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When ServiceTitan asked commercial contractors how confident they were going into 2023, the numbers were grim. Only 22% felt confident in their ability to meet their objectives or goals. A year later, the outlook feels more balanced. Despite market uncertainties, the confident contractors now number 39%, almost double last year’s findings. And while that’s still less than half, the outright pessimism of 2023 has largely vanished. Just 3% of respondents were pessimistic about the upcoming year in 2024, compared to 22% in 2023. The rest (57%) were neutral.

ServiceTitan’s second annual commercial service report, released May 22, surveyed more than 1,000 commercial contractors in the U.S., not solely limited to ServiceTitan customers, including mechanical/sheet metal and refrigeration and other trades like electrical, plumbing, commercial doors, and septic.

The survey found that labor shortages, overhead costs, and supply chain struggles continue to be the biggest challenges for contractors — and 49% are still worried about economic recession.;

As a cloud-based software platform built specifically for trades businesses, ServiceTitan also asked about the impact of technology on the trades. Here’s what the data has to say about the state of commercial contracting in 2024.

Skilled Workforce

“While contractors feel optimistic about the future, there are still potential risks that they are mindful of,” the report stated. Labor continues to be a top issue, with 53% of commercial contractors concerned about labor shortages, and 50% worried about labor/overhead costs.

“And although the cost of labor is also a concern for 50% of survey respondents, 73% still plan to increase technician salaries this year,” the survey said.

The average salary in the U.S. was:

• Apprentice/helper: $16.78/hour
• Journey or equivalent: $27.50/hour
• Master or equivalent: $30.44/hour

Supply Chain

In 2023, the survey reported, only 14% of commercial contractors were able to deliver more than 90% of their projects on time. Increased material and equipment lead time affected more than half of respondents.

DELAYS: In 2023, only 14% of commercial contractors were able to deliver more than 90% of their projects on time. “Ongoing supply chain challenges make it difficult to source supplier parts (53%) and equipment (34%)," the survey stated. (Courtesy of ServiceTitan)

“Ongoing supply chain challenges make it difficult to source supplier parts (53%) and equipment (34%)," the survey stated.

In 2023:

• 24% of commercial contractors reported material lead time increases of a month or more
• 27% experienced similar delays in lead times for equipment
• Between 28-35% reported increases of 1-3 weeks in materials and equipment

Survey results indicate that most commercial contractors (63%) keep inventory on hand, and roughly a third of businesses (37%) order supplies as needed.

• 50% order direct from the supply house
• 24% order straight from the manufacturer
• 26% order direct from the vendor

“Since supply chain issues persisted in 2023 and 20% of contractors see material lead times as a risk for 2024, software could be the solution that businesses need today,” the survey stated. Today’s software can help commercial contractors via centralized purchasing system, streamlined procurement processes, inventory management, forecasting reports, and supplier diversification.

Material Costs

“In our 2023 survey, contractors expressed concern about rising costs impacting profits,” the survey said. However, 24% of respondents said material prices remained the same, and 65% reported lower material prices throughout 2023.

“Lower/stable prices had a positive effect on contractor profits, which stayed the same or increased for the vast majority (83%) of commercial contractors,” the survey stated.

Refrigeration was among three services that outperformed other contractors in terms of profit growth in 2023:

• Refrigeration (43%)
• Fire/safety (43%)
• Commercial doors (46%)

Marketing

“Today’s competitive landscape drives contractors to seek ways to stand out from the competition,” the survey said. “Survey results indicate that this is especially important to newer companies, as 72% of those with less than one year in business will prioritize business development in 2024.”

Revenues came in at:

• Repeat customers: 51%
• Marketing/SEO: 17%
• Word of mouth/referrals: 16%

ServiceTitan’s study indicates that more than half of commercial contractor revenue comes from repeat customers, meaning marketing and referrals are “untapped sources of revenue with great potential to drive new business.” Marketing was the top business tactic (43%) cited to help mitigate risks and drive growth this year, followed by improving internal procedures (35%), investing in technology (34%), hiring new employees (31%), and purchasing new tools/trucks (20%).

“Annual revenue also determines how contracting businesses approach their sales and marketing spend,” the survey said. “47% of contractors with revenue under $30M will spend more on sales and marketing efforts this year, versus 32% of those whose revenue exceeds $30M.”

Technology

Commercial businesses are embracing technology to combat industry-wide pain points like labor shortages and supply chain delays. Currently, 69% of commercial contractors currently use 4-6 different types of software to run their business. The trend is even more pronounced among larger companies:

• 93% of businesses in the $30-40 million annual revenue bracket rely on the same range of software applications
• 88% of private equity-backed contractors use 4+ types of software
• 82% of contractors with 40+ technicians use 4-6 types of software

This year, 14% of commercial contractors plan to implement business management software, and 7% plan to get accounting software, to help combat 2024 financial challenges. However, in some cases, the initial cost of software gave contractors pause:

• 45% stated that migrating to a new software is too expensive
• 22% said the alternatives to their current system are too costly

“Though the price tag may be a hurdle, technology is a long-term investment that helps contractors optimize their costs and maximize their productivity — similar to updating your equipment as a way to offer better service and increase your revenue,” ServiceTitan noted. “An unwillingness to embrace change and adapt to industry demands could create long-term disadvantages for commercial contractors, making them less competitive and limiting their productivity.”

Workflow Optimization

Crucial to getting that ROI on a technology investment is ensuring it’s being used to its full capacity. Marketing and invoicing are two such examples.

“When it comes to marketing, there seems to be a gap between commercial contractors’ goals and their approach to software,” the survey said. For example, 69% of commercial contractors still don’t use a CRM to support their marketing efforts or sales pipeline.

“Could this be the reason why only 17% of contractors’ revenue comes from marketing/SEO efforts?” ServiceTitan queried. “CRM technology plays an essential role in sales and marketing. By tracking and managing customer interactions, this software offers comprehensive data that your team can use to manage leads, analyze campaign performance, and boost customer engagement. … To achieve their workflow optimization goals, forward-thinking contractors should adopt all-in-one solutions that streamline operations and increase productivity, eliminating the inefficiencies caused by siloed systems.”

Invoicing and payment is another area where software can help the bottom line. Today, 55% of commercial contractors send invoices immediately after completing their work, and 67% collect payment on time. Even though 30% of survey respondents identified improved cash flow as their top goal:

• 20% of contractors still take more than a week to send invoices
• 33% of customer payments are more than one week late

Contractors who want to process invoices on the spot might want to consider a cloud-based platform.

“Cloud-based platforms enable contractors to access and manage their invoicing and payment information anytime, anywhere,” the survey said. “This enables technicians to process invoices on the spot before they even leave the customer location.”

Retail customers take longer to pay than office customers, the survey noted.