Home Service Pros Feel Pressure, but Remain Optimistic About Their Future
While the new year brings continued economic uncertainty, small businesses are confident in their ability to put the lingering effects of the pandemic behind them and emerge stronger than before. Among the groups affected are home service pros. We’re looking closely at the obstacles they’re facing, as well as the steps they’re taking to grow their business.
Overall, the home service industry has benefited from a period of strong growth as consumers double down on their primary investment — their homes. Yet, despite this boom for business, industry challenges remain, including continued supply chain issues, increased prices for materials and energy, and persistent labor shortages. Together they form headwinds for a national industry that accounts for almost $500 billion in annual sales.
In our new Economic Sentiment Survey, home service professionals expressed an uncertain view of the economy overall. But, this was balanced with some very good news: despite roadblocks, home service pros remain fundamentally optimistic about the growth potential of their businesses and plan to keep investing in their future.
Homeowner Preferences Change as Costs Rise
It’s hard to underestimate the pandemic’s effect on the role our homes play in our lives. Over the past two years, millions of people have begun to work at home, exercise at home, and even teach their kids at home. In response, as we noted in our fall and winter trend report, homeowners are looking to increase their usable square footage while making their homes more flexible and dynamic — either by updating their spaces to better cater to their new lifestyles or keeping up with the increased wear and tear on their homes. This past fall, smart-home installations increased by 134% and closet remodels had risen by 156%. Our data even showed that swimming pool removals had spiked by nearly 60% as people found better uses for that square footage.
These changing preferences translate into more business for home service professionals, which explains much of small business owners’ optimism. Their confidence, however, is tempered by a continued increase in the cost of doing business. According to our survey findings, 20% of home pros report raising prices due to the increased cost of supplies and energy, while 19% attribute the increase to shortages caused by problems in the building material supply chains, and 9% point to rising labor costs.
Gabor Halasz, a Thumbtack electrical construction pro, shared that “growing inflation impacts everybody. The material shortages are making it extremely difficult to schedule and complete jobs. Operations are extremely inefficient and businesses are being forced to stock up and keep inventory like never before.”
Early in the pandemic, many larger companies were hit by massive cost increases and have long since adjusted their prices accordingly. Most local service businesses however, are only now starting to catch up, with more than half of home pros surveyed reporting that they have raised their prices compared to a year ago. And nearly 60% saying they expect to see their prices increase over the next quarter.
Optimism Backed Up by Investment
Amidst all these forces, home service professionals are displaying a remarkable combination of grit, resilience, and optimism. Last summer, in the throes of the pandemic, 87% of home pros who took part in our Small Business Friendliness Survey said they believed there was enough community economic opportunity for their businesses to thrive.
At the moment, homeowners are adapting their living spaces to meet the demands of changing priorities and lifestyles. But, home investment can be a very fluid thing. Millions have recently invested heavily in weather-related improvements. Many are having smart appliances and technology installed to make their home more eco-friendly. Others are switching to new forms of sustainable energy. And as homeowners make these adjustments, they are moving away from “DIY” projects and looking for professionals who can be a true partner in their home-ownership journeys.
That helps explain why 42% of home pros say they plan to invest in their businesses in the first quarter of 2022. These increased capital investments signal the continuation of strong consumer demand in the future. And home pros feel solid in their current financial situation — with nearly 80% rating their current financial situation as satisfactory, good or very good, and one third expecting to increase their revenue in the first quarter of 2022.
Just as homeowners are optimizing their homes for their needs, now is the time for pros to optimize their business. With historically-high demand, the best way for pros to capitalize is to start booking jobs further in advance, to come up with retention and hiring plans for their employees, and to invest in new tools and software that can save them time.
Navigating Labor Shortages
When it comes to hiring, home pros feel caught between a rock and a hard place. Home service companies want to increase their work forces to meet rising demand, but are faced with a persistent shortage of skilled labor (36% report trying to fill part-time and/or full-time positions late last year and more than half report problems filling these positions).
Facing an already tight labor market, many home pros are concerned about their ability to entice skilled workers — and more than a third report that they are increasing compensation to attract and retain skilled workers.
Calls for a More Active Government Role
Home pros are confident in their ability to control their own destiny and grow. They are less convinced, however, that the national economy can do the same. Much of their uncertainty stems from macro-economic factors (the on-going public health crisis, a volatile stock market, uncertain market conditions, and inflation). As a result, nearly half of home pros expect the economy to worsen over the next quarter. And almost 20% identify inflation as their biggest concern while one third report that they are finding it harder to get bank credit as interest rates rise.
And though home pros are optimistic about the state of their businesses in the long term, they say they could use a hand. Understandably, they look to the government to address some of these concerns. More than half say that capital infusion in the form of government grants would have the most positive long-term impact on their businesses, while 46% say changes to the tax code would provide the most benefit. Many would also like to see the government step up and make health coverage more affordable, create a more favorable regulatory environment, and make more job-training programs available to help address the labor shortage. Given the difficulties the pandemic has left in its wake, small businesses will need new policies at a federal and state level to help them — and we will all benefit from these measures.
A New Era of Homeownership
America needs a vibrant, flexible home services industry to help people adapt their homes to the new reality, meet the needs of an increasingly remote workforce, and help its homeowners maintain the value of their most important investment.
Our country needs a strong, flexible, efficient home services industry ready to adapt and protect homes that for many Americans constitute their single — but fragile — nest egg. We’re ready to help this industry thrive — and to help homeowners protect their investments — by providing home service professionals with the technology and immediate access to the right customers they need to successfully grow.
Methodology: To compile our Q4 2021 Economic Sentiment Survey, we analyzed responses from 886 small businesses, more than half of which identified themselves as home service professionals. The survey was conducted between Dec. 13–23, 2021. We identify the home service industry as a category that includes plumbers, carpenters, painters, electricians, and all trades that help homeowners renovate, repair, and maintain their homes.
