Survey Finds Contractors Often Underestimate Expenses - 2/14/2005 - Real Estate Education Training Schools Conferences

Survey Finds Contractors Often Underestimate Expenses

Half of the Intuit survey respondents said they often omit general condition costs from their job estimates. These omissions — which include supervision, phone calls and temporary power — result in lower revenue and gross profit. Most respondents, however, recognized the problem.

When asked about the areas of their business most needing improvement, 65% of the respondents cited greater job profitability and 57% said more accurate estimating.

More than 500 residential and commercial contractors and subcontractors were surveyed for Intuit by the independent research firm Decipher. The results were announced during the International Builders’ Show in Orlando, Fla. last month.

Scheduling and Managing Labor Is the Most Frustrating Aspect of Business

Asked to name the most frustrating aspect of managing a contracting business, 50% of the survey respondents cited scheduling labor and managing work crew productivity. Almost as many respondents said hiring quality employees was their greatest challenge.

Despite obstacles in managing their businesses, the survey respondents estimated that their current gross profitability per job was 15.5%. They also anticipate 12% growth over the next five years.

Interest Rates and Healthy Economy Drive Growth

Not surprisingly, most said the health of the economy and interest rates would have an effect on their success. Seventy-two percent of contractors consider interest rates and the economy as the key factors driving construction industry growth. To meet growth projections, 66% of respondents said they would hire additional field employees.

One cause for optimism among new companies is evidence that the road gets smoother with time.

Builders with annual revenues of at least $10 million were the most successful. One possible reason: These companies use a single, integrated management solution for estimating, scheduling, accounting and analysis. Thirty-nine percent of respondents reported that they expect to invest in integrated business management software in the next three years.

Regarding business technology, 32% of survey respondents said they were happy with their current technology but would upgrade to save additional time and money. Twenty-five percent reported that they would upgrade for greater product functionality.

Two-Thirds Have No Exit Strategy

As for what to do with their businesses when they retire, overall, 67% of survey respondents said they have no exit strategy, but 60% of contractors who have been in business more than 10 years indicated that they do have plans in place. Of those respondents with exit strategies, 38% plan to sell or give their companies to family members.