Software Needs Cycle for Construction: Tech Small General Contractors Need to Succeed

by:
on May 8, 2018

Figuring out what type of construction software you need as a general contractor can be tough. Solutions can be specialized for certain trades, pricing varies drastically and vendors can be unclear about what functionality their software offers.

Add to that the element of timing. You want to invest in the right tools at the right time, otherwise, you risk over-buying and paying for features you don’t use.

That’s why we created this construction software needs cycle for general contractors. Based on an analysis of hundreds of conversations with firms who contacted Software Advice for help with the software selection process, we’ve charted the applications you need to start, grow and then optimize your operations.

By adopting the right software at the best time for your business , you can maximize the return on your construction software investment.


construction needs cycle graphic

Methodology: To create this Needs Cycle, we looked at Software Advice consultations with general contractors from the past year, and examined a random sample of 200 interactions for each size of business (determined by annual revenue). We then calculated the percentage within each size range that requested different construction software applications to determine the stage (I.e., Start, Grow or Optimize) at which they reach peak adoption.

Construction Software You Need to Start

This section is for general contractors just starting out, who want to automate the core functions central to their operations so they can get their business up and running efficiently. Buyers in this section have an annual revenue of $5 million or less.

1. Takeoff

What it does: Takeoff software helps contractors measure plans (i.e., blueprints and drawings) electronically, generate a materials list and then calculate the amount or quantity of materials and labor. This helps contractors determine the scope of a project.

Once they know the amount, contractors can calculate the cost (we’ll cover estimating in the next section).

Learn more about takeoff software in our Buyer’s Guide.

Why you need it to start: Manually performing takeoff is labor intensive and prone to error. Contractors need to print plans and perform measurements by hand with a ruler. If mistakes are made or the plans are changed, the contractor has to reprint and re-measure, and make sure that everyone involved is working on the most up-to-date version.

The time and resources involved in manually performing this process can quickly add up. That’s why contractors should have takeoff software in place when they start out so they can perform this function as quickly and as accurately as possible from the get-go.

When to adopt: Looking at our data, we see takeoff software adoption to be highest among small firms with less than $1 million in annual revenue. This suggests it’s essential to automate this function early on, so firms have these tools in place as they grow.

General Contractors Requesting Takeoff Software, by Annual Revenue
Data: Requests for takeoff are highest among contractors with an annual revenue of less than $1 million

 NEXT STEPS: 

  • Ready to start your search? Head here to compare takeoff solutions.

2. Estimating

What it does: Estimating software helps contractors calculate the total and itemized cost of labor and materials (identified during takeoff), and then produce a quote for that work.

Key features include access to a trade-specific item/cost database, pre-built templates for standard jobs (such as a bathroom remodel) and “what-if” scenarios that provide variable estimates based on different scenarios such as a delay or an unexpected shortage of a material.

Learn more about estimating software in our Buyer’s Guide.

Why you need it to start: Estimating means not only pricing the labor and materials, but also calculating taxes, overhead and mark-ups for profit. Using software to perform this function helps contractors ensure their quote is both competitive and profitable.

In fact, the top purchase drivers we hear from contractors looking to retroactively fit themselves with an estimating tool is that they’re losing jobs to their faster competition and/or that they’ve underbid on jobs in the past and didn’t see a profit as a result.

When to adopt: Estimating software adoption is highest among small firms with less than $1 million in revenue. This indicates that it’s a critical part of a firm’s success early on, so invest in these tools from the get-go.

General Contractors Requesting Estimating Software, by Annual Revenue
Data: Requests for estimating are highest among contractors with an annual revenue or less than $1 million

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3. Project Management

What it does: Project management software, also called “construction management,” helps contractors schedule projects, coordinate teams and track progress on job sites. These systems become the primary access point for project information from contract agreement to project close, storing estimates, budget information and documents (e.g., RFIs, submittals and change orders) in a centralized hub.

Key features include project scheduling, tracking, document control, budgeting/job costing and equipment and resource management. At the most basic level, construction management software should help with planning and tracking, which are the capabilities that contractors should focus on initially.

Learn more about construction management software in our Buyer’s Guide.

Why you need it to start: Construction management software is used to help contractors deliver projects on time and on budget. Without automated tools, contractors might have limited success, but will never be able to scale efforts to multiple, or concurrent projects, and in all likelihood would experience a costly mistake.

In fact, mistakes resulting in a claim or lawsuit are one of the most common reasons firms retroactively invest in construction management tools, according to Christian Burger, president of Burger Consulting Group.

Firms that want a leg-up on the competition should invest in these systems from the start so they can avoid similar issues.

When to adopt: Our data shows that project management* is essential as firms start out, and then remains a pivotal function as they grow and optimize. Adoption is above 50 percent for every size of business but is highest among firms with five to $10 million in annual revenue.

General Contractors Requesting Project Management Software: By Annual Revenue
Data: Requests for project management are highest among contractors with an annual revenue between $5 and $10 thousand

*To create this chart, we counted “project scheduling” and “project management” together. Buyers requesting project scheduling are looking to map out schedules using Gantt charts and the critical path method (CPM).

 NEXT STEPS: 

  • Need more convincing? Check out this article on the benefits of automating project tracking (includes use cases showing how mistakes stemming from manual processes can cost your firm).

Key considerations for general contractors starting out:

Takeoff and estimating is performed pre-sale, when you’re quoting a job, but have not yet “won” the job. Project management, on the other hand, is needed once the job has been won. It helps manage the actual build process, so you can take the project from a drawing to a physical structure.

While takeoff and estimating are commonly bundled together (again, because they are both “pre-sale”), project management will require a separate solution.

In addition to these three applications, firms starting out often use general accounting software, such as QuickBooks or Xero, to manage their finances. Most construction management systems have pre-built integrations with these popular accounting products.

Together, these applications ensure you’re set up to effectively handle the entire project lifecycle. Invest in these systems from the start, so you have a solid foundation in place as you grow and scale operations.

Construction Software You Need to Grow

This section is for general contractors experiencing growth, who want better oversight on jobs so they can maximize the number of on-time and on-budget projects. They need to layer additional management capabilities on top of basic planning and tracking. Buyers in this section have an annual revenue between $5 and $50 million.

4. Budgeting

What it does: Budgeting and job costing is a capability under the larger construction management umbrella. It helps contractors manage budgets, create purchase orders, compare actual project costs to estimates and track a project’s earned value. It’s used to monitor the cost of the project while it’s in progress and the profitability for the firm.

Key features include data import from estimating tool, forecasting, dashboards and budget reports.

Learn more about budgeting and job costing in our construction management Buyer’s Guide.

Why you need it to grow: Budgeting and job costing acts as a stepping stone between the generic accounting solutions used by most contractors starting out, and the industry-specific accounting solutions needed by firms to optimize operations.

This capability supplements any construction-specific budget-related workflows and processes that aren’t supported in QuickBooks or Xero or other non-industry-specific accounting solutions.

Eventually, firms looking to optimize operations will need an industry-specific accounting solution to manage core accounting and budgeting, but before that point, they can manage job costs through their construction management system and an integration with their accounting software.

When to adopt: Although we see requests for budgeting and job costing across each size of business, adoption is highest among firms with between $5 and $50 million in annual revenue.

General Contractors Requesting Budgeting/Job Costing: By Annual Revenue
Data: Requests for budgeting are highest among contractors with an annual revenue between $10 and $50 thousand

 NEXT STEPS: 

  • Need more convincing? Check out this article from Buildrite on construction budgeting 101 and why you need more than a spreadsheet to manage hard, soft, site-specific and unforeseen costs on a project.
  • Ready to start your search? Call our advisors at (855) 998-8505 for a free software consultation, and let them know you need budgeting and job costing in your construction management software.

5. Timesheet Tracking

What it does: Timesheet tracking is a capability under the larger construction management umbrella. This application helps individual workers input their time cards into a centralized system, while contractors can review, approve and pay them based on their logged hours.

Key features include time entry (by project, cost code, job site, billable status etc.), manual and/or automatic time tracking, time card approval and timesheet reporting (filter data by time entry variables, e.g., project, cost code etc.).

Learn more about timesheet tracking in our construction management Buyer’s Guide.

Why you need it to grow: As a contractor at a small firm, you’re overseeing single projects and likely pull from the same pool of subcontractors for each job. You can usually track hours manually or with a spreadsheet.

But as you grow, you take on larger projects and expand your circle of subcontractors. It becomes much more difficult to know who worked on what job site for what amount of time. Timesheet software can automate much of this process and ensure your teams get paid promptly and accurately.

Construction timesheets can not only save employee time and help with administrative payroll functions but knowing the exact amount of time spent on any part of a project, let alone the project as a whole, helps contractors schedule projects more accurately in the future.

When to adopt: Requests for timesheet tracking increase as firms grow beyond $5 million in annual revenue. Adoption is highest among firms with between $25 and $50 million in annual revenue, suggesting it’s most relevant to contractors in this size range.

General Contractors Requesting Timesheet Tracking: By Annual Revenue
Data: requests for timesheet tracking are highest among contractors with $25 to $50 million in annual revenue

 NEXT STEPS: 

  • Need more convincing? Check out this article about how electronic timekeeping systems can help prevent time theft and buddy punching, helping to identify fraudulent activity and reduce payroll losses.
  • Ready to start your search? Call our advisors at (855) 998-8505 for a free software consultation, and let them know you need timesheet tracking in your construction management software.

6. Document Control

What it does: Document control is a capability under the larger construction management umbrella. This application helps contractors stay on top of project documentation and ensure everyone is working off the most up-to-date version of blueprints, punch lists etc.

On top on centralizing files, this feature helps manage workflows and approvals surrounding change orders. Adhering to a set process is important for providing an audit trail, which can help safeguard a contractor should a claim or lawsuit be brought against them. For example, if a client is seeking to have the contractor pay for the cost of a rework due to change order error.

Key features include revision control, advanced search, ability to archive (rather than delete), ability to set permission levels and storage.

Learn more about document control in our construction management Buyer’s Guide.

Why you need it to grow: It’s a simple correlation: As the size and complexity of construction projects increase, the volume of documentation increases as well. As does the likelihood of error stemming from misplaced or mishandled documents.

In fact, a study by Skanska found that inaccurate documentation is the leading cause of rework, resulting in 55 percent of claims.

This is why ensuring you have a digital process for document control is essential for contractors experiencing growth, so you can reduce the likelihood of rework and protect yourself in the event a claim is brought against you.

When to adopt: Our data reflects the correlative relationship between size of business and needing document management, showing that as annual revenue increases, requests for document control increase as well. There is a significant jump in adoption, however, between the size ranges $5 to $10 million and $10 to $25 million, indicating this is when firms should invest.

General Contractors Requesting Document Control: By Annual Revenue
Data: Requests for document control are highest among contractors with $25 to $100 million in annual revenue

 NEXT STEPS: 

  • Need more convincing? Check out this article about how digital plans and document control systems can help cut down on waste, save trees and help prevent errors that lead to rework.
  • Ready to start your search? Call our advisors at (855) 998-8505 for a free software consultation, and let them know you need document control as part of your construction management system.

Key considerations for general contractors experiencing growth:

We see a significant number of requests for mobile capabilities among contractors in the grow stage. In fact, requests jump from 17 percent among firms with $1 to $5 million in annual revenue to 32 percent among firms with $5 to $10 million in annual revenue. This percentage remains largely unchanged for the larger size bands.

So, look for cloud-based construction management software if you’re experiencing growth. Budget tools, timesheets and document control will do you little good if you aren’t able to enter data and view changes in real-time throughout the day.

Cloud-based tools give you, your office and your jobsite crew anytime, anywhere access to project data, providing a seamless transfer of information and up-to-the-minute accuracy.

Construction Software You Need to Optimize

This section is for established general contractors looking to optimize operations, who want to expand their pool of subcontractors, market their business and improve customer management. Buyers in this section have an annual revenue greater than $50 million.

7. Accounting

What it does: Construction accounting software helps contractors manage their company finances. Key features include core accounting—general ledger (GL), accounts payable (AP) and accounts receivable (AR)—as well as job costing, payroll processing and financial reporting.

These solutions also support the industry’s common billing formats, including time and materials, cost plus and retention and progress per percent completion.

Learn more about construction accounting software in our Buyer’s Guide.

Why you need it to optimize: The majority of small construction firms are using an entry-level accounting system, such as Quickbooks, Xero or Sage 50. As they grow, they can supplement these systems with the budgeting and job costing application within their construction management system.

However, contractors will reach a point where it becomes more work than it’s worth using disparate systems for accounting, job costing, timesheet tracking and payroll. At this point, they’ll need to look for an industry-specific solution to centralize and consolidate this work into a single system.

When to adopt: Roughly one-fifth of contractors are looking for industry-specific accounting software from the start. However, because so many firms choose to use, and are able to get by using, generic accounting software, an industry-specific solution isn’t required at this stage.

We see adoption start to increase as size of business scales, with around one-quarter of firms in the grow stage looking for construction accounting. Adoption peaks, however, as firms grow beyond $50 million in annual revenue, suggesting an industry-specific accounting solution is required to optimize operations.

General Contractors Requesting Construction Accounting Software: By Annual Revenue
Data: Requests for accounting are highest among contractors with more than $100 million in annual revenue

 NEXT STEPS: 

  • Need more convincing? Check out this case study detailing how a construction firm cut payroll processing time for over 300 hundred employees in half by switching to an industry-specific accounting solution.
  • Ready to start your search? Head here to compare construction accounting solutions.

8. Bid Management

What it does: Bid management software helps contractors prequalify subcontractors, solicit bids for work and then compare subcontractor proposals. These tools act as a database, helping to connect contractors with specialists and expanding a contractor’s pool of resources.

Key features include contact management (to store subcontractor information), prequalification, invitation to bid, access to an online planroom (to share project documents), risk management to track compliance and reporting.

Learn more about bid management software in our Buyer’s Guide.

Why you need it to optimize: Manual bid solicitation is an arduous process, one that is both time consuming and error prone.

Prequalification involves sending a request for subcontractors’ insurance, safety and financial information. When subs respond, contractors send requests for proposals (RFPs) along with drawings and plans. Subcontractors submit a bid, which contractors have to audit and compare, then negotiations ensue.

Factor in the time to respond, the back-and-forth regarding plan changes and bid negotiation, and you can understand why there aren’t very many small firms investing their resources in this process. Instead, they work within the same pool of subcontractors for every job.

However, as construction projects increase in size and complexity, contractors have to expand this pool to ensure they have the best crew for each job, at the best price. Firms in the optimize stage deal with hundreds of contractors, and they need automated tools to manage bidding.

When to adopt: Looking at our data, we see requests for bid management software start to increase as firms surpass $25 million in annual revenue. Adoption is highest in our largest size band, firms with more than $100 million in annual revenue. This suggests it’s important to automate this function as firms look to optimize operations.

General Contractors Requesting Construction Accounting Software: By Annual Revenue
Data: Requests for bid management are highest among contractors with more than $100 million in annual revenue

 NEXT STEPS: 

  • Need more convincing? 34 percent of firms say that bid management workflows are dependent on software, according to a study by JBKnowledge. It’s not hard to see why considering the many steps involved in both the prequalification and bidding process.
  • Ready to start your search? Head here to compare bid management solutions.

9. Customer Management

What it does: Customer management software helps contractors manage their sales, marketing and customer service functions. These tools assist with running marketing campaigns, increasing brand awareness and turning prospects into sales.

Key features include campaign management, contract management, customer portals, business intelligence and reporting and forecasting.

Learn more about customer management software in our Buyer’s Guide.

Why you need it to optimize: Many construction management tools include light customer management features, including contract management, a customer portal and messaging. Some include marketing functions as well, such as customized branding on client-facing documentation, plus the ability to send surveys and request reviews from customers.

This is sufficient for most firms in the start and grow stages. However, as firms look to optimize operations, they’ll need a dedicated solution for customer management and business marketing.

When to adopt: Our data shows that customer relationship management (CRM) isn’t as commonplace as other construction software, indicating it’s more of a “nice to have” than a “need to have” system for the majority of contractors. However, we do see a slight uptick of requests in larger firms with more than $50 million in annual revenue, suggesting that larger firms are more likely to need these solutions.

General Contractors Requesting Customer Management Software: By Annual Revenue
Data: Requests for customer management are highest among contractors with more than $100 million in annual revenue

 NEXT STEPS: 

  • Need more convincing? Unhappy customers are bad for business, and research has shown that disgruntled customers are more likely to leave negative reviews.
  • Ready to start your search? Head here to compare customer management solutions.

Key considerations for general contractors looking to optimize:

At the optimize stage, you have standardized processes in place, you’ve refined your workflows and you require more advanced tools to support the level of your operations. More than ever, integration is of crucial importance, so be sure to discuss this requirement with vendors as you evaluate solutions.

Additionally, at this stage you should be investing in emerging technology and trends that align with your business strategy, such as drones, AR/VR and green building practices.

Conclusion: Choosing the Right Products for Your Firm

Now that you know what types of software you’ll need at different stages of your business development, you’ll have to pick which products within these categories are right for your firm.

We offer a few different services to help you out:

  • Use our interactive Buyer’s Guides to filter products based on criteria that’s important to your firm, including price, deployment and user rating. (There’s a link in the “What it does” section of the software description that will take you to the guide for that solution.)
  • Call 855-998-8505 to speak to an advisor.This needs cycle offers guidance based on the tools your peers are using, but why not cut to the source? Get your own personalized consultation and receive a shortlist of products geared to your specific needs. It only takes a few minutes, and it’s completely free.

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