Construction pros in the home building and remodeling industry have been battled tested the past few years having navigated a global pandemic and the high costs and uncertain labor market that followed.
A 2024 state of industry report finds these home building professionals resilient and positive as they look to grow their home construction businesses.
That report from The Association of Professional Builders is based on a 2023 survey of 1,817 building companies in the United States, Australia, Canada and New Zealand. The results were published in the 2024 State of Residential Construction Industry (SORCI).
The 2024 SORCI report reveals most home construction pros see the year in a positive light, with 76.9% of survey respondents saying they plan to grow in the coming months and roughly half of respondents saying they plan to do so earning 10% net profit on their home builds and renovations.
But for this to happen, construction pros will have to address several construction industry trends that the APB survey and report identified. Some of the more prominent trends in the construction landscape include:
1. Generate the leads that power growth
The most recent SORCI report found that 45.9% of the builders surveyed say that generating quality leads is their biggest challenge. Yet the survey found that builders do not consistently market their trade to potential customers on social media, nor do they regularly use CRM software to follow up with leads. In fact, 58.7% of builder respondents say they never even email potential clients, and nearly 1 in 3 builders rely on referrals for 80% or more of their leads.
Successful builders know how to market themselves. Results from the SORCI revealed that builders who invest time and money on marketing reap benefits. For example, builders who setup an online blog and regularly post about themselves see higher markups on jobs. Also, builders who invest 3% of their revenue in marketing achieve higher gross and net profit margins than those who do not, according to the recent SORCI data.
It’s important to note that many construction management software platforms make it easier for builders to setup marketing campaigns. For example, with Buildxact, builders can easily store all their customer and prospect information in one place generated by collaboration software that’s available from anywhere there is an internet connection. Better lead management means more prospects converted to customers. Those conversions then can be used to better predict the profitability from future project wins.
2. Make the most of your prospects
It is no surprise the key to growth is not just more projects, but more profitable projects. The SORCI report shows builders continue to abandon error-prone spreadsheets as their main project management tool. The survey found that only 12.5% of respondents use spreadsheets for project management. But 25.8% of respondents say they use spreadsheets for estimating. Successful Builders increasingly understand that using software to replace spreadsheets helps:
- Win more projects. For example, Buildxact estimating software is 5X faster than spreadsheets, leading to more bidding.
- Submit more accurate estimates. Buildxact estimating offers material live pricing to ensure fluctuating material and labor prices don’t eat into builder profit margins.
- Include the right markup to cover direct and indirect expenses. Roughly two-thirds of respondents include between 15-33% markup in their project estimates. Buildxact estimating ensures all direct and indirect project costs are captured so that builders set the right markup for each project.Â
3. Run Your Business. Don’t let it run youÂ
The APB survey found that 61.4% of respondents spend less than 25% of their time actually managing their business. That means they are working up to 10 hours of a day, or more, with only about 2.5 of those hours spent on strategic planning and financial management.
Lack of focus on the strategic future of a home construction business results in poor decision making and a fast decline in a challenging home construction market, according to the APB.
How to carve out more time for better decisions? Builders are using construction management software to speed the administrative time needed to manage projects so that there’s more time for long-term strategic planning.
4. Strengthen construction project management
Builders need to generate more estimates in less time to win more work. With pre-construction software tools like those from Buildxact, they move straight from estimating to planning project schedules using dynamic Gantt charts that clearly group and prioritize pre-construction activities.
Keeping high-value tasks and projects running on time is the key to success; yet, the SORCI report reveals that 28.6% of projects faced delays in 2023, underscoring the complex process of timing subcontractors, according to the APB report.
Here, Buildxact scheduling with interactive Gantt charts allows for proper timing of subcontractor work and materials with simple point-and-click commands. That’s important because the SORCI survey found that subcontractor delays were the biggest challenge to running effective projects. And with software, the most successful project schedules can be saved as templates to benefit future work of similar scope.
5. Know your numbers
Construction management software also serves up the data needed for proper financial management. Using software, budgets can clearly be set and tracked using integrations with popular accounting software like Quickbooks and Xero. From there, builders can track revenues, costs, and gross profit, and this leads to understanding the proper markup and margins that grow a business.
Yet, the SORCI report found that only 52.3% of builders produce monthly financial reports to track these key metrics, and perhaps more troubling, only 64.1% of builders have a business plan mapping out the next three years.
Other key takeaways:
- 33.9% of projects regularly finish over budget. Construction management software like Buildxact tracks budgets closely, comparing estimated costs to actual.
- Only 10.7% of SORCI respondents say they achieved a Net Profit Margin greater than 15% in 2023. Profitable builders effectively manage costs by clearly communicating and document customer change orders. Buildxact manages change orders online for prompt customer approvals that are clearly documented.
- Most respondents say they pay themselves between $60,000-$180,000 in the form of a salary and 52% of builders plan to pay themselves more in 2024. To achieve this target, builders need to closely manage project budgets. With construction management software like Buildxact, this is easier to do because estimates and budgets from the most successful jobs can be saved and used for future reference.
- Most builders surveyed reported between $1-$3 million in revenue in 2023 and plan to earn more in 2024. To achieve these growth targets, many builders will have to successfully bid and complete more work. Construction management software makes this possible.
- Construction pros plan to increase their net profit margin by about 10% in 2024. Smart builders, who use live material pricing to estimate, work have tighter control of their expenses and profit to increase profits.
