CHICAGO — The 2009 business forecast for many plumbing companies is bleak — plumbing contractors will continue to cut costs in 2009 in order to weather the worsening national economy. However, despite this economic downturn, plumbing companies with green products and technologies have forecasted a steady and possible increase in business this year.
"Like many companies, we had hoped that 2008 would be the bottom of the cycle, and we would see slow and steady improvement in business conditions in 2009,” said Don Devine, chief executive officer of American Standard Brands. “Unfortunately, the credit crisis and the ensuing drop in consumer confidence suggest that the first half of 2009 will be weaker than the first half of 2008, and we won't be able to call the second half of 2009 until we see more progress in the markets and understand the full agenda of the new administration.”
According to Devine, American Standard has narrowed its focus on managing costs while continuing to develop and commercialize new products. It also has forecasted that buyers will be interested in a product’s performance, water efficiency and value in price in 2009.
Like American Standard, many plumbing contractors are expecting less business in the beginning of 2009 when compared to the start of 2008.
“We are projecting a substantial downturn for the new year,” said Doug Santoro, owner of General Plumbing, West Palm Beach, Fla., and member of PHCC and Quality Service Contractors, an enhanced services group of Plumbing-Heating-Cooling Contractors. “We are in the south of Florida and have forecasted that the first quarter of 2009 will be worse than 2008, but we predict the second half will be better.”
Even though many plumbing companies are projecting a decrease in business in the beginning of 2009, some companies are expecting business to remain steady.
“We’re not planning on any significant increase of revenue in 2009, but we’re also not thinking of any decreases,” commented Patty Frank, vice president at Milton Frank Plumbing Co. in Spring, Texas, just north of Houston. “We will have to work smarter and harder in our businesses to overcome the downturn of the economy.”
Plumbing companies in cold-weather climates are hoping to do more business at the beginning of the year if the harsh weather continues this winter.
“We are hoping for a cold winter to help drive sales and make equipment work hard,” said Roger Fouche, owner of Schaal Heating & Cooling, Des Moines, Iowa, and member of PHCC and Quality Service Contractors. “A higher majority of our equipment sales are coming from our emergency service and failed equipment.”
Despite the continued economic downturn, some companies are forecasting a possible increase in business in 2009 due to the shift towards green products and technology, including green building, and energy and water conservation.
Australian fixture manufacturer Caroma, which invented the dual-flush toilet, is forecasting business growth in 2009 and expecting to see the market gravitate towards green technologies, according to Derek Kirkpatrick, the firm’s North American general manager.
“This will be a real transition change for companies,” commented Kirkpatrick. “The companies with green technologies will find themselves in a good position. Consumers are also smart and want products that will help them conserve energy and water, ultimately saving them money.”
Regardless of what plumbing companies are forecasting for 2009, the majority of owners are taking steps to cut and manage costs throughout the year. Traveling to sales meetings and trade shows, shipping, increasing product prices and freezing employee raises and bonuses are some of the many steps companies are taking to cut costs.
“All companies have to look at house keeping,” said Kirkpatrick. “Instead of traveling, conference calls and video conferencing can be done. Trade shows are also chosen wisely now – we want to get the most bang for the buck.”
According to Bill Chronister, president of The Earl's Plumbing in Rancho Santa Margarita, Calif., and member of PHCC and Quality Service Contractors, technicians have not been laid off, but office staff has been cut and inventory levels are being decreased.
In the new year, many plumbing companies will hold employees accountable for the time they put in on the job every day. Companies also are also examining benefit packages.
“As we start planning for 2009, we are going to review all of our business expenses,” stated Frank. “This starts with reviewing all our insurance policies, utilities, supplies and labor expenses. This does not mean cutting any employees, but watching overtime hours and making employees more accountable for their time. We’ll most likely be reviewing our benefits package, trying to save a larger percentage of those dollars, whether it be a company provided benefit or something that comes out of the employees pay.”
Plumbing companies are even cutting back expenses on small items that can be overlooked, but will help a company save in-house expenses.
“We are having people cut back on printing documents from printers, so we save on paper costs,” explained Santoro. We are also making sure people turn lights off in rooms that are not being used and consolidate deliveries, so we save money there too.”
One budget companies do not want to cut back in is marketing. However, the unstable economy has made owners examine what advertising and marketing strategies directly increase sales.
According to Fouche, more money will be spent on promotional advertising and discounts. Plus, any advertising that does not increase sales will be cut.
Caroma is also selective regarding their marketing strategies. “We use publications and media that will now give us the best results,” explained Kirkpatrick. “We are managing the bottom line much better now.”