What’s in this edition:
- News/Publications to follow
- Financial considerations for your HVAC/Plumbing business plan
- Industry metrics for guidelines
Public Information to Follow
Financial Considerations for your Business Plan
Limited resources to collect
Most contractors are small businesses or solo operators, so they don’t have a lot of resources to chase down payments. It can take an average of 58 to 66 days to collect payments, and receivables can account for 31 to 41% of total assets. This can put a strain on cash flow and make it difficult for contractors to stay afloat.
Maintenance services provides smoother cash flow
HVAC and plumbing work is often tied to the construction industry, so sales and cash flow can be affected by the seasons and the economy. During slow periods, it can be challenging for small businesses to maintain staff and cover overhead costs. Construction problems can also delay cash flow. Companies that offer maintenance agreements typically have smoother cash flow because the work is spread out over a longer period of time.
Potential equipment purchases could include:
- Pipe and Duct Borescope: $1,500 – $3,000 A pipe and duct borescope is a flexible, handheld inspection tool that is used to view the interior of pipes and ducts. The borescope has a camera on one end, which is attached to a long, flexible cable. The other end of the cable has a control unit, which allows the user to move the camera and view the images on a display screen.
- Drain Cleaner: $250 – $7,000 A tool to physically break up the clog. The most common type of mechanical drain cleaner is a plumber’s snake. Plumber’s snakes are long, flexible cables that can be inserted into the drain and rotated to break up the clog. Other types of mechanical drain cleaners include drain augers and toilet plungers.
- Air Testing Equipment: $250 – $3,000 Measures the quality of air in a building. This includes measuring the temperature, humidity, airflow, and concentration of pollutants in the air. The results of air testing can be used to identify problems with the HVAC system, such as leaks, blockages, or inefficient operation.
- Vehicle: $25,000+
Recent Industry Metrics (Companies <$5M revenue)
Highlights from this vertical analysis and financial ratios:
- Days receivables declined 20.0% from pre-pandemic.
- Pandemic squeezed out inefficient firms.
- Rising costs of labor and materials were transferred to customers with limited impact to bottom line margins.
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