Sage survey revealing the revenue performance and business challenges of residential contractors during the continuing economic recovery. The survey was conducted at the 2015 NAHB International Builders' Show.

1. Survey
2015 NAHB International
Builders’ Show
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2. Sage
2015 NAHB International Builders’ Survey
Overview
Home builders felt the ripples caused by the Great Recession of 2007 long after other
segments of the economy began to recover. Available credit dried up, new home
construction ground to a halt, and the unemployment rate crossed the 10 percent mark
for the first time since 1983. To make matters worse, the recovery has been painfully
slow. Almost five years after the Great Recession had ended, employment had risen
much more slowly than it had on average during four previous recoveries.1
The predictions at the start of 2014 bore nothing but false hope. However, as we move
through the first quarter of 2015, the experts once again expect the recovery that has
boosted so many other sectors of the economy to finally reach the housing market.
According to a December 31, 2014, report by TheStreet.com’s Tim Mullaney, the
average forecast is for housing starts to go up about 15 percent in 2015, which would
be enough to create roughly 300,000 new jobs.2
Sage was curious about whether these predictions are coming true, and traveled to the
NAHB International Builders’ Show in January to talk with attendees about their
economic recovery. Respondents reported that revenues are up and their companies
are not only back to prerecession levels, but in many cases, are as strong as they have
ever been.
Key findings
The good news
At the end of 2014, housing starts were on pace to only be up a measly 7 percent after
forecasts for as much as 30 percent when the year started.
However, confidence remains high. Bank of America Merrill Lynch housing analyst
Michelle Meyer told TheStreet.com’s Mullaney that she expects housing starts to rise
about 20 percent, existing-home sales will climb to 5.2 million, and home prices will
rise about 3.6 percent.
The following results of the Sage survey of the 2015 NAHB International Builders’ Show
indicate those predictions are already becoming a reality.
Methodology
Sage surveyed
attendees at the 2015
NAHB International
Builders’ Show who
represented
commercial or
residential builders,
remodelers,
developers, and
subcontractors,
collecting data from 89
respondents.
1 “The Slow Recovery of the Labor Market,” Congress of the United States Congressional Budget Office, February 2014
2 “That Promised Housing Recovery May Finally Occur in 2015,” Tim Mullaney, TheStreet.com, December 31, 2014
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3. Sage
2015 NAHB International Builders’ Survey
Revenue is up
Three of four builders report that their revenues were higher in 2014 than in 2013. The
largest proportion—roughly one-third—report their revenues were up 30 percent or
more. Seventy-nine percent expect continued growth in 2015.
Three of four builders
report that their
revenues were higher
in 2014 than in 2013.Declined
21-29%
Declined
11-20%
Declined
1-10%
Stayed the
same
Increased
1-10%
Increased
11-20%Increased
21-29%
Increased
>30%
1%
1%
6%
17%
16%
17%
10%
10%
Rate the level of revenue
growth your business
was/is experiencing (Over
the past 12 months)
Three of five
respondents—57
percent—report their
businesses are actually
stronger than before the
crash.Much weaker than
before recession
Not in business
before recession
Somewhat
weaker than
before
recession
About the same
as before recession
Somewhat
stronger than
before recession
Much stronger
than before the
recession
6%
9%
10%
19%
24%
33%
How does your business
compare to where it was
BEFORE the recession
started (generally accepted
to be the end of 2007)?
Stronger than ever
Three of five respondents—57 percent—report their businesses are actually stronger
than before the crash. Seventy-two percent say they are in growth mode, with 15 percent
reporting hypergrowth, the kind that makes it “imperative that we stay sufficiently
organized and disciplined to take advantage of the opportunities.”
A large majority—71 percent—give credit to the increasing quality of the projects they are
working on as one of the key factors behind this renewed strength.
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4. Sage
2015 NAHB International Builders’ Survey
Rate how challenging each of the following is to
your business (somewhat/extremely challenging).
Controlling the
quality of our work
Controlling
materials costs
Getting clear and timely
financial information
Completing projects on
time and on budget
Finding good contractors
to work with
Getting more work from
existing customers
Controlling labor costs
Hiring and retaining
quality personnel
Creating project bids
Winning business from
new prospects
Meeting profit
margin goals
Project management
Compliance issues
0% 40%20% 60%10% 50%30% 70%
62%
61%
56%
56%
55%
54%
51%
48%
47%
46%
45%
36%
31%
More than half of the
survey respondents
report that winning
new business as
being somewhat to
extremely challenging.
Growing pains
For seven long years, builders struggled to stay profitable. Now the pendulum is
swinging the other way, and simply responding to all the new opportunities is taking its
toll. More than half of the survey respondents report that winning new business as
being somewhat to extremely challenging.
Keeping on top of things is another growing concern. Builders mentioned issues such
as controlling work quality, keeping jobs on time and on budget, and preventing
materials and labor costs from rising.
Underscoring the red-hot nature of the home building segment, nearly one-third say
they actually had to turn down work in 2014 due to a lack of skilled labor.
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5. Sage
2015 NAHB International Builders’ Survey
Keeping these
recommendations top
of mind can ensure high
quality work
Sage on how to prosper in a recovery
These findings point to four best practices builders can implement to take advantage
of growth opportunities and deal with new challenges during the recovery.
1. Create more accurate estimates in less time (winning new business)
This establishes a more realistic budget. And in a bidding situation, it improves the
home builder’s chance of getting the job.
2. Proactive budget control (completing projects on budget)
Today’s construction software technology provides ways for home builders to
actively monitor issues that threaten a project’s budget. For example, designated
employees can be notified immediately whenever costs exceed the budget,
unexpected costs come in, change requests aren’t approved, or current profit falls
below a specified percent).
3. Prequalify subcontractors to improve quality (controlling quality of work,
controlling labor costs, completing projects on time/budget)
Home builders can put in some level of prequalification process that assures the
skill level, quality capabilities, and work capacity of their subcontractors meets the
home builder’s standards.
4. Focus on retaining good subs (controlling quality of work, controlling labor
costs, completing projects on time/budget)
With the competition increasing for labor, home builders need to look for ways to
retain their best subs. This can be as simple as involving subs in process
improvement discussions and making sure they are always paid on time.
Home builders are dealing with changing priorities as they switch from survival to
growth challenges. Keeping these recommendations top of mind can ensure high-
quality work, satisfied customers, and allow home builders to take greater advantage
of a market that may not grow as quickly as it did ten years ago, but will be much more
stable and profitable over the long term.
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6. Sage
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