The new year is here, but the residual effects of 2022 — inflation, supply chain disruptions and a looming recession — are clouding its economic outlook.
Economic uncertainty is affecting nearly every industry, and the trades, while more resilient, still need to prepare for the effects.
How can business owners navigate these challenges in 2023, and what trends will lead to new opportunities? Our ServiceTitan experts offered their best predictions, and they all have the same advice: Invest in great technology.
“To stay competitive (in 2023), business owners should continue to double down on investing in technology and data-driven solutions to better serve their customers and employees,” said Chris Hunter, Principle Industry Advisor at ServiceTitan.
Will residential slowdown help commercial businesses?
Macroeconomic factors such as rising interest rates and inflation will continue to affect construction in 2023, with residential and commercial sectors weathering the storm differently, said Sendur Sellakumar, SVP of Commercial & Construction at ServiceTitan.
Here’s how it will likely impact residential construction:
Rising mortgage interest rates and costs of capital are leading to fewer available buyers and an overflow of housing inventory.
Less capital is going into new construction.
“With increased supply but lower demand, residential operators who historically focused on new construction will begin to diversify their services — pivoting to repair and maintenance work, residential retrofits, or to adjacent sectors like commercial construction,” Sellakumar said.
On the commercial construction side, Sellakumar sees the economic volatility leading to a much different effect: Stability.
2023 commercial construction starts will likely stay at similar rates to 2022.
That means commercial operators can focus on investments in personnel, new business and innovative technology like 3D cameras for better site management.
“Less activity in the residential sector will ease the strain on building material inventory, which should positively impact current supply chain challenges and lead to improved project timelines,” Sellakumar said.
While all of these are predictions, Sellakumar is certain about one thing: For operators across residential and commercial construction, 2023 is the year to align their services to the economic health of their customers.
“Consumer and institutional purse strings are strapped heading into (2023),” he said, “and as a result, smart business owners will invest in new services and more efficient technologies to better reach current and new customers.”
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Better customer experience mitigates 2022 impact
The ripple effects of 2022 will affect what customers decide to service in 2023, Hunter explained.
“We will see customers choose to do more maintenance and repairs, and contractors should offset this by offering financing for repairs and replacements,” Hunter said.
Customers, Hunter said, will also be affected by higher prices for replacements and longer wait times due to supply chain disruptions following the new HVAC efficiency standards taking effect in January.
This means they could be less likely to invest in a brand-new HVAC system and might elect for a quick repair, he said.
“We are already beginning to see this trend with our own customers — in October 2022, maintenance and repair jobs exceeded 70% of total jobs, while installs and sales comprised less than 30%,” Hunter said.
Hunter added that business owners should also devote time and resources to customer acquisition and loyalty programs, and use tools such as dynamic pricing to automatically adjust rates and protect profit margins.
With consumer spending on the decline, how can business owners do all of this while staying competitive? By tracking their data, Hunter said.
“Data can help businesses identify and mitigate common reasons why technicians may churn, like too much driving time, not enough jobs, or the wrong types of jobs,” Hunter said. “This can help boost employee retention and lead to long-lasting customer relationships, which is especially critical in today’s tight labor market.”
To stay competitive (in 2023), business owners should continue to double down on investing in technology and data-driven solutions to better serve their customers and employees."
AI: The year of adoption
ServiceTitan’s Chief Technology Officer Anmol Bhasin predicts that 2023 will not be the year for advanced AI innovation. Instead, it will be the year for mass AI adoption. Here’s why:
As companies look to cut costs and extend their runways, automation through AI is going to be a major factor in staying competitive.
In 2023, Bhasin thinks the industry will see an increase in AI adoption, expanding the number of people working with this technology and illuminating new AI use cases for businesses.
“I like to think of this using a construction analogy: In the past, we built AI brick by brick. It was time intensive, and we needed experts to ensure every brick was laid with precision,” Bhasin said. “Now, instead of bricks, the industry has evolved to use prefabricated homes that you can build in a day. In the same vein, AI is evolving to provide templates that anyone can use to automate tasks and processes, such as GPT-3 for text creation or DALL-E for AI imaging.”
As these AI templates continue to gain popularity and the barrier of entry continues to lower, Bhasin thinks we’ll see widespread adoption across industries and an emerging workforce trained to handle AI systems.
“This is exciting because as adoption increases, further innovation will follow,” he said. “In the next five years, we could see many more parts of businesses using some form of AI to automate workflows and increase efficiencies.”