Running a contracting business in California is a challenging endeavor. Competition is fierce, labor shortages persist, and stringent codes inflate the costs of construction. Yet, with a booming economy and a robust construction sector, opportunities await those who work hard and smart to advance their contracting business.
If you're a contractor starting in the Golden State, there are several factors to consider if you want to run a successful business. Some are state-specific, while others stem from the highly competitive nature of the industry here in California. The guide below offers some insights into these factors; read on to find out more.
1. Choose the right industry segment
Do your research before deciding which projects to pursue. Make sure you always keep your fingers on the pulse of the construction industry in the state.
At the moment, most industry segments seem to be headed for healthy growth. In the near future, recently enacted ballot measures should lead to an uptick in transportation projects, such as highway, railway, and airport developments surrounding major metropolitan areas. The same is true for projects related to the 2028 Olympics in Los Angeles, particularly hospitality, infrastructure, and sports venues in the LA metro area.
While the housing shortage continues to plague the state, few new measures have been introduced to increase density and allow multi-family developments in large, coastal cities, where the crisis is felt the most. The state's home production lags behind population growth, while the legislature continues to debate bills aimed at promoting the construction of residential housing – take a look at the multitude of new Accessory Dwelling Unit laws that have been enacted over the past 3 years.
Meanwhile, smaller towns away from the coast are seeing an influx of new residents due to overpricing in cities like San Francisco and Los Angeles. These folks will need new homes, meaning that single- and multi-family residential construction will see a healthy growth period in these inland areas.
In addition to the slow rate of home production, wildfires continue to ravage the state almost every year. 2019 had a relatively calm wildfire season, yet hundreds of structures were still destroyed in the more massive fires, such as the Kincade fire. Unfortunately, wildfires are expected to keep returning every year, and rebuilding efforts shall be a recurring opportunity for contractors operating in the stricken areas.
In February 2020, the Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey published an optimistic long-term outlook for commercial developments in the state. Despite an expected economic slowdown in 2020, the forecast predicts a construction boom for all segments of commercial real estate, except retail, from 2022 onward.
2. Find a niche
In a highly competitive market, it's better to be a master of one trade rather than a jack of all. Instead of offering a wide array of services that you could potentially perform, find a specialization and devote all your efforts to achieving notable quality on your projects.
If you're wondering which construction trades will see the most demand in California, then,the Employment Development Department (EDD) has identified construction-related occupations that are expected to undergo the most employment growth between 2016 and 2026 as follows:
Solar Photovoltaic Installers – 131% change
Tile and Marble Setters – 26% change
Hazardous Materials Removers – 22% change
Carpenters, Carpet Installers, Mechanical Door Repairers, Structural Iron and Steel Workers – 21% change
Plumbers, Pipefitters, Steamfitters, Pipelayers, Stonemasons, HVAC, and Refrigeration Mechanics and Installers – 20% increase
Fence Erectors, Reinforcing Iron and Rebar Workers, Roofers, Glaziers – 19%
Brickmasons, Blockmasons, Painters, Carpenters, Security and Fire Alarm Systems Installers – 18%
Of course, the regional demand for various specializations may lack consistency with the forecasts above. For example, according to the San Diego Workforce Partnership, electrical engineers, mechanical engineers, reinforcing iron and rebar workers are set to undergo the most job growth in San Diego County. Similar studies in the locales you would prefer to target as a contractor would be worthwhile to research.
3. Reduce overhead
Reducing overhead does not mean laying off staff. Organizational growth must stay a step ahead of revenue growth. If your company expands operations beyond the capabilities of its organizational infrastructure and without sufficient staff, the quality of work is likely to suffer, leading to a loss of reputation and clients. Rather than downsizing staff, consider these cost-reducing measures:
Maintain a cost-efficient fleet.
Reduce, reuse, and recycle.
Build and maintain good relationships with suppliers.
Hire the right staff. Find experienced professionals who take ownership of their work, and whom you won't have to micromanage. Workers with diverse experience in the industry can become a versatile asset and help improve the efficiency of operations.
4. Invest in quality
Quality is what truly sets you apart from your competitors. Most customers take the time to research contractors before they solicit bids, and value word of mouth referrals from previous customers. Ultimately, nothing leaves a better impression on a client than a quality product and service.
Keep in mind that as a contractor, the "quality" of your service isn't limited to bricks and mortar holding up after you leave the site. Quality also includes your ability to finish work on time and be within the set budget.
To perform quality work, you must employ the right people. Whether they're staff or subcontractors, workers employed under your helm must understand your quality expectations and take pride in their work. Remember the contractors who perform well and maintain relationships with them. This will help you avoid nasty surprises such as shoddy workmanship, busted budgets, and delayed schedules.
Finally, as the person signing checks for your staff and subcontractors, make sure to set the bar high. Don't accept substandard performance, and people who work for you won't expect to get away with it.
5. Form relationships
Look out for the "right" people. In construction, these are all the folks that add value to your company. You can count on the "right" subcontractor to complete a problematic scope without cost overruns, delays, or defects. The "right" engineer and/or architect will furnish you with seamless, buildable drawings and send clients your way. The "right" client will pay you on time and refer you to others.
Some people forge relationships naturally. If this isn’t the case for you, you'll have to put some work into networking – meet people for coffee, dinner, and drinks, send "thank you" emails, and greeting cards during the holidays. Look at it this way – if you're out for lunch alone on a weekday afternoon, you're probably missing out on a valuable networking opportunity.
Relationship-building may seem like a waste of time in the break-neck world of construction, but investing some time and effort into building a quality network will give you an edge over your competition.
How Design Everest can help
If you're starting as a contractor in California, Design Everest can be a valuable asset to your enterprise. Our team of professionals offers a full suite of engineering services you and your clients can rely on. Our engineers have been in business for more than 14 years, during which they've gained plenty of experience and nurtured countless relationships. To learn more, contact us at (888) 512-3152.
*Note: The content published above was made in collaboration with members of Design Everest.