Construction Industry Trends | SMB Buyer Report 2016

Every year hundreds of prospective construction software buyers contact Software Advice for help selecting the right tools to support their business. These consultations provide us with unique insight into construction market trends and the industry-specific needs of buyers.

We analyzed a random sample of interactions with buyers from small and midsize businesses: (SMBs) from the past year to better understand the common pain points driving their search as well as the functionality they want most in new solutions.

This report, which highlights our findings, can guide other SMB buyers as they analyze their own business needs and begin their search for construction software.

Key Findings:

  • SMB construction software buyers are slow to adopt construction software.
  • Most firms are looking to improve estimating and project tracking.
  • Buyers want functionality that supports processes over the course of a project life cycle, from pre-sale through execution and billing.

This is the third year in a row that Software Advice has conducted an analysis of construction software buyer consultations. This report will look at buyer trends from 2016 and when relevant, compare them with those from previous years (2014 and 2015) to see how the market has changed over time.

Majority of SMB Buyers Are Looking to Purchase Construction Software for the First Time

Despite the variety of tools on the market, 50 percent of those sampled are currently using manual methods, e.g., spreadsheets or pen and paper, to perform various tasks, including calculating takeoff, preparing bids and managing projects.

Thirteen percent are using non-construction software—in most cases, QuickBooks—to track projects and manage financials. In fact, only about quarter of our sample are looking to replace existing construction software (26 percent).

Prospective Buyers’ Current Methods 
current methods

 
These findings are consistent with last year’s, where we saw similar numbers of first-time construction software buyers.

These buyers are predominantly from small construction companies, with $5 million or less in annual revenue (see demographics at the end for more information). Most start out using manual methods but find eventually that spreadsheets or pen and paper alone cannot sustain their business.

The owner of a small residential remodeling company from Montana notes that when they first started their business, they were able to get by using Excel spreadsheets. However, they say “It’s gotten to the point where [we’re] taking on too much work and it’s a little overwhelming. We have multiple projects that we need to track.”

Specifically, they are looking for a project management solution to provide the transparency and document tracking not available in spreadsheet tools.

Desire to Improve Estimating/Takeoff and Project Management Are Top Reasons for New Software

According to Christian Burger, president and founder of Burger Consulting Group—a consulting firm specializing in technology for the construction industry—there are three main causes that push a company to adopt construction software:

  1. Company growth, where a contractor needs a better way to manage an increased number of jobs.
    1. New people, which leads a firm to realize they need to standardize their processes.
      1. A mistake, such as a claim or a suit, which shows a firm that they need to find a more disciplined approach to managing projects.

      These reasons align with the pain points cited by the buyers in our sample. Their purchase drivers center around two key departments within the company:

      • Takeoff/estimating
      • Project management (PM)

      Top Reasons for Evaluating Construction Software
      pain points
      Takeoff and Estimating
      Perhaps unsurprisingly, considering the number of buyers using manual methods, one third of our sample say they are looking for software to reduce the time required to perform these functions.

      One family-owned company out of New York is looking to implement a new system before the son takes over, saying it currently takes the father around four hours per takeoff, and they “need to trim that down to one to two hours to keep up with bid requests.”

      An additional 15 percent say they’re investigating software solutions to increase the accuracy of their bidding process.

      The owner of an electrical company in Georgia says that he realized he underbid on a few small jobs, but wants to avoid making a more costly mistake now that they’re taking on larger jobs: “[I] miscalculated the amount of time it would take [my] guys to complete the job and ended up losing out on money.”

      For companies looking to streamline operations, but who may not be ready to invest time and money in a comprehensive system, check out our list of 7 Free Construction Estimating and Takeoff Products. These systems can help you cut down on turnaround time and win more bids, without breaking the bank.

      Project Management
      Twenty-four percent of the buyers in our sample are looking for software to provide more transparency and better project tracking, particularly when it comes to requests for information (RFIs) and change orders.

      One home builder out of Florida says he has “had issues in the past with clients who forget about change orders and question [my] accountability.” To combat this issue, he is looking for a solution that will provide better back office support.

      An additional 20 percent are looking to automate and standardize their processes. Lack of defined processes among project managers can not only lead to miscommunications, but can seem disorganized and unprofessional to customers.

      A general contractor out of Florida is looking for a PM solution to help his team become more unified and standardized, saying that he has “five project managers that take five different steps on projects and [they] need to become more homogeneous.”

      Burger says that construction project management software can provide the appropriate organization and audit trail these buyers are looking for.

      “When you have an audit trail, you know who got it, when did they get it, when did they return it, when did they approve it and so forth,” says Burger. “You can see that whole chain of custody.”

      Estimating, Takeoff, Accounting and Project Tracking Are Top-Requested Capabilities

      Functionality most-often requested by buyers in our sample support a firm’s needs over the duration of a project life cycle, from pre-sale, through execution and billing.

      Top-requested capabilities include:

      Top Four Construction Software Capabilities Requested By Buyers
      Top-Requested Construction Software Functionality

      It’s important to note that while each of these capabilities are critical for a construction company, they won’t always be found in the same solution.

      According to Burger, it’s much more likely for takeoff and estimating, or project tracking and accounting, to be integrated in the same solution, while it’s less likely that project tracking and estimating would be found together.

      “Normally in a construction company, the estimating department is a unique department. And they do all the bidding, they do the takeoff, they do the job site surveys, everything. And once a job is bid and awarded, it gets turned over to project managers. And that’s who starts working in PM [software],” says Burger.

      Which brings us to an interesting finding not immediately borne out in the chart above:

      When combined, requests for project management functionality actually exceed those for estimating.

      This is because “project tracking,” “document management” and “scheduling” can in fact all be grouped together under the larger “project management” bucket.

      Burger says that as a result of this, project management software provides the greatest value to general contractors as it helps them manage the actual building process.

      “They have to manage RFIs, submittals, meeting minutes, daily logs, punch lists etc…So for general contractors of almost any size, having some form of project management software is going to be important.”

      Christian Burger, president and founder of Burger Consulting Group

      Prospective buyers should consider investing in a PM system with mobile connectivity. Mobile applications (requested by 6 percent of buyers in the chart above) allow contractors, subs and technicians access to the PM system while out at job sites.

      This immediate transfer of data allows for improved communication and collaboration between all parties, a benefit that Burger encourages firms to take advantage of.

      Key Takeaways

      Based on the results of this research, construction companies should consider investing in either a stand-alone PM solution or an integrated PM and accounting suite. If estimating and takeoff are also required, look for solutions that offer easy integration with the main PM system.

      Secondly, consider a system with mobile apps that can boost your team’s productivity by allowing construction professionals access to the main system from any location, on any device.

      For more information about the tools available for construction professionals, email me at eileen@softwareadvice.com. I’m available to answer any questions you may have and when you’re ready, can help get you set up with a price quote or product demo.

      Demographics

      The demographics for the buyers in our sample are as follows:

      • The majority of buyers are from small firms with $5 million or less in annual revenue (62 percent).
      • The greatest percentage of contractors are from companies that employ between two and five employees (28 percent).
      • The vast majority of companies are looking to purchase solutions for five or less users (84 percent).
      By Segment: Prospective Buyer Size
      By Annual Revenue: Prospective Buyer Size
      By Number of Employees: Prospective Buyer Size
      By Number of Users: Prospective Buyer Size

      A detailed methodology for this report can be found here. If you have comments or would like to obtain access to any of the charts above, please contact me at eileen@softwareadvice.com.

      You may also like

      Building a Case for New Construction Software? 4 Questions to Answer

      Calculate the ROI of Estimating and Takeoff Software

      5 Free Construction Estimating & Takeoff Products to Cut Turnaround Time and Win More Bids

      Compare Construction Business Software