Respondents to this year's Top 50 survey expect steady growth ahead for the electrical construction industry
Running an electrical contracting company can be extremely demanding — no matter what the size of the firm. Keeping experienced, qualified employees is one challenge. Outfitting those employees with the tools and equipment they need to complete the job and providing them with the training they need to maintain their proficiency level and stay safe makes it more difficult. Throw in the operational issues of running a business, and things really get interesting. Now bump the company’s employee head count up into the hundreds or thousands, and the difficulty level of managing the business rises exponentially. This is why I’m always eager at this time of year to analyze the research data we collect from our proprietary Top 50 Electrical Contractors’ surveys and show you how the giants in this field are performing.
The data collected not only provides us with an inside view of these powerhouse companies, but it also helps paint a picture of how the overall market is performing and where it’s headed in the near future. First, let’s take a quick trip down the Top 50 memory lane to remind us what it’s like for these companies to do business in the roller coaster environment known as the electrical construction market.
Back in 2008, this elite group of electrical contractors reported some strong sales totals for the prior year. Forty firms on the list reported revenue gains. Many were struggling to manage growth, recruit and retain qualified personnel, and combat rising material and fuel costs. In 2009, total sales reported by the group remained high and even beat the prior year’s total. However, depleted backlogs and fewer new projects on the horizon signaled a cause for concern. The slowdown in the economy was now evident and proved troublesome for many in the group. Strategies quickly shifted to include: diversifying markets, expanding geographic territories, and managing overhead expenses.
Our 2010 report was best summed up with two key words: fierce competition. Tighter credit standards and cancelled projects forced many contractors to bid more competitively. Cost cutting was the new mantra. These hard times surfaced again in our 2011 report. However, two-thirds of the Top 50 participants characterized the market as “fair.” At this point, we started to see a little glimmer of hope on the horizon. Last year’s report finally revealed a bit of good news again. Strength in the private market sector drove up overall revenue for the first time in many years. The industrial, manufacturing, power (utilities and T&D), health care, and data center/mission critical sectors led the charge. A fair number of the Top 50 reported that business conditions had improved enough to start hiring additional employees.
So did this year’s survey results deliver more good news or disappoint? I’m pleased to say the results are positive, and the outlook remains optimistic. I’m also happy to report that the number of surveys returned to us this year was at an all-time high. This signals to me that, despite what some analysts may be reporting, overall the construction market has rebounded to a fairly strong level — and the big contracting firms are glad to spread the news.
Here’s a quick peek at our findings. The collective sales total for electrical and datacom services from this year’s Top 50 reached nearly $14 billion — the highest level in at least five years. Growth is being fueled by pent-up demand and cash-rich companies finally opening up their wallets and reinvesting their profits. Health care, data center/mission critical, and power work are leading the charge, and are anticipated to do so throughout the remainder of this year. What’s more interesting to me is even though 86% of survey respondents characterized the 2012 business climate as fair or strong, 40% of the Top 50 don’t predict an economic recovery to take hold until 2015 or 2016. This tells me we’re on a path of steady growth for at least the next few years.