Billd survey finds optimism despite looming problems

Billd, an Austin, Texas-based provider of material and labor financing for commercial subcontractors, has titled its recently released second annual construction industry market report “How Labor Shortages and Market Volatility are Impacting Subcontractors.”

The firm’s 2022 National Subcontractor Market Report resulted in part from a survey of nearly 800 commercial construction professionals across the country, “largely consisting of business owners and executives, most of whom have been in business for at least 10 years,” Billd says.

The report indicates subcontractors remain concerned about volatile material prices and labor shortages but are optimistic about continued growth over the next year.

Rising material costs and price volatility are key issues for subcontractors. According to the report, 88 percent of those surveyed expect continued price turbulence to impact their business in 2022, representing a 9 percent increase compared with 2021.

Some 87 percent of respondents say a lack of availability of materials will “keenly impact their business in 2022,” Billd adds. Labor issues seem to now rank as the most pressing concern of subcontractors in the United States, with 40 percent of Billd survey respondents reporting availability of skilled construction workers as the biggest risk in 2022, compared to 30 percent who stated material price volatility as their No. 1 concern.

Subcontractors also reported that despite higher material and labor prices, they have not reflected those higher costs in their project bids, putting considerable strain on subcontractor profit margins.

“Billd’s 2022 National Subcontractor Market Report confirms a lot of the known challenges and opportunities subcontractors experience across the industry,” says Billd CEO Chris Doyle. “The labor and material challenges for subcontractors is not just a headline, it’s the day-to-day reality for every subcontractor in the country.”

Doyle adds, “Despite these challenges, subcontractors remain optimistic about their businesses. This report highlights the entrepreneurial spirit subcontractors continue to exhibit each and every year, despite an industry that’s largely turned its back on them.”

While subcontractors remain satisfied with their financing and credit options, they feel the pressure of paying for large material and labor costs upfront, disrupting their cash flow. According to the survey, 59 percent of contractors intend to rely on cash to fund business growth in 2022, while nearly half state cash flow remains a significant challenge.

Supplier terms remain the overwhelmingly preferred option for purchasing materials, with 69 percent favoring them over credit cards, cash or bank financing. Despite the favorable opinion of supplier terms, 70 percent of contractors have terms of only 30 days or less; not nearly the length of time needed to ensure payment before having to come out of pocket for materials. According to the survey, two-thirds of subcontractors come out of pocket for materials before getting paid for their work and almost 80 percent of them wait at least 30 days to receive payment on their pay applications.

“Subcontractors are resilient and optimistic but need more tools to navigate this increasingly challenging environment,” Doyle says. “The payments supply chain in construction is terribly broken, leaving subcontractors to finance a $1.5 trillion industry with very few cash flow solutions offered to them.”

Doyle adds, “Billd stands as the one company truly championing the subcontractor, helping them get the financial support they need to do the best work of their lives. This report highlights the persistent subcontractor challenges that Billd was created to address: providing subcontractors more financing options to weather rising costs, meet project requirements and lay the foundation for further growth.”

The Billd 2022 National Subcontractor Market Report can be downloaded here.