The 2024 Market Report is Here: Find Out How Subs are Growing Their Profits

Prepare for 2023 With Insights From 876 Construction Professionals

2023 National Subcontractor Market Report: $97 Billion in Extra Weight on the Shoulders of America’s Subcontractors

We surveyed subcontractors across the country on the challenges they faced in 2022 and what they see for the coming year. Read the 2023 National Subcontractor Market Report to prepare for 2023 and see how you compare to your peers.

The Good

Subcontractors anticipate new growth in 2023

Despite mounting economic uncertainty, subcontractors didn’t slow down in 2022. From the survey, 61% of subcontractors grew revenues in 2022 and even more plan on doubling down in 2023.

The percentage of subs who anticipate increased revenue in 2023
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The unexpected expense for material and labor that subs carried in 2022

The Bad

Subcontractors profitability decreased due to higher material and labor costs

Despite new growth, 57% of subs saw a decrease in profitability. This is due in part to increases in subcontractors’ two largest costs – materials and labor. On the back-end, subcontractors struggled to raise bids to account for these rising expenses in an ever-competitive market.

The Ugly

Lenders, banks and suppliers are leaving subs to foot the bill

While subs are waiting over two months for WIP payments, banks and lenders are sitting on the sidelines. Only 45% of subcontractors relied on lines of credit to purchase materials and just over half anticipate tapping theirs for growth. Meanwhile, supplier terms, what used to be the most relied upon cash flow solution for subs, are becoming less so. More than half of the participants reported insufficient supplier terms and 32% had those terms cut down in 2022. 

The average number of days subs waited to get paid after fronting project costs
The increase in likelihood of subcontractors tapping into subcontractor-specific financing for business growth

The Future

Subcontractors seek new, entrepreneurial solutions to old problems

America was built by people using other people’s money – and subcontractors are no different. With increased financial pressures, subs are 2x as likely to use material financing to support new business growth, invest in their business, and address increasing input costs.

A Snapshot of What We Learned

Banks and Lenders Aren’t Financing Construction, Subcontractors Are

Historically, banks have been reluctant to lend to the construction industry, which limits subcontractors’ financing options. Meanwhile, subcontractors are the ones executing the work AND fronting the material and labor expenses.

The report illuminates just how much subcontractors are spending to finance construction, and it’s no small figure – they are putting forth billions more in materials and labor than they should have to. In fact, it amounted to an extra $97 billion in 2023.

Subcontractors See Growing Revenue, But Minimal Profitability

Despite a majority of respondents seeing revenue growth, the majority also reported a decline in profitability. The $97 billion extra dollars that subcontractors fronted might have something to do with that.

Subcontractors also reported difficulty raising their bids. This inevitably eats into their profit margins, no matter the volume of new projects coming in. The difficulty around securing and maintaining the capital to fund these projects also contributes to strained profitability.

The Labor Shortage Is Worse than Ever, and Material Volatility Isn’t Stressing Subcontractors

Subcontractors think the labor shortage will be a greater threat to their business in 2023 than any other economic factor. Labor costs are increasing and availability is shrinking. We’ve known this for a while, but the situation seems to be getting dire. The report expands on why subcontractors are making this assessment.

Suppliers Terms and Relationships Alike Are Becoming Less Reliable

The relationships between subcontractors and suppliers have always been critical to project and business successes. But long lead times, price hikes, unpredictable pricing and inflexible terms are straining those relationships and putting subcontractors and suppliers in a tough spot.

This forced subcontractors to seek out new suppliers in 2022, then establish credibility and trust from scratch. Meanwhile, terms fall short in almost every department even though they remain subcontractors’ favorite way to buy materials. At an average of 30 days, they’re not long enough for subcontractors to actually get paid. They’re also becoming less reliable, with a third of subcontractors saying their terms were shortened in 2022.

Subcontractors Remain Optimistic about Business Growth

Despite the current state of their profitability, cash flow and ability to secure financing, subcontractors are displaying an admirable degree of optimism around business growth. With greater access to tools and subcontractor-specific financing, 2023 could be the year the industry bucks the trend of reliance on unsustainable financial practices.

Along with a wealth of subcontractor responses and industry analysis, the report also sees Billd CEO Chris Doyle offer his veteran perspective on the current state of the market. To download the full report, simply click the link below for free access.