Contractors Look Ahead to 2011

If there's one word that can sum up business owners' outlook over the last year, it's “uncertainty.” Even though the recession has officially ended, the economy is not recovering quickly because businesses are too uncertain about the future to make substantial investments or hire more workers.

Business owners are uncertain about taxes, uncertain about regulations, uncertain about incentive packages, uncertain about the direction of the government — but most importantly, they are uncertain about consumer demand. If the demand is not going to be there, there are no jobs to be created.

That same uncertainty is found among the small-business owners who make up the HVACR contracting industry and it may color the coming year even more deeply.

How Comfortable Are Contractors?

In February 2010, the Air Conditioning Contractors of America (ACCA) launched the Contractor Comfort Index (CCI). The CCI is our industry's first leading economic indicator, offering a measurement of how ACCA's contractor members feel about their short-term growth prospects, including new customer acquisition, existing business and employment numbers. The CCI offers valuable knowledge on an ongoing basis — the more confident a contractor is about the short term, the more likely he or she is to invest — but will become even more valuable over time as we gain access to historical trends.

With an index of 50 or above indicating anticipated growth, the CCI has consistently painted a picture of a cautiously optimistic contracting industry in its first year. From a low of 55 in February to a high of 69 in June, contractors have believed all year that they were poised for short-term growth … but they have been conservative about how much growth they expect.

A Record Year

Yet despite their cautious reaction when asked point blank how they feel about the next month's prospects, anecdotally we've been hearing a slightly different message from many of our residential contractor members this year. It's a message similar to what I heard personally from many of our members at ACCA's annual Contracting Week events in October.

They told me that 2010 has been a banner year for many contracting businesses. Records have been broken. Some contractors almost seem sheepish about admitting how well they have been doing.

What's been fueling the growth for those contractors?

Hot, hot, hot. Well, let's face it — weather still plays a big part in contracting fortunes. And the 2010 summer was a really hot one in most of the country. (Not everywhere; for example, the Northwest part of the country experienced cooler-than-usual summer temperatures, which had a big impact on contractors in that region.)

Would you like a tax credit with that? Government programs also have played a role. The $1,500 high-efficiency federal tax credits supported by ACCA, put into effect this year at a higher rate than ever before, fueled many homeowner system purchases.

Remarkable rebates. In addition to federal tax credits, state and local government and utility rebate programs exploded throughout 2010. In some parts of the country, contractors have been able to combine tax credits and rebate programs on behalf of homeowners, which brought the customer's price down to astonishingly low levels.

A businessperson, not a contractor. Even more than the weather, rebates and credits, what distinguishes the record-year contractors from everyone else has been their approach to their businesses. They didn't panic when the economy changed. They inventoried their operations and cut back on nonessential operations while increasing investment in those areas essential for growth, such as marketing, education and new service offerings.