When it comes to industry trends, there appears to be a light at the end of the tunnel. And unlike in 2023, that light isn't a pair of headlights barreling your way.
Welcome to our first report on the State of the Trades, a comprehensive overview of trends and conditions affecting residential and commercial contracting in the U.S. This is a new endeavor from ServiceTitan, the software provider for the trades, which will now deliver quarterly, must-read industry insights and analysis to inform your business decisions.
The latest piece of ServiceTitan data? Revenue numbers are up across the board this year from April to June:
Residential shops saw an increase of 6.84% to 15.82% in revenue, which is a complete flip from last year, when numbers went in the opposite direction in the same time period—from 10.52% to 2.55%.
Commercial shops saw an increase from 9.52% to 12.58%. This time last year? It dropped from 8.66% to 7.44%.
So what does all of this mean? Chris Hunter, a principal industry advisor at ServiceTitan, thinks that we might be inching toward “business as usual,” territory, he said.
In other words, the light at the end of the tunnel could actually be daylight.
“I think (this data) is telling the story that you've almost outlasted the worst of it,” Hunter said. “And now, the contractors who have battled through, who have leaned up their ships, who have focused on efficiency, who have optimized their software to make things run extremely smoothly—they're going to be in for a real rebound.
“They're not just going to get through it anymore. They're going to be the ones who are going to be winning.”
No more Covid skew
The last big ripple effect from Covid-19 was felt heavily throughout the trades in 2023.
As we now know, a lot of work was pulled forward from 2020-2022, which led to a steep drop-off in installs in 2023 as customers opted for repairs instead. Rising interest and mortgage rates certainly didn’t help either, as homeowners and property owners limited their spending.
Shops were challenged with “tightening their belts and being more efficient,” Hunter explained.
“When it was easy, it was really easy to let things get out of control a little bit,” Hunter said. “2023 was the wake-up year.”
But based on the numbers, things are on the upswing.
For example, lead call growth is on the rise from April to June 2024:
For residential customers, it’s gone from -1.76% to 11.68%. Last year at this time, it went from 4.05% to -8.86%.
More specifically, HVAC residential customers have seen an increase from -0.75% to 16.28%, compared to last year’s drop of 8.23% to -10.30%.
For commercial customers, it’s gone from -10.14% to 1.18%. Last year? It went from 0.45% to -12.47%.
More specifically, HVAC commercial customers have seen an increase from -9.05% to 3.91%, a much different tune from last year’s drop of 3.67% to -11.65%.
After basically no change in average ticket size for the first quarter of 2024, April through June saw solid increases, as seen on the chart on the State of the Trades page.
For residential, average ticket size increased from 2.1% to 4.2% in June. Last year, it went from 0% to -1.7%.
Two regions of the country performed better than others in terms of average ticket size — the southeast region grew 8% year over year in June, while the west grew 5% year over year.
Even annualized technician churn rate has cooled down:
For residential, it’s sitting around the 10% mark, whereas last year it was almost double around this time.
“The tech rate churn being close to single digits is a great sign to me,” Hunter said. “That means (the techs) who are at shops are staying there, and they're not turning over like they were. Because it was crazy there for a while.”
‘Contracting as normal’
2023 was the wake-up year. So with revenue, leads calls and revenue per tech all trending upward, what does that make 2024?
“I think it’s contracting as normal,” Hunter said. “It's back to focusing on the key elements of your company, making sure you're priced right, making sure you're serving well, and that you're converting the calls that you get.”
But for those who’ve leaned into technology and made it through 2023 relatively unscathed, Hunter thinks there’s an even brighter light ahead.
“(The last couple of years have) prepared us for a new age of contracting. You're optimized, you're efficient, you're leveraging the technology, you're leveraging the marketing that's available. Those who do that are going to be the ones who are winning far more than others.
“I think we may even see the gap between those who do that and those who don't start to get even wider. The way that homeowners are booking calls, the way they're communicating, the way that they're marketed to, my goodness. (With technology), it is so different than it was just a few years ago.”
There may even be a “slingshot” effect in 2025, Hunter explained.
“When everything breaks loose again in 2025, and customers have to replace again, and the interest rates cool off a little bit, I think it's going to be a slingshot, especially at the end of the year next year.”
But for now, Hunter sees this data and what’s happening around him as a sign that the last of the Covid ripple effects are behind the trades.
“We boomed. We crashed. And now I think we're back to just normalization,” he said.
Check back next month for our latest State of the Trades story.
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