Report: Contractors Push for Growth Despite Headwinds
(Courtesy of ServiceTitan Inc.)
LOS ANGELES — ServiceTitan Inc., which offers software for trades businesses, released its Commercial Specialty Contractor Industry Report, a study of more than 1,000 specialty contractors, primarily in HVAC, plumbing, and electrical, that focus much of their business on construction.
The report reveals that amid significant hurdles, contractors are pushing for growth, with 93% focused on winning new projects, according to a press release from ServiceTitan. Of the factors threatening growth, 64% of those surveyed anticipate material prices will increase, making it harder to forecast job costs and protect margins. The report also found that to stay agile, contractors are focused on diversifying service offerings (43%), improving project execution (59%), and internal processes (51%), which is spurring software adoption, the press release said.
“The commercial sector is in the midst of a perfect storm with a fluctuating economy, regulatory changes, and rising costs,” said Alex Kablanian, vice president and general manager for commercial and construction markets at ServiceTitan. “In this challenging landscape, adopting innovative technology, including artificial intelligence, is essential for streamlining operations and driving profitable growth even in uncertain times. Historically, we've seen the best operators use periods like this as a catalyst to harden their business and build long-term durability, and it's our job to help our customers make that happen.”
The study found that only 50% of contractors factor volatile material costs into their planning, and, as a result, 36% are regularly adjusting budgets mid-project to deal with unexpected material costs. Approximately 83% of contractors cited budget overruns as a top issue, as well as unplanned risks not covered by contingency funds or change orders (70%). To keep projects on track and financially stable, 57% of contractors are prioritizing cash-flow management.
A majority of respondents (70%) are converting less than 20% of their bids, with the average bid conversion rate at 17.9%. Bid conversion rates have remained the same year-over-year for 79% of respondents.
Forty percent of respondents indicated labor shortages are a primary risk to meeting goals, and 76% reported they are actively hiring. Among contractors who are decreasing bid volume, 46% said it’s because of workforce and capacity limitations.
Approximately 63% of respondents indicated enhancing budget forecasting and accuracy as a top priority for improving cost management, followed by managing change orders and variances (62%) and streamlining cost-tracking and reporting (54%). Only 46% of contractors said they have the tools to effectively manage costs.
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To optimize workflows and drive efficiency, 80% of contractors use communication tools, 51% use project management software, and 40% use specialized workforce management software. Almost half (49%) continue to use spreadsheets. Thirty percent of contractors are looking to invest in technology to achieve their goals.
Some 17% of respondents said artificial intelligence (AI) is impacting their businesses. Contractors believe document management (57%), reporting (41%), project planning and scheduling (20%), and bid management (19%) will be among the most significant way AI transforms their businesses.
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