view, a thread of hope. This is one of those.
I agree -- the conflicting opinions are baffling. Housing starts are way down, and commercial construction is dipping as well. Sadly, these realities are tied to a mortgage and finance mess that the Feds haven’t fixed. And then there’s the global market vortex: hey, we’re all in this together.
It’s through this ugly haze that we focus our periscope on the U.S. hydronics industry. Let’s take a look at how things may look in ’09.
It’s down. I won’t win any awards for that call. Many of you are struggling to meet payroll and lease payments. But not all of you. Many manufacturers, reps, wholesalers and contractors are saying, “We see the cloud, but it hasn’t affected us yet. Business is up.”
Spirited leaders
Only a small portion of the new construction market overlaps with hydronics. It’s chiefly at the high end where radiant and hydronics dwell. There’s little disagreement that -- at the core of it -- the technology thrives noticeably only in the northern regions, or in hydronic strongholds like Boston and Rochester.
These are areas -- frequently where cold winters and higher incomes intersect -- where you’re most likely to experience the logic-defying, anti-gravitational pull toward hydronics, both in the residential and commercial markets. Typically, in the residential sector, the higher-end work involves mod-con or geothermal and solar technology connected to extensive, multi-zone radiant heat systems. Also, there’s the “re-green” residential retrofit business, no small portion of business on the move today. Commercial use of radiant heat, hydronics and geothermal has slowed, but there are many exciting projects out there.
Remarkably, a disproportionately high number of hydronics projects, large and small, are found where spirited, passionate contracting firms or leading reps and wholesalers energetically champion new technology and comfort solutions. They’re creating cozy pockets of hot water!
What are they saying today?
This stuff is for real, folks. These long-time industry pros are in the same industry we’re in. Yet they’ve clearly got a different perspective on business and the economic outlook than a majority of others.
This Old House celebrity and master plumber Richard Trethewey, said the hydronics industry has, at last, moved back into the consciousness of mainstream America. “The [push for green] is our best opportunity. Let’s make it work.”
Key hydronic indices
Here are the most current numbers from the Air-Conditioning, Heating, and Refrigeration Institute (ahri). Overall boiler sales are the ultimate barometer:
And of course there’s the influence of new technology:
The push for green is on, and a whole new generation of technology is waiting for the next shuttle bus into your customer’s home or commercial project.
