2020 CONSTRUCTION OUTLOOK SURVEY 1
INTRODUCTION The construction landscape continues to improve and grow along with the economy in Georgia. The following report is based upon an online survey of privately-held construction companies in Georgia conducted by the Construction Management Department at Kennesaw State University, in conjunction with Bennett Thrasher, LLP. The purpose of the Georgia Construction Outlook Survey is to analyze specific benchmarking data of general contractors and subcontractors in the construction industry that are headquartered in Georgia. The survey highlights: Financial performance and investment in the business • Employee compensation and retention best practices • Business strategies and concerns • Innovation and use of technology • By analyzing and interpreting this data, a greater awareness of best practices and trends help leaders in the construction industry better understand the competitive landscape and prepare for the future. The survey report also highlights the top concerns of Georgia construction businesses and provides an economic outlook for the state of the industry. 2
SURVEY DATA If you have any questions regarding the 2020 Construction Outlook Survey, or would like to learn more about how this data compares to your business performance, please contact one of the following individuals: Tom Jollay – Partner, Bennett Thrasher Tom.Jollay@btcpa.net W. Scott Hazy – Partner, Bennett Thrasher Scott.Hazy@btcpa.net Special thanks to Khalid Siddiqi, Chair of Kennesaw State University’s College of Construction Management . This document contains proprietary and confidential information of Bennett Thrasher, LLP. Use, disclosure or reproduction is prohibited without the prior express written consent of Bennett Thrasher, LLP. For inquiries regarding reproduction or distribution of any survey data or content in these materials, please contact Allison.Lavelle@btcpa.net . 3
SURVEY ANALYSIS AND RESPONSES 4
Heavy Home Builder SURVEY RESPONDENTS Contractor 3.8% 5.8% The 2020 Construction Outlook Survey received 103 total responses. The four respondent categories the Specialty survey model will analyze are Contractor 48.1% General Contractors, Heavy Contractors, Specialty Contractors General Contractor and Home Builders. The chart on 42.3% the right reflects survey results by respondent type. The data will also often compare responses by revenue ranges. The bar chart on the left is shown by revenue and respondent type. Under $5M $5-9.9M $10-24.9M $50-99.9M More than $100M General Contractor Heavy Contractor Specialty Contractor Home Builder 5
GENERAL CONTRACTOR INDUSTRY SEGMENT RESPONSES The majority of General Contractor survey participants work in the non-residential sectors. 92.5% of respondents work in the non-residential sector and 7.5% work in the residential sector. Commercial/Non-Residential Residential 6
HEAVY CONTRACTOR INDUSTRY SEGMENT RESPONSES The majority of Heavy Contractors participating in the survey work in Highway ( 40% ). Bridge, Tunnel & Elevated Construction Highway Water, Sewer, Pipeline, Comm, Powerline Misc Heavy 7
SPECIALTY CONTRACTOR INDUSTRY SEGMENT RESPONSES The highest level of participation in the survey of Specialty Contractors were Electrical ( 26.5% ) and Mechanical & Plumbing ( 24.5% ) . Electrical Mechanical & Plumbing Other Plastering, Drywall, Acoustical & Insulation Roofing, Siding and Sheet metal work Glass and Glazing Work Demo and Wrecking Work Flooring Masonry Work 8
OVERVIEW 9
ALL CONTRACTOR TYPES BY GROSS REVENUE More than $100M $50-99.9M $25-49.9M $10-24.9M $5-9.9M Under $5M The data above represents the survey responses from within each revenue category. Comparing this information against the gross revenue estimates in Georgia indicates that a statistically relevant sample size from each revenue category was received for the survey. 10
AVERAGE GROSS REVENUE 2019 2018 General Contractors $460,127,407 $534,737,753 Heavy Contractors $55,125,000 $161,415,649 Specialty Contractors $127,428,201 $83,947,405 Home Builders $152,500,000 N/A All Contractors $254,513,435 $279,526,514 The variance between gross revenue figures in 2019 and 2018 is attributed to the number and variety of survey respondents. 11
GROSS REVENUE BY CONTRACTOR TYPE General Heavy Specialty Home Contractors Contractors Contractors Builders Under $5M Under $5M Under $5M Under $5M $5-9.9M $5-9.9M $5-9.9M $5-9.9M $10-24.9M $10-24.9M $10-24.9M $10-24.9M $25-49.9M $25-49.9M $25-49.9M $25-49.9M $50-99.9M $50-99.9M $50-99.9M $50-99.9M More than $100M More than $100M More than $100M More than $100M 12
GENERAL CONTRACTOR REVENUE CATEGORY BY INDUSTRY SEGMENT Residential Commercial/Non-Residential Under $5M $5-9.9M $10-24.9M $25-49.9M $50-99.9M More than $100M 13
HEAVY CONTRACTOR REVENUE CATEGORY BY INDUSTRY SEGMENT Highway Water, Sewer, Pipeline, Comm, Bridge, Tunnel & Elevated Misc Heavy Powerline Construction $10-24.9M $25-49.9M $50-99.9M More than $100M 14
SPECIALTY CONTRACTOR REVENUE CATEGORY BY INDUSTRY SEGMENT Concrete Electrical Fire Floor Laying Glass & Other Painting & Plastering, Plumbing, Roof, Siding Wrecking & Protection & Other Glazing Paper Drywall, Heating & & Sheet Demolition Floor Work Hanging Acoustical Air Metal Work Work & Insulation Under $5M $5-9.9M $10-24.9M $25-49.9M $50-99.9M More than $100M 15
REVENUE COMPARISON BY AGE OF COMPANY 1-5 years 6-10 years 11-15 years 16-29 years 30+ years Under $5M $5-9.9M $10-24.9M $25-49.9M $50-99.9M More than $100M 16
CONTRACTOR TYPE COMPARISON BY AGE OF COMPANY 1-5 years 6-10 years 11-15 years 16-29 years 30+ years General Contractor Heavy Contractor Specialty Contractor Home Builder 86.41% of companies participating in the survey have been in business more than 15 years. 17
COMPARISON OF PROJECT MARGINS FROM PRIOR YEAR 2018 Outside Ring The majority of companies have experienced an increase or no change in margins over the prior year. Fewer companies are reporting that margins have decreased, possibly due to an increase in projects and bid margins. 2019 Inside Ring General Heavy Specialty Home Contractors Contractors Contractors Builders Increase 43.2% 40.0% 56.0% 25.0% Decrease 13.6% 20.0% 12.0% 1.0% Remain the Same 43.2% 40.0% 32.0% 50.0% Increase Decrease Remain the Same 18
STATUS OF CURRENT PROJECT BACKLOG OR PIPELINE FOR ALL CONTRACTORS Number of Months of Current Backlog 1-2 3-6 7-12 13-18 19-24 Higher than last year Lower than last year No change from last year 25+ 55% of survey respondents reported a higher project backlog from the prior year. 19
2020 REVENUE PROJECTIONS 76.24% of companies projected an increase of revenue, which is lower than 84.38% in the previous year. 27.00% of companies indicated they expected a 10% or more increase of Increase 10% or more revenue, which is lower than Increase 5-9.9% 40.00% in the previous year. Increase 1-4.9% Less than 1% increase/decrease Decrease 1-4.9% Decrease 5-9.9% Decrease 10% or more 20
BUSINESS STRATEGIES Expansion of Geographic Reach Expansion of Business Offerings Implementation of Lean Construction Principles Acquisition Other Transfer of Ownership to Management Team Transfer of Ownership to Family Members Outside Capital Infusion Sale/Divestiture/Sale to ESOP No New Strategies Expansion of Geographic Reach was a leading business strategy, followed by the Expansion of Business Offerings, which is consistent with the previous year’s strategies. There was an overwhelming response that “No New Business Strategies” would be implemented in day-to-day operations. 21
FAMILY-OWNED BUSINESS 63% of construction businesses in Georgia are family-owned businesses. Yes No 22
ENTITY LEGAL STRUCTURE S-Corp was the largest proportion of legal entity types ( 58%), followed by LLC ( 23% ) and C-Corp ( 17% ). S Corp Limited Liability Company C Corp ESOP Small Business (2 owners) 23
SUCCESSION PLANS 20% of all construction companies participating in the survey indicated they did not have a succession plan in place. 70% indicated they did and 12% were unsure if they had a succession plan in place. Specialty Contractors and Heavy Contractors were the least likely to have a succession plan in place. The majority of all groups reported they had a succession plan in place. General Heavy Specialty Home Contractors Contractors Contractors Builders Yes 76.7% 60.0% 62.0% 75.0% Yes No Unsure No 11.6% - 28.0% 25.0% Unsure 11.6% 40.0% 10.0% - 24
SALES COMPETITION STRATEGIES High Quality Adapting to Customer Needs Low Price Quick Completion of Projects Innovation High Quality continues to be the leading sales strategy, while more emphasis was placed on Adapting to Customer Needs as a sales strategy compared to Low Price in the previous year. Competing for sales on Innovation and Quick Completion of Projects had the lowest response rates. 25
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