The tariff wars that are affecting the world economy are having an impact on contractors everywhere.
The ongoing uncertainty is pushing up prices on necessities such as copper and steel, making it difficult for contractors to find the supplies they need at prices they can afford and on schedules they can live with.
Finding ways for contractors to navigate tariffs is the mission of Nate Agentis, vice president of plumbing with Business Development Resources. BDR provides financial management advice, education and support for electrical, home services, HVAC and plumbing contractors. Agentis is also CEO of PlumbingCEO.com, which teaches plumbing company owners how to improve their operations and boost their profitability, as well as owner of Agentis Plumbing in Bethlehem, Pennsylvania.
What the tariffs mean for contractors
The current tariff war has thrown distributors and contractors alike into confusion. According to Agentis, their collective response to the on-again/off-again/ever-changing tariffs was to react as best they could.
“We saw a lot of price increases on products due to people guessing what was going to happen next,” he says. “We also saw pauses and pulled back prices whenever settlements or negotiated deals happened pretty quickly. It all created a lot of chaos for our wholesalers’ ERP systems and how they price and control inventory. It also threw contractors for a loop, as they tried to figure out how to make adjustments in their field service software to get their price and flat rate books updated accurately.”
For those in the plumbing and drain cleaning industry, the tariffs on raw materials pose the biggest problems.
“You're talking copper, steel, and aluminum — water heaters have all of those materials inside,” Agentis says. “Normally prices on water heaters go up once or twice a year. Now they’re all over the place, and I expect to see four or more price increases this year alone. The same is true for piping and other basic components.”
Coping strategies
Faced with uncertain tariffs and price increases, some distributors and contractors have tried to cope by buying as much stock as they can as soon as they can. This strategy can potentially work in the short term, but it has its own risk — namely by putting a business at financial risk by burning through cash and piling on debt.
Besides, just because you order parts and equipment today doesn’t mean that they’ll be immune to price hikes. This is because it takes time to build and ship these items. Given that tariffs are assessed when imported goods come into the U.S., buying everything now may just weaken your company financially without avoiding extra costs at all.
“It can take four to six months for shipping containers to come in by sea,” Agentis says. “As a result, you will still be affected by tariffs when the containers do arrive.”
What should contractors do in this situation? The answer is to stay calm, control cash flow and purchasing costs, and stay in close contact with distributors to monitor product pricing and supply availability.
“The goal is to keep on top of price changes and keep adding them to your field service software,” Agentis says. “Having this updated data will allow you to make adjustments across your books, so that you can charge for your services and products profitably."
Unfortunately, many contractors are not currently doing this level of price tracking in their businesses, and their bottom lines are showing the pain.
“Many tradespeople have no correlation or understanding of their material percentages with respect to revenue,” Agentis says. “They're not watching their numbers to that granular level. They're just looking at truck per hour costs or their tech sales and what is happening at the end of the year when it's tax time. This is why BDR and PlumbingCEO teach contractors to be engaged with their finances on a monthly basis. This helps them notice when their costs are rising due to tariffs and other factors, and respond to it quickly and appropriately.”
How distributors can retain contractor loyalty
Thanks to online suppliers with their lower overheads, brick-and-mortar suppliers are already struggling to keep contractors. How can they do so when prices are being hiked higher by tariffs?
“Through good communication that builds strong relationships between distributors and contractors,” Agentis says. “If a distributor is feeling pain on prices and has to raise them, keeping their contractor clients informed on what is happening helps to build trust and loyalty. The more we're talking, the more I trust you. As well, those distributors who are trying to absorb some of the price hikes and taking other steps such as end-of-year rebates to build contractor loyalty are on the right path.”
Pricing flexibility is key
At the end of the day, the price hikes caused by tariffs are only a threat to contractors whose own pricing strategies aren’t keeping up. This is why flexible pricing on the part of contractors is key: As long as they keep adjusting their own prices to retain profitability, this crisis can be weathered.
As a third-generation plumber, Agentis appreciates what a challenge this new approach is for people in the contracting profession.
“We're really good at turning the wrench, we're really good at pumping, we're really good at jetting and cabling and doing all those kinds of things,” he says. “We're not the best at being good financial stewards of our business because we were never taught that. But now is the time we need to learn, because becoming better at financial management is the surest way to deal with the current tariff situation and other economic challenges that may confront our businesses.”
