< Previous10 JANUARY 2020HIGH-PERFORMANCE HVAC TODAYCONTRACTOR SPOTLIGHT“We set ourselves apart from compet-itors by surveying all the accessible ductwork, recording all the measurements, we then assess. Between the sales consultant and the office, we can catch something that contributes to the system not per-forming as it should.“This helps us see the bigger picture and allows us to help the homeown-er see it as well. Performance-Based Contracting™ helps us overcome ob-jections, sell more, and provide excel-lent service.”For these reasons and many more, the team here at High-Performance HVAC Today magazine selected In-door Comfort Team as our January 2020 Contractor Spotlight. the first snag when price is discussed. “When it comes to paying such a higher price, customers develop what I call selective hearing. By that I mean they’d rather hear what the cheaper guy has to say than what we do. Then they either pay twice to get the system to perform correctly, or they are stuck with something substandard.“From my perspective, we can and do prove that Indoor Comfort Team offers the highest standards when sell-ing duct renovations and air upgrades. “We can detect problems, diagnose them correctly and repair them prop-erly. We tell them in writing, ‘no equip-ment can fix or overcome ductwork deficiencies.’” Rahmanovich says. so many other strong Performance- Based Contractors, he has stories about projects where the ductwork needed repairing and replacing but were told their price was too high. The homeowner hires another, less-ex-pensive outfit, and eventually they call Indoor Comfort Team back because they still have areas of the house that are uncomfortable.According to Rahmanovich, “They often have us come back out and redo the job the Performance-Based way. In other words, they pay twice even though we warned them about it. It is all about communicating correctly.” OVERCOMING OBSTACLESRahmanovich says that closing duct renovation or air upgrade sales hit JANUARY 2020 11HVACTODAY.COMAAs we begin 2020, the U.S. economy is slowing down. We do not yet have 2019 fourth-quarter U.S. Gross Domes-tic Product (GDP) results (they are due out in late January), but results through the third quarter of 2019 show the economy’s dimin-ishing growth rate.This slowing trend has been underway since the second half of 2018 and is consistent with our forecast and what our leading indicators have been suggesting for quite some time. Our analysis indicates that the economy is on track for further deceleration in the fourth quar-ter of 2019 and a potential first-quarter 2020 contraction in GDP. However, we anticipate the economy will avoid outright recession in 2020, gaining firmer footing and accelerating during the second half of the year. That’s the good news. The bad news, for you who serve the commercial marketplace, is that you lag the broader macroeconomy. The eco-nomic headwinds of 2019 and early 2020 are poised to linger over the industry through 2020 and into 2021. THE ECONOMIC TRAINIn my keynote presentations, I often ask folks to think of the overall U.S. economy as a train, with each of its various sectors as different cars. This is a useful way to show how different sec-tors experience economic shifts and headwinds at different times. Some sectors are closer to the front of the train, hitting the bends, slopes, and tunnels first, while others are toward the ca-boose, blissfully unaware of the shifts occurring toward the front. This is especially apparent when we examine the U.S. construction space. The residential mar-ket is nestled close to the locomotive; it is often first into the turbulence of an economic storm, but it is also one of the first sectors to come out of it. At ITR, we see the U.S. housing market as a very important leading indicator – we view its shifts through the business cycle as a likely path for the overall economy as measured by GDP. This is precisely what we saw play out during the last year, as the new housing market was fal-tering in late 2018 while the overall economy was still near its business cycle peak. The housing By Connor LokarMANAGEMENT2020 Commercial HVAC Market: Prepare for Mild Headwinds12 JANUARY 2020HIGH-PERFORMANCE HVAC TODAYMANAGEMENTsons why. The quarterly growth rate for the U.S. GDP (adjusted for in-flation) is presented. The blue dots mark the end of the first year of a Democrat’s term in the Oval Office; the red dots depict the same for a Re-publican. From our perspective, it is not possible to statistically demon-strate that superior growth, or the lack thereof, can be laid at the feet of one party or the other. From 1976 to the present, the av-erage GDP rate-of-change during Re-publican administrations was 2.81%; for Democratic administrations, the average was 2.85%. All of which leads us to the point we strive to make in our presentations and con-versations: Its policies and what ulti-mately becomes law or rule or execu-tive order that can (at times) matter, not the party. At ITR we will keep an eye on any proposed policies that gain ground as the election cycle heats up and pro-vide commentary on whatever busi-ness implication they may have. Your job as a reader is to keep your head above the political noise this year and focus on running the business. tions through which the U.S. econo-my suffered a decade ago. Prepare for some headwinds to impact growth for your construc-tion-tied business, but not a collapse. POLICY VERSUS PARTY – WHAT MATTERS?To compound matters, we have of-ficially entered a presidential election year. With the fact that the U.S. econ-omy is slowing down, that makes two converging trends likely to yield gro-tesquely irresponsible economic re-porting and high uncertainty during the next year. We are known for being apolitical at ITR Economics; we do not favor either political party when it comes to our analysis of the overall econo-my. Policy can matter, but history has shown us that the party in the White House does not. The chart illustrates one of the rea-market continued to slow and eventu-ally contracted in 2019, and the U.S. economy has been following just be-hind, posting diminishing growth rates in 2019. Now, we see encouraging signals that the new housing market is round-ing the corner in early 2020, out in front of the improvement that we an-ticipate for the overall economy during the second half of the year. However, the commercial construc-tion market is at the back of the train, which is limping into the opening quarter of 2020. U.S. Private Nonresidential Construction during the 12 months through October 2019 (most recent data available) is down 0.2% com-pared to the same 12-month period a year ago. Private Nonresidential Con-struction lags U.S. GDP through the business cycle by 15 months. In other words, Nonresidential Construction is way back toward the caboose of the train and has yet to feel the brunt of the deceleration currently impacting the U.S. economy. Much larger than your typical res-idential project, commercial proj-ects last months at a minimum, if not years. The large size and scale lead to a lethargic response to shifting eco-nomic trends; thus, we can expect the current economic slowdown to linger over the industry into 2021. Fortunately, this economic down-turn is mild and will stop well short of the extreme recessionary condi-“FORTUNATELY, THIS ECONOMIC DOWNTURN IS MILD AND WILL STOP WELL SHORT OF THE RECESSIONARY CONDITIONS OF A DECADE AGO.”JANUARY 2020 13HVACTODAY.COMTHE “PEOPLE PROBLEM”Despite the macroeconomic slowdown underway and mild headwinds for the industry, finding and keeping tal-ent will remain a big issue. U.S. Employment of Build-ing Equipment Contractors – which includes electri-cal and wiring installation contractors; plumbing, heating, and air conditioning contractors; and other building equip-ment contractors – is averaging an all-time high of 2.25 million individuals during the most recent 12 months. Hiring is showing tentative signs of slowing, but Em-ployment is still up 4.0% from the same period a year ago. While you should expect hiring to slow national-ly into 2020, the trend will stop well short of the rising unemployment typically observed during macroeco-nomic downturns. This is not that kind of cycle. Try to leverage the slower growth next year by hiring more talent to prepare you for the next growth cycle. The challenge for those in the commercial HVAC space in 2020 will be balancing a slowing economic environment and the bluster and noise emanating from the media sur-rounding the 2020 general election. Evaluate your cash position and stay flexible with ad-equate access to credit as the bottom of the business cy-cle approaches, with the main goal of avoiding being over-ly pessimistic in your thinking. We expect accelerating growth in GDP to be gaining traction later in 2020, with greener pastures awaiting in 2021. Will you be ready to meet that level of demand? Ask yourself how you can leverage the current pause in the business cycle to load up for the next upswing. Connor Lokar is a Program Economist at ITR Economics, a 72-year-old economic research and consulting firm. Lokar specializes in the construction industry and provides economic consulting services for businesses, HVAC trade associations, and Fortune 500 companies. He is a graduate of the economics department of the University of Mich-igan. His economic insight and forecasting experience play a key role in ITR Economics’ 94.7% forecast accuracy. To learn more about ITR Economics, visit www.itreconomics.com. Follow Lokar on LinkedIn (ncilink.com/ConnorLokar).16 JANUARY 2020HIGH-PERFORMANCE HVAC TODAYtomer Survey which we have edited to our needs. These are specific questions that give clues to the consultant as to any airflow issues. We ask clients to be as honest as possible in their answers because we cannot address their issues if we do not know them. We say things like, “Mrs. Jones, you live here, we do not. You know every little thing that hap-pens in your home. We cannot possibly know what comfort issues you have without your honest input.”After the interview, the comfort consultant gath-ers measurements and photos. When they find any abnormalities, they further investigate possible solutions and prepare to speak to the homeowner.TRANSLATING TECH TO ENGLISHHere are some of our top analogies and props that we use to explain ductwork issues:Return Ductwork Gaps and Leaks In Basement. We say, “Mrs. Jones, we found a lot of return duct leaks and gaps in the basement.” We then show the client the leaks with a smoke stick and explain:“Air follows the path of least resistance so the HVAC system will pull air from the basement gaps and leaks before it pulls all the way from the second floor. We want to pull air from the rooms being heated and cooled, not the base-ment. Does that make sense?”Undersized Return Ductwork. We say, “Mrs. Jones, your return ductwork is under-sized and not delivering the proper amount of air to the furnace/air handler. The best way to explain this condition is to think about those old type vacuum cleaners with hoses. If you put your hand over the hose, then no air would come out This is the look your clients have in their eyes when the service technician/com-fort consultant starts explaining why they need ductwork modifications in “air-head” terminology. It’s our fault because we some-times feel the need to speak in “technical” terms to emphasize the issue. We really do not know how to explain the problems in “English.”Years ago, I was guilty of this exact thing. When I first was certified by National Comfort Institute (NCI) in air balancing and diagnostics, I thought I was the king and I spoke to my clients in terms to impress them with my new-found knowledge. I quickly learned I was confusing them. They didn’t understand what I was saying, so they chose not to do the upgrades. My team and I now use analogies and props to discuss airflow issues. This results in a better- educated client and more add-on ductwork up-grades. Is that not a “win-win” sce-nario we can all use? One thing to note here, 90% of our customers’ HVAC systems are located in base-ments, so our analogies/props are based on that.In our company, comfort consul-tants are exposed to more oppor-tunities then service technicians, though the following examples can work for both groups. THE CLIENT INTERVIEWWhen one of our consultants first visit a potential customer’s home to provide an estimate, he or she performs a client interview. We use the NCI Residential Cus-How to Sell High-PerformanceAir UpgradesBy Vince DiFilippoSALESUndersized return ductwork example.“IT’S ALL GREEK TO ME!!”JANUARY 2020 17HVACTODAY.COMJANUARY 2020 17HVACTODAY.COMlow on the wall near the floor. Our comfort consultant will say, “Mrs. Jones, cold air is heavy and will always fall. Warm air is light and will always rise. Let me give you an ex-ample: Have you ever wondered how the meat products at the supermar-ket stay cold when the display case is wide open? That’s because the case is filled with heavy cold air. “The same thing happens when you open the freezer door on your refrig-erator, your feet get cold! Installing low returns in the basement will elim-inate the cold floors and installing high returns upstairs will cool off the 2nd floor bedrooms.“Adding low returns will help with comfort issues. Installing high return vents on the wall will help comfort in the back of the vacuum. This is what’s happening with your system. No air is going in so no air comes out. Does that make sense?”Return Duct Down-drops With No Elbow. We explain this as follows: “Mrs. Jones, your return duct down-drop is ‘slammed’ against the furnace and the air can’t find its way into the system. This reduces airflow. Can we go into your kitchen so I can show you what’s happening to the air?”We then ask for a soup ladle and hold it under a stream of water from the sink faucet and it shows the water following the curve of the ladle. “You see Mrs. Jones, the water is just like airflow and is following the curve. This is why we need to rework the return down drop so the air will Demonstrating airflow using a stream of water and a soup ladle makes it visible to customers.flow into your furnace easier.”Heat Rises, Cold Air Sinks. Mrs. Jones complains that the house has cold floors on the lower level and the second-floor bedrooms are too hot. This indicates to us that returns on the first floor are probably mounted high on the wall, and returns are non-ex-istent on second-floor, or are located 18 JANUARY 2020HIGH-PERFORMANCE HVAC TODAYit to the second floor. The force of the air is twice as hard and the air mixes with the heat and helps cool the area much better. “In the winter cold air sinks, so the second-floor vents close and all the first-floor vents open. The force of air increases, the air mixes, and the area heats twice as fast and with more comfort. In other words, Mrs. Jones, you will heat or cool only the areas you need so your HVAC system will only run when needed. This saves you energy. Does that make sense?”OVERCOMING OBJECTIONSHow many times have you offered an estimate to a client and they say, “The other companies I’ve called for an es-timate say I need a larger air condi-tioning system and that will solve my comfort problems.”As professionals, we know it is much better to undersize the system than to oversize it. How do you explain this to a consumer?Our crew will say something like, “Mrs. Jones, have you ever stayed in a hotel or motel room and the room was not only cold, but it felt “clammy” or moist? This happens when the air conditioning system is oversized. It’s cold but it isn’t removing humidity from the air. “Oversized systems blow lots of cold air into the home and that causes the thermostat to turn off. The cold air quickly dissipates and then the thermo-stat turns the air conditioning back on. “This on-off cycle cools the house the second-floor bedrooms by draw-ing hot air from the ceiling.”Offering and Explaining Zon-ing. Sometimes we cannot raise/low-er returns nor add additional return ductwork on the different floors to increase comfort. In those cases, we offer the customer zoning. When we recommend a new zoning system, we discuss how it will help solve comfort issues and reduce energy. “Mrs. Jones, with zoning, you’re only delivering air to the area where you need it,” our Comfort Consultant will say. “In summer, heat rises so the vents on the first floor close and all the vents on the second floor open. So now in-stead of the HVAC delivering air to the whole house, you’re only sending SALESJANUARY 2020 19HVACTODAY.COMally find flex duct runs to those rooms that are between 20 to 30 feet in length.Our comfort consultants will say, “Mrs. Jones, your comfort issues are due to poor ductwork design. You have flexible ducts that are too long. Be-cause of this, they slow down the air. “For example, have you ever used a garden hose to water the flowers? The water stream coming out of the nozzle is pretty good. What happens to the stream when you add another length of hose to it? It’s weak, isn’t it? “This is what’s happening with your ductwork and airflow. There is more friction in the additional hose just as there is more friction in your ductwork because the air has further to travel.” Our consultant may add, “To make matters worse, there is a metal “slinky” that’s wrapped along the whole inner length of the flex duct that is ribbed and slows air even more. Does that make sense? We can correct this con-dition with ductwork modifications.”I hope this helps in selling ductwork modifications. Remember, speaking in ‘English’ will help your clients un-derstand the issue. Using props will reinforce what you’re trying to say.Good luck and stay safe! but doesn’t allow the air condition-er to run long enough to dehumid-ify the air. This on-off cycling also shortens the equipment life. “Mrs. Jones, we want the system to run longer so the air gets dehumidi-fied, the hot air gets returned to the system, and the air mixes in the home. Does that make sense?”FIXING THE DUCTWORKIn the Northeast, of the few attic sys-tems we service, we often run into the good old short plenum box with mas-sive lengths of flex duct feeding off it like an overgrown octopus.In these situations, the clients’ big-gest comfort complaints are about rooms furthest from the air handler/furnace. Upon investigation, we usu-Vince DiFilippo is president of DiFilippo’s Service Co., Paoli, PA. He is a long-time member of National Comfort Institute, is active in a number of national trade associations, a speaker and panelist at sev-eral NCI Summit events, and a recipient of NCI’s 2012 Chairman’s Award.Next >