"We are not in a good place right now"
Contractors across the country have generally seen the prices of materials double in the past 12 months. The real estate industry has been on the rise causing the availability of work to be on the rise too. These factors would normally be a welcomed problem with contractors but with the materials needed, the profit margin in the jobs is not enough to survive. They have also faced issues with labor shortages and face regulations and mandates that have made hiring people a scary task.
Price of Goods Gone Bad
The image above from MB Woods shows side by side comparison to an order of 500 2x4x8 studs for home construction in Atlanta GA.
Some industry experts say it is worse than mainstream media has let on. We spoke to the commercial desk at an Indianapolis lowes about a few claims of substantial inflation, for instance, OSB in 2019 that sold for $7.68 a sheet is selling today for over $30.00 a sheet.
Contractors are hearing pushback from their clients and many are requiring the customer to pay for all materials upfront and are still running into issues on fulfillment. Robert H., a contractor from Texas that sometimes has to drive to five locations just to gather the materials that are needed to finish a job. Every contractor is feeling the pinch. Several contractors have also mentioned that they have staffing that often quits and files for unemployment benefits and is getting paid out on claims that simply would have been declined and found fraudulent two years ago. Others mention that some communities that require permits are not issuing permits in a timely manner and are also substantially more expensive than they were in the past. Drywall contractor Jeff B. From Noblesville, Indiana mentioned that he has a job waiting on an inspection in a neighboring county that the inspector said it would be 10-12 weeks to have an inspection that would have been done the same day in minutes only a couple of years ago. This action caused him undue hardship as he still has to pay his crew, and cannot collect payment on a job that they cannot finish until the inspection is done.
Combating Cashflow and Sustaining Their Businesses - They Fought Back
The word "pivot" has become commonplace in the contractor community as they have to make concessions to stay open and not bleed out money. Erik J. a contractor in Kansas City M.O. worked with the Metromedia branding team to come up with an app for ordering handyman services and it operates as easily as Amazon or Uber. He mentions " They are smaller jobs, but they are stable jobs to keep us going between the large ones". The large jobs for many have been delayed over funding as clients quickly find out the cost of materials is borderline offensive. Eric worked closely with several finance companies to make sure that the ability to pay for larger jobs was available for his clients. He finds himself on the marketplace buying discounted building materials from other companies to stockpile to help less fortunate clients afford required jobs to keep their homes livable. Several have turned to social media platforms to live stream jobs to monetize their social presence and help carry payroll.
Three tips for contractors
The mess they are facing is beyond their control. The first thing they need to do is to review the contract they sign with their customers. Consult your legal counsel, but the language regarding product availability and labor shortages should be in there to protect your business. The second thing they should do is not to underbid themselves, it must be remembered that having a job that loses money is worse than not having that job at all. Often, contractors find themselves in a financial crunch because a job lost money. Finally, work with your existing clients to find referrals for other jobs. The industry is saturated with a lot of third-party lead generation sites that are doing nothing but selling leads to you and all of your competition forcing the potential of profit out of the job. Taking a holistic organic marketing approach not only saves you money but it brings better results.
Help is available for contractors, here are some links:
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