How to Look to Other Construction Industry Sectors for Business Growth
Change brings opportunity.
Nido Qubein
As a small general or specialty trade contractor (< 10 employees), have you wondered if you are working at your highest potential? Are you working within the sector of the construction industry that most effectively utilizes your team and maximizes the earnings of your company? Have you taken the time to examine your work to see if there is more than what meets the eye?
Many small contractors, by default, make the decision to stay in the sector where they started their careers, whether residential, commercial, etc. That could still be the right plan. After all, your contacts, work history, and reputation were developed there.
But staying in your lane could be costing you money. Your lack of knowledge about other compatible market sectors and business requirements could mean a loss of viable opportunities for you.
In this article, we’ll be discussing what future work you may be missing out on that could help you broaden your business horizons.
Construction Industry Market Sectors
Associated General Contractors (AGC), a national construction trade organization, published that the size of the U.S. construction industry in 2019 was $1.3 trillion dollars. The forecast for growth was between 2% and 4% before the coronavirus pandemic hit. However, with Congress and the Administration passing a very large stimulus package to get the pandemic-frozen economy moving in the 3rd and 4th quarter of 2020, $1.3 trillion to be spent on construction in 2020 is likely a reasonable value.
The breakdown of the $1.3 trillion spent across major industry sectors is:
- 10% industrial
- 17% infrastructure
- 73% buildings, which breaks down into,
- 35% residential consisting of single-family homes and multi-family dwellings, new and remodels
- 65% non-residential consisting of shopping centers, medical office buildings, and offices
- Light scale commercial is updating interiors, such as flooring, painting, light carpentry, etc., skills that would be similar to those in single-family home construction.
- Medium-scale construction would involve a significant increase in scale and scope where the expansion of space along with extensive remodeling is the norm.
- In large scale commercial construction, there is no previous structure and the building is built from the ground up through detailed design and construction administration.
Determining Which Sectors are Right for You
To understand which sector is right for you, first consider the size and general capabilities of your company. Know your own strengths. A few questions to ask yourself:
- What size projects can you cash flow or secure financing?
- What level of bonding can you provide?
- What partnering relationships can you arrange?
For example, if your firm has previously only worked in single-family residential construction, assess whether you can step up to light-scale commercial work.
With the above understanding of the different sectors in the construction industry, you are in a much better position to consider what new work to target.
Focusing Your Business Development Activities
In order to grow your business development activities, small construction business owners must keep their fingers on the pulse of a broad range of building sectors in the construction industry. A keen understanding of the opportunities available in each sub-sector can help you determine which market is worth the time, energy, and money you spend on business development.
A few good business development activities that can help with your strategy to capture new work and ensure you are prepared for what may lie ahead in new market sectors are:
- Learn if related opportunities are advertised in different media. You have to be looking in the right places for this new work.
- Research if there are substantial contractual differences in the management of the work to make sure you have the business structure to address them.
- Discover if there are significantly different insurance, bonding, and other costs associated with the potential new construction sub-sector to determine if you are able to make those adjustments.
A good picture of the overall construction industry allows the small construction business owner to evaluate potential new revenue streams that are aligned with their resources to take the next step toward greater business success. For the sake of progress, growth, and the prosperity of your company, make sure you are not leaving precious stones unturned that could provide other options that would be a good fit for your company.
So what is the next step? I’m happy to discuss it with you!
If you want to have a focused conversation about your business goals and how to reach them, contact me today and we’ll set up a call.
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