Construction Industry Survey

Transcription

1 2008 Construction Industry Survey

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3 Thank you for your participation in the 2008 Construction Industry Survey. As promised, we have enclosed the results of the surveys received from construction professionals in the Greater Genesee County area. The survey respondents included a diverse group of contractors. Commercial, residential and government construction services were all represented with revenues ranging from $1 million to $50 million. We trust this information will be useful to you in making strategic business decisions for your company. In an effort to present the information in a manner that can be easily interpreted and utilized, we have enclosed the following: 1. A description of the survey respondents including contractor size and type. 2. A summary of data for areas including operations and financial management; customers and marketing; human resources; benefits; compensation; and technology. 3. Graphic representations of the questions posed within the original survey. We hope you find this information valuable and appreciate your participation in our survey. If you have any questions regarding the information represented, please feel free to contact us directly at (810) LEWIS & KNOPF, CPAS, P.C. Thomas Lillie, CPA, CFP, PFS Principal Gregory Waller, CPA Principal 5206 Gateway Centre Suite 100 Flint, MI fax

4 Description of Survey Respondents National reports show the commercial construction industry in the U.S. accounts for approximately 90,000 firms and $465 billion in annual revenue. Meanwhile, the residential construction industry is made up of approximately 170,000 companies and $500 billion in annual revenue. Government contractors generate $150 billon annually on projects such as highways, bridges and public buildings. The images below illustrate the 2008 survey respondent demographics. According to the respondents, the dominant profile includes those operating in one state and in the commercial construction sector. The majority of respondents reported annual sales between $1 million and $10 million. As indicated in recent national reports, one of the largest challenges currently facing contractors is the state of the U.S. economy. In addition to those listed below, respondents noted availability of work to bid and cash flow as other major challenges facing their companies. How many offices do you have? In how many states do you currently operate? 1 office 2 offices 3 offices 4 offices More than 4 offices 18.7% 1 state 2 5 states 6 15 states More than 15 states 62.5% 75.0% What is the biggest challenge currently facing your business? Annual Sales Employee recruitment Employee retention $1 $10 million $11 $50 million Business development Seasonal work flow Other 43.8% $51 $150 million Over $150 million % What does your company primarily provide? In what categories do you classify your business? Specialty trade service 43.8% Commercial 87.5% General contracting Residential Subcontracting Governmental

5 Operations and Financial Management According to national reports, many companies are leasing machinery on a project-by-project basis due to high costs. Larger construction companies typically own much of their equipment, while smaller companies lease equipment for particular projects. Contrary to reports, however, more than 68% of the 2008 survey respondents reported they own over 75% of their equipment. Reports show cash flow for construction companies can often be unpredictable and fluctuates significantly due to periodic payments and payments held until after jobs are complete. Of the total respondents, 37.4% reported their receivables are aging days, down from 47.1% in In addition, 43.8% reported they bill clients on a monthly basis. What percentage of equipment do you own versus lease? What is the average age of your receivables? 0 25% 26 50% 51 75% % days days days More than 90 days 68.7% 37.4% What level of assurance is required for your financial statements? How often do you bill? Compilation Weekly Review 62.5% Bi-weekly 6.2% Audit Monthly 43.8% N/A Other 18.8% 18.7% 6.2%

6 Operations and Financial Management (cont.) According to national reports, profit margins are relatively thin and there is little room for error in cost estimation or project management. Construction companies must manage cash flow carefully due to delayed and unpredictable payments. Estimating accuracy rates varied significantly for most respondents, ranging from 1% to more than 5% over and underestimated. Not including change orders, on average, how close are your estimates to actual job costs? What percentage of gross revenues are generated using the following methods? 5 4 Underestimated Overestimated 17.9% 23.1% Max price Fixed price 3 Cost plus fee % 20.5% Time and materials 0 1 2% 3 5% More than 5% What percentage of your corporate gross revenue is attributable to change orders? What percentage of your corporate gross revenue is attributable to bonded projects? 0 5% 37.5% 0 25% 62.5% 6 10% 37.5% 26 50% 37.5% 11 20% 51 75% 0% More than 20% % 0% 0% % Do you include workman's compensation in your labor burden rates for bid purposes? 6.2% Yes No 93.8% 4

7 Customers and Marketing With the scale and cost of many construction projects rising, contracts and subcontracts are much more likely to be awarded to companies with expertise in a particular specialty such as framing, mechanical, demolition, roofing, electrical, public works or roads, according to national reports. For many companies, the majority of new contracts come from existing customers who hire them to do projects similar to those completed in the past. The 2008 survey respondents reported they expect healthcare and educational facilities to present the most opportunity for their construction business. In the 2008 survey, 50% of the respondents reported their actual gross profit percentage is between 5% and 12%, up from 47.1% in In addition, all of the respondents reported they were offered early completion bonuses. What percentage of your work is government contract (vs. commercial)? What percentage of bids do you win? 12.4% 0 15% 16 30% 31 45% 6.2% 6.2% 18.8% 0 20% 21 40% 41 60% More than 45% More than 60% 81.3% What is your gross profit percentage? 68.8% What new markets will be opening in your industry in the next five years? % 18.8% 43.7% 5 8% 9 12% 13 15% 31.2% More than 15% Targeted Actual Transportation Educational facilities Healthcare Offices Strip malls Multi-family housing Residential Other N/A % Other includes: Alternative power and senior living What is your marketing budget as a percentage of gross revenue? What percentage of jobs are exposed to penalties? % 0 1% 2 5% 6 7% More than 7% 6.2% 0 20% 21 40% 41 60% More than 60% 93.8% 5

8 Human Resources According to national reports, contractors tend to only keep a small amount of full-time workers and hire skilled labor on a project-by-project basis. Contrary to national trends, 50% of the survey respondents keep over 20 fulltime employees on staff. In addition, 100% of the survey respondents reported 20% or less of their workforce is made up of minority workers. By contrast, 88.2% of the 2007 survey respondents reported a minority workforce of 20% or less. What percentage of your full-time workforce is union? On average, how many full-time employees do you keep on staff? 37.5% % 21 40% 41 60% 18.8% 6.2% More than 60% More than 50 What percentage of jobs are subcontracted? 37.5% 43.8% 0 20% 21 40% 41 60% More than 60% 12.4% 6

9 Benefits Because most construction companies keep only a core of full-time workers and hire extra workers on a project basis, there are no long-term fringe benefits for the extra workers, according to national reports. Contrary to national standards, this year s survey respondents are offering a greater benefits package to both full-time and part-time employees. Specifically, all of the survey respondents reported they offer health insurance to their employees. Over 66% pay the entire cost of employees health insurance, an increase of over 6% since last year s survey. 38% of the survey respondents reported they offer benefits to their part-time employees, up from 30% in In addition, the survey respondents who offer life insurance and short-term and long-term disability pay 100% of their employees coverage. Do you offer a clothing allowance? Pension Plans Offered 13.0% 13.0% Yes 401(k) 56.0% No N/A Profit-sharing Defined contribution 19.0% Defined benefit SIMPLE 6.0% 74.0% 13.0% Holidays Observed What benefits do you offer your part-time employees? New Year s Day Good Friday Memorial Day 4th of July Labor Day Veterans Day Thanksgiving Day after Thanksgiving Christmas Eve Christmas Day New Year s Eve 6.0% 31.0% 38.0% 31.0% 44.0% Health insurance Short-term disability Long-term disability Dental insurance Pension plans Life insurance N/A 19.0% 13.0% 6.0% 19.0% 56.0% Do you combine vacation and sick days into a "Paid Time Off" (PTO) system? Number of Days Received % Yes No Paid time off Range Average First year After first year After fifth year Vacation Range Average First year After first year After fifth year Sick time Range Average First year After first year After fifth year

10 Benefits (cont.) Individual Health Insurance Coverage Percentage Paid by Company Family Health Insurance Coverage Percentage Paid by Company 22.2% 100% 76 99% 50 75% 14.3% 7.1% 100% 76 99% 50 75% 1 49% 1 49% 11.1% 0% 0% 66.7% 78.6% Do you offer dental insurance coverage to your employees? Individual Percentage Paid by Company Family Percentage Paid by Company 18.7% Yes No 42.9% 100% 76 99% 50 75% 1 49% 42.9% 100% 76 99% 50 75% 1 49% 0% 0% 57.1% 57.1% 5 Do you offer life insurance coverage to your employees? Do you offer disability coverage to your employees? Yes No Short-term 68.7% Yes No 68.7% Long-term 68.7%

11 Compensation Jobs in non-residential construction often require special training or experience and are relatively high-paid. According to the Bureau of Labor Statistics, average hourly wages for commercial workers increased to $23.09 at the end of 2008, up from $22.09 in Among the survey respondents, 75% reported their criteria for increasing employee salaries is primarily merit based, an increase of over 11% since last year s survey. The 2008 survey data reflects a wage increase in all positions. What is the basis for salary increases for your employees? Merit based 75.0% Automatic annual Cost of living Salary and Experience Position Range Average Project Manager Hourly rate $16.88 $40.87 $32.97 Years exp Superintendent Hourly rate $19.37 $45.00 $31.82 Years exp Estimator Hourly rate $24.00 $40.00 $33.21 Years exp Foreman Hourly rate $19.23 $40.00 $30.49 Years exp Administrative Staff Hourly rate $12.00 $25.00 $18.31 Years exp Position Range Average Office Manager Hourly Rate $15.00 $42.00 $25.43 Years Exp Sales Staff Hourly Rate $19.23 $25.00 $21.41 Years Exp Marketing Director Hourly Rate $38.46 *N/A Years Exp. 24 *N/A Controller Hourly Rate $31.25 $57.00 $44.42 Years Exp Bookkeeper Hourly Rate $14.00 $42.00 $23.57 Years Exp *Indicates only one company listed wages for this position. 9

12 Technology According to industry reports, technology is the most effective way for U.S. contractors to increase their business. In an industry that relies heavily on correct scheduling, coordination and technical specifications, technology can be invaluable. This year, the survey respondents reported an increase in the use of technology software for financial management/accounting, from 82.4% in 2007 to 100% in The use of project management technology increased over 8% since last year s survey. QuickBooks was the most prominent software used for estimating and financial management/accounting. What do you use software for? 68.8% 31.2% Yes Estimating No 43.8% 43.8% 12.4% Project Management What software do you use? Financial Management/Accounting Estimating QuickBooks 35.8% QuickBooks 37.5% Foundation Software Timberline Peachtree Solomon Versus COINS 7.1% 7.1% 7.1% 7.1% 7.1% 21.6% Xactimate Estimation MC 2 Quickpen Bid2Win Business Works 7.1% Quote software Project Management Xactimate 2 Fast Track 2 Microsoft Project Management 2 COINS 2 Quote software

13 Technology (cont.) Top Software Used Ranked on a scale of 1 to 10 (10 being the highest). Estimating Software QuickBooks Xactimate Estimation MC 2 Quickpen Bid2Win Quote Software Sophistication Ease of use Cost Stability Technical support Project Management Software Xactimate Fast Track Microsoft Project Management COINS Quote Software Sophistication Ease of use Cost Stability Technical support Financial Management/Accounting Software QuickBooks Foundation Software Timberline Solomon Versus COINS Sophistication Ease of use Cost Stability Technical support

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16 5206 Gateway Centre Suite 100 Flint, MI fax