ServiceTitan Principal Industry Advisors Chris Hunter and Angie Snow, both of whom have run highly successful HVAC companies, had an interesting reaction to the results of a residential service and replacement industry report commissioned by the company.
They were taken aback. The numbers in the report were generally more gloomy than what they see for ServiceTitan customers.
The survey involved more than 1,000 contractors in the United States, across all trades from HVAC, plumbing and electrical to appliance repair and pest control, more than 20 trades overall. The survey was not limited to ServiceTitan customers.
\The results showed that revenue increased for only 26% of contractors. Revenue stayed the same for 35% of contractors in the survey, and 38% saw a revenue decline.
Still, 34% of contractors enjoyed increased profits in 2022. Annual profits remained the same for 52% of respondents, and 13% experienced reduced profitability.
The report also included these key findings:
71% of respondents said word of mouth was their biggest driver of business.
70% fear a recession as the biggest inhibitor they face.
49% named the labor shortage as the biggest inhibitor, 44% said competition, and 41% an increase in material prices.
29% said they plan to increase their use of technology in the next year.
On average, only 7% of revenue came from financing, limiting some customers’ ability to get the services they need.
Those numbers, especially around reduced revenue, made Hunter and Snow recognize the ServiceTitan bubble they live in, and showed how many contractors still need help.
“Angie and I have been spoiled by looking at specifically ServiceTitan data, which shows that our contractors are super successful,” Hunter said. “We’ve seen the growth rate of our customers, where this report was saying only 26% even grew last year.
“That broadened our perspective, and made us realize this industry's big and there's a whole lot of people who still need help, who still need the advancement that technology brings.”
“It’s not just the industries we’re used to talking about, but 20-plus different trades,” she said. “These numbers weren't really aligning with the numbers we're seeing at ServiceTitan. So there's a bit of a discrepancy.”
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A different definition, a bigger picture
While the statistics on word-of-mouth referrals struck both Hunter and Snow, both said it’s not the traditional “my neighbor told me” definition. It has expanded to include online reviews, social media, networking and neighborhood groups, encompassing a bigger digital picture.
That requires a different approach.
“There's a new mindset when you are going to market and looking to grow,” Snow said. “It's not the phone book anymore. Ten years ago when Chris and I were doing this, it was a guess. We were in phone books, we were on billboards, we were sending out postcards, we were doing a lot of things just to see what was working. And then to track that, we were having to ask our customers over the phone, ‘How did you get our number today? How did you hear about us?’
“With ServiceTitan, all of our marketing campaigns are tracked. I can tell exactly how that call was generated, where that call came from. I can see an ROI that I wasn't able to really track before.”
Leaning into that technology and platforms such as Google makes word of mount a much broader category. Now, it’s about reviews.
“I want to know exactly who's doing a good job, what the pricing is, what's the service like, what's the experience like,” Snow said. “People nowadays want an experience. You're not just selling them a service, a repair, a new furnace, you're selling them an experience.”
Hunter suggested doubling down on this expanded definition of word of mouth, and maximizing the way contractors capture those leads.
“They're coming because they saw a review, they got a recommendation in a Facebook group, or a friend told them about it,” he said. “But contractors, we still have to do a great job of measuring how they're coming and then maximizing that as well.
“We need to double down on providing that phenomenal customer experience where they want to go and tell their friends about it.”
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Think ahead, protect profitability
Hunter and Snow also encouraged contractors to think ahead to 2024, when they expect service and repair to increase and big-ticket projects to decrease. That means protecting profitability by minimizing overhead and maximizing the return on marketing spend.
“Contractors are having to be a little strategic now because we're not seeing the bigger tickets,” Snow said.
Their other suggestion? Lean harder into technology, something 29 percent of respondents said they plan to do in the next year. Those contractors have the right idea, they said.
“Really embrace technology, embrace automations, embrace AI,” Snow said. “These things can help you cut overhead, increase your efficiency, help you be more effective. You have to make up profit in other areas, typically out of overhead, labor, some of those areas where we're used to spending. So now we've got to spend smarter and be smarter with our operations.”
For Hunter, technology is the answer for the best contractors.
“The contractors who double down technology, they're more efficient, they provide a better experience, they're able to be profitable while doing it,” he said. “While it may seem like an initial cost and an investment, those who optimize it, they're the ones that are going to win.”
Both Snow and Hunter said that, with the pace of change, moving fast is imperative for success. And technology is the equalizer between big and small companies.
“As contractors, we're all looking for that silver bullet,” Snow said. “What is that one thing that's going to get us to the next level of success? And we want to get on that same train.
“In this case, the train is technology, the train is AI. And it's moving fast.”
ServiceTitan is a comprehensive software solution built specifically to help service companies streamline their operations, boost revenue, and substantially elevate the trajectory of their business. Our comprehensive, cloud-based platform is used by thousands of electrical, HVAC, plumbing, garage door, and chimney sweep shops across the country—and has increased their revenue by an average of 25% in just their first year with us.