Even as the New Year has dawned, I offer these final thoughts on the year just passed. If I could sum up this past year’s dialogue into one overall theme I would say,
“Managing a construction business is a completely different activity from managing a construction project.”
The Contracting Business
Throughout 2025 I have tried to illustrate the unique nature of the construction business financial transaction.
“No other commercial enterprise sells its products by signing a legally binding performance contract for a fixed price, determined through a Dutch auction (low bidder), for a highly complex construction project executed with multiple partners working within a web of subcontracts fraught with legal entanglements, that calls for the winning bidder to finance for no charge the entire project as it goes along, and complete it to specification on a date certain in the distant future.”
If you had trouble reading that ridiculously complex sentence, then you just experienced what it’s like to manage a construction business transaction.
The Construction Industry
The commercial industrial history of the United States is one of a fledgling agrarian society growing rapidly into an industrial behemoth as the nineteenth century morphed into the twentieth. Fueled by a sophisticated investment banking industry that expanded in lock step with commercial industry, small companies founded by skilled individuals grew into the publicly owned iconic corporate brands that have made America the industrial leader of the world. Companies like Ford, Procter and Gamble, General Electric, Dupont, etc., etc., were founded by individual entrepreneurs who passed the reins to professional business managers as the companies became international corporations employing tens of thousands of people.
Still Mom and Pop
The transformation of the small entrepreneurial start up into large publicly owned corporations was accompanied and enabled by the emergence of a professional business management class. Trained at the now famous business schools of Harvard, Stamford, Wharton, and the University of Pennsylvania, professional managers eventually occupied most of the top management positions across all industries with the sole exception of the construction industry. A majority of the millions of individual construction firms that make up our industry are still run by the heirs or successors of the original founders.
No Small Potatoes
The U.S. construction industry’s total revenue for 2024 varies by source, but estimates hover around $1.3 trillion to over $2 trillion, with figures in the trillions cited for the market size including residential, commercial, and infrastructure.
Construction is one of the largest industries in the world but is still largely populated by small businesses. Below are several key statistics from the most recent full year of available data from the U.S. Census Bureau:
- Total annual spending / gross output: $2.2 trillion (2024)
- Construction industry share of U.S. GDP: 4.5% (2024)
- Total construction industry employment: 8.2 million (2024)
- Total employment in construction-specific occupations: 6.4 million (2024)
- Number of construction businesses (total): 3.7 million (2023)
- Total homes built per year: 1.6 million (2024)
(Data published by the U.S. Census Bureau)
Too Big for Its Britches
The data above paints the picture of a construction industry that has grown too big for its britches. That is to say, the millions of privately owned companies that produce annual output of trillions are still largely run by professional builders that are not formally trained businessmen or women. Although they remain in private hands, many of these companies have grown to a size that, coupled with the complexity of the construction business transaction, requires professional business management. However, most construction companies are closely held or family owned and tend to pass ownership and control to heirs and other family members that have little or no professional business management training. As jobs get bigger and more complex, profit margins are continuously shrinking to single digits that flirt with negative territory. It is long past time for contractors to recognize the difference between construction project management and business enterprise management.
Hire Trained Professionals
Business management is a profession. At a certain level of company size and complexity, a professionally trained CEO, CFO, Legal Counsel, Human Resource Manager, and Marketing Manager, should share the executive suite if a construction company is to thrive and prosper in this modern marketplace.
2026
Our 2026 blogs will discuss one or another of the professional skill sets necessary to excel at the management roles listed above. All are invited on a journey of discovery and review of your management team to professionalize your performance, improve profitability, stabilize your company, and minimize financial risk. Let’s have a Happy New Year together.
For more information on construction company executive roles, read more at: ROLES
For a broader view on profitable business practices, read more at: PROFIT
To receive the free weekly Construction Messages, ask questions, or make comments contact me at research@simplarfoundation.org.
Please circulate this widely. It will benefit your constituents. This research is continuous and includes new information weekly as it becomes available. Thank you.
