US builders poised for recession success

US builders have had to contend with a number of issues that have impacted business: lumber prices soaring by as much as 142% due to increased demand, supply change disruptions, wildfires and flooding in Canadian timberland, the APB noted in its report. “Fortunately, most builders in the United States protected their margins by using allowances for lumber from mid-2020 onwards,” according to the report. Builders elsewhere weren’t as lucky, according to the APB: “The majority of Australian builders, however, were not so fortunate due to the structure of the fixed price contracts they signed, which limited the use of allowances and did not permit the use of cost escalation clauses.

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“It was good to see them utilizing dedicated project management software to manage the process efficiently,” the report reads. “In 2021, 64.8% of building companies ran their projects using specialist construction software rather than relying on spreadsheets, pen and paper or even memory compared to just 33.6% of building companies in 2020. This is an incredible change in the industry, and one that clearly demonstrates the determination of professional builders to deliver a better service to their clients.”

But marketing – or lack thereof – continues to be a major sore spot. The association has long stressed to its members that margins are linked to marketing, yet many builders spent less than 1% of their revenues on marketing, according to the report: “Something that was clearly underlined in the data collected in this report where it showed that the building companies that spent less than 1% of their revenue on marketing had the lowest margins.”

The reason for this goes back to the law of supply and demand, according to the report. “Builders that have more demand than they can service are able to pick and choose the clients as well as hold a stronger negotiating position during contract negotiations,” the report reads. “Conversely, builders that do not invest in generating more demand for their services end up clinging on to every opportunity, which results in them not only compromising their margins, but also dealing with the consumers who are only interested in finding the cheapest quote.”