3 Strategies for Construction Companies During Labor Shortages

Associated Builders and Contractors reports that the worker shortage in the construction industry will top half a million in 2024. Labor shortages are a concern for your business because without the right strategies in place, you’re facing:

  • Higher labor costs
  • Issues with retention rates
  • Growing consumer costs

Job costing remains an issue, too. You need to pass labor costs on to consumers, but if costs are too high, it can also lead to less consumer appetite.

What can you do?


We’re going to explore a few strategies that you can follow during labor shortages to stay afloat. It’s a challenging climate for the construction industry, but there are ways that you can remain profitable and keep your customers happy at the same time.

But first, let’s see what a labor shortage means for construction companies.

What Labor Shortages Mean in the Construction Industry

Labor shortages are something that you’ve likely been dealing with, and if not, you probably will be in the future. When the labor market tightens, it’s often good for workers and bad for companies. You’ll need to manage:

  • Higher starting salaries, cutting into profits 
  • Retention rates are lower than normal, meaning more workers are willing to leave their positions
  • Passing costs of labor to customers, especially for larger-priced repairs, contracts, or maintenance needs

Skilled labor remains a precious commodity for construction and home service companies. If you’re continually replacing labor, you’ll have to pay for more training and lose productivity in the process.

What happens if you can’t pass costs off to your customers?

You’ll need to focus on write offs, reducing overhead expenses and acquiring more customers. Efficiency and productivity should also become a central focus. You’ll need to ask yourself:

  • How can we be more efficient?
  • What technologies can help you become more productive?
  • What steps can you take to reduce costs?

A lot of planning during labor shortages will allow you to withstand the shortage, continue growing revenue, and attract more customers in the process.

Below, we’re going to discuss many of the points in greater detail, starting with ways to attract more customers and begin increasing revenue.

1. Work on Getting More Customers

You need more customers. Word of mouth works to an extent, but it’s not what it used to be. You need to continue networking and asking for referrals so that you can keep a healthy number of customers in your pipeline.

Neighbors talking to neighbors will always work to some degree, but you need to go the extra mile. Consider:

  • Offering a referral discount to get people talking
  • Providing a free service or bonus

For example, Blue Planet Plumbing is offering a $50 credit to your account if you refer someone to the company. Other companies are paying $150 for a referral that becomes a customer.

Why?

It’s an incentive to lure in new business and help others find great contractors that they can work with.

On top of referrals, you should also be marketing your business. Digital marketing is a great place to start. You can purchase pay-per-click ads on platforms like Google, Facebook, LinkedIn – and countless others.

Local marketing will help, too. Pay for fliers to be placed in people’s mailboxes, advertise locally, and keep working on filling up your sales pipeline. If you have more customers, it will help pad your bottom line and offset higher costs and slimmer profit margins.

While you’ve started to integrate methods to grow revenue, you can begin focusing on operational efficiency.

2. Integrate Technology to Increase Operational Efficiency

Operational efficiency should be – in my opinion – top of mind for every business. You want to keep costs low and efficiency high to maintain profit margins and grow revenue. One example of this is to use GPS fleet tracking software.

Tracking your fleet in real-time allows you to monitor:

  • Diagnostic data
  • Fuel costs
  • Location data
  • Maintenance alerts

If your vehicle needs repairs or maintenance, management apps can alert you to schedule repairs. Faster maintenance can reduce the risk of larger repairs in the future. Timely repairs and maintenance also reduce the risk of downtime and lost revenue.

 Real-time GPS can further help you schedule:

  • Material drop-offs with greater efficiency
  • Jobs based on location

The larger your construction company is, the more GPS can help. If you run an HVAC maintenance and repair fleet, cost savings from efficiency isn’t the only benefit. Faster service calls with route optimization will also lead to higher team productivity.

Of course, this is just one example of how you can improve your construction or construction-related company’s operational efficiency. 

Expense reviews may be the last thing that you want to do, but they’ll be equally important to keep costs low.

3. Review Vendor and Non-vendor Expenses

Suppliers are the key to getting projects done. You need to work with reliable vendors who can source quality materials at prices that keep your overhead low and customers happy.

But when was the last time that you reviewed:

  • Vendor accounts?
  • Expense accounts?

You’ll want to review your contract to find any items that you no longer need that you may be paying for already. Construction company owners or managers should spend time reviewing expense receipts to better manage costs.

Modern companies also need to review other costs that are easy to overlook:

  • Tools and equipment costs
  • Maintenance fees for vehicles and equipment
  • Fuel costs
  • Membership and association fees
  • Insurance costs
  • Software or SaaS subscriptions
  • Subcontractor costs

Over 70% of software used by businesses are recurring payments. You’ll want to review expenses to discover if you’re paying for subscriptions that you no longer utilize. Trimming these costs is crucial to maintaining a lean business that can withstand labor shortages.

Labor shortages through 2024 seem like an almost certainty. Construction companies must go the extra mile to remain efficient, keep costs low, and acquire more customers. If you’re not implementing the strategies above, it’s a good time to start.

Making small, incremental adjustments to the way you operate can keep customers happy and your business afloat.

Schedule an appointment with us to learn more about how we can help you with business planning, tax planning, and more.

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