Labor shortage-Start a construction/development firm

What are you guy's thoughts on this? I know traditionally construction is low margin with a big team so it makes no sense really to have a firm bigger than necessary but now with labor shortages going on indefinitely would it be advantageous to have in-house construction/gc now?

And what's the best way to even learn that industry? Building a house and going bigger each time?

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Jan 17, 2022 - 10:43am

Champagne Sipping

What are you guy's thoughts on this? I know traditionally construction is low margin with a big team so it makes no sense really to have a firm bigger than necessary but now with labor shortages going on indefinitely would it be advantageous to have in-house construction/gc now?

And what's the best way to even learn that industry? Building a house and going bigger each time?

Most GCs I know of make a ton of money.  Margins can be high and you can pass a ton of cost overrun on to your owner.

The larger issue is that construction is really risky, and really technical.  You need to be good at it or it'll be a nightmare, it's not something where you walk onto a site with a hammer and say "lets get started".

Besides, labor shortages will still hurt you.  No construction firm has all the personnel to build an asset - they hire subs, and the subs are the ones having the labor shortage.  In house construction has a lot of advantages but not one which helps this particular issue; in fact, having a team to feed will make it worse in a lot of ways.

Jan 18, 2022 - 6:55pm

I own a GC/development company and have definitely thought about if it was worth it.

For us it's worthwhile as a support for the development company as you can support development overhead costs (if need be) with cash flow from the GC and it's nice to have knowledge of what other projects cost if you are also doing 3rd party work in the area you are developing.

Staffing is always difficult, but if you can put together a large enough backlog and offer enough comp it's not too difficult to hire. I've also found it can be devastating if a PM or Superintendent quits mid project, so have a plan in place to prevent the repercussions if this happens.

Good GC's generally have a lot of overhead so be sure you watch your cash flow and working capital if you start one.

Jan 18, 2022 - 7:44pm

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