173. SORCI Report 2025 Insights With Russ Stephens and Sky Kolade

Welcome to another episode of Professional Builder Secrets. In this episode, I interview the co founders of the association of Professional Builders, Russ Stephens and Sky coladay. Every year, APB releases the State of Residential Construction Industry Report, or SOURCEI as we call it for short. The 2025 SOURCEI report reveals the biggest trends shaping the residential construction industry right now, including the adoption of AI, shifts in marketing strategies and critical financial practices that the best builders are using. These insights could have a major impact on your building company, so keep listening to find out what's changing and how you can stay ahead. Today's episode of Professional Builder Secrets is brought to you by Smarter Content that Sells. Relying on referrals is a surefire way to mediocre margins, yet 48.4% of builders are guilty of it. Set yourself up as an authority and close more high margin building contracts by getting smarter content that sells free report@smartercontentthatsells.com report. That's smartercontentthatsells.com.

We'Re not just surveying everyone in the APB network and who are just members. This is casting quite a wide net to as long as you're the owner of a residential building company doing new homes or remodeling, the answers are included and we are deleting responses and not including them in the finished data if they don't fit that profile. Just so it's as as niche as possible. So to do all of that and to still have more respondents and have more of those respondents this year compared to last year, actually have a structured, documented approach in their sales process that's really, really encouraging, especially when you look at any builder who has a documented sales process that contributes to the profitability of that building company.

Welcome to Professional Builder Secrets, the podcast for building company owners wanting to grow safely and securely. I'm your host, Will Blunt and today I'm joined by the co founders of apb, Sky Coladay. Sky, welcome to the show.

Hey Will, how are you doing?

Very well, thank you. Lovely to have you on. And Russ Stevens. Russ, how are you doing?

Great, thanks Will. Lovely to be here.

Awesome. Well, I'm super excited about today's show because we're talking about the State of Residential Construction Industry Report which has just dropped for everyone out there. It's available now to get in hard copy and also to download as a digital version. But the 2025 report is bigger and better than ever. We had 2,240 participants. So Ross, do you want to tell us a bit more about who actually participated in the survey this year?

Yes. It's a survey of residential or owners of residential building companies across the U.S. australia, Canada and New Zealand. And what it does is it gives us some very detail, deep and accurate insights into how these building companies are being run and operated. It's the kind of data that we haven't seen anywhere else in the industry. We all hear those stories about what people are actually doing in their building companies, and we never really know what the truth is. But when you look at the data, it gives a real, accurate insight into what is really going on behind the scenes of these building companies.

Well, based on that, do we want to talk about a couple of the top insights that you took from the report? Sky?

Yeah, I mean, you know, as Russ mentioned it and you mentioned, it's getting bigger and better every single year. Gosh, are we like, what is it our fifth year? Is this our fifth report that we've been. And that's just insane to think about because, yeah, we wanted the data and we couldn't find it anywhere. So we just created it ourselves by creating the survey and started asking as many builders as we can the answers to these questions. And then to have five years worth of data to reference on, I think that's really packed the punch for this year's report because we're actually able to look back on last year and the year before and the year before that and compare it and really see what's changing and where the growth is. There have been so many huge takeaways. And we were talking about this one, like, literally right before we went on Mike, and it was the impact of systems in building companies and how it actually impacts profitability to those building companies. And it's not just one particular system. This is using systems in sales, whether that's having sales scripts or a documented sales process or an onboarding process or even just having a business plan. We've actually been able to tie that back again and again and again back to all the other answers that those builders have to. To give on their profitability or their other financials, how much they even pay themselves. For me personally was like the biggest takeaway that I took out of this year. How much? We were able to cross reference the answers in one particular section and go, okay, so the builders that do this, what are their financials like and does it make them better? And I think if you take anything away, the more systems you have in your building company, not just in one particular area, but sales, marketing, onboarding within your building company, they directly translate to Net Profit and improving your bottom line. So that for me was the number one takeaway. Russ?

Yeah, I mean it's like you say, it's this report has grown and grown, but not in one dimension either because obviously with our partners coming on board, companies like BuildXact and Build a Trend and Houzz and getting this survey out to their databases as well has allowed us to collect a lot more data, which obviously the more data you can collect, the more accurate it is. So it's been good to see the survey growing in that respect. And we have added a few questions over the as well, which has made it a little more in depth. But I think what's really exciting now is what you just mentioned sky, and that's because it's in its fifth year. We are now able to analyze trends and you know, the, the data is moving in a positive way for the industry, which is exciting. But I think the big, the big step forward this year was the use of AI to analyze the data. Because if you can imagine when you got thousands of surveys coming in with I think it was 116, 100 data points from each of the respondents to be able to cross reference different questions and go really deep with the different data points, cross referencing two or three different data points, that's where you start to see some really incredible insights, which gives people what they need to see, I think. And that is proof that the kind of coaching, the kind of systems and processes we're encouraging builders to adopt actually delivers in terms of improving their bottom line.

While you've got the mic, Russ, do you want to tell the listeners a little bit more about the survey respondents and who's actually participating?

Like I said, it is aimed at the owners and directors of residential building companies. And the reason for that is it's only the owners and directors that have access to the real information. So if they're not in that position, then the data coming in isn't going to be accurate. So I think that's a really important thing to just, just get out there first. But we also we niche in terms of residential construction. So these are building companies that are doing new homes or large renovation projects. And we do dissect the data and break up between the two because there are variances on how building companies are run between those two models. But it doesn't incorporate any data from commercial builders, for instance, or handymen or small renovation companies. And the reason for that is that they are very different business models and it would skew the data. So it's very, very targeted in order to make the data useful. But in terms of who actually responded, I think something interesting to come out of this year's survey responses were the demographics and that it kind of showed that the younger builders are dropping off. In terms of respondents, it wasn't massive, but we're seeing more older builders in the respondents than we saw in previous years. So I think that's something we have to keep an eye on because we. We've seen it in the trades where the trades aren't attracting enough apprentices, enough of the younger generation into the trades, and that's going to cause a massive problem further down the track. Unless, of course, they're all replaced with AI robots, in which case it won't be a problem. But we could experience the same issue with building company owners as well if we're not attracting the younger generation into the industry. So that was something to obviously keep an eye on. Another thing saw in the demographics as well was membership of association. So we'll see in Australia, HIA Master Builders. In the us, we've got the national association of Home Builders. In Canada, Canadian Home Builders Association. Membership of these associations actually increased. And I think that is really a sign of the times where things were getting tougher after the COVID boom and builders are looking for borrowed authority, ways to demonstrate trust to potential clients there.

Great. Well, it sounds like whoever's listening is in the right place if they're a residential builder and they fit into that criteria. What I want to do now is dive into each of the key sections from Sourci. So there's nine sections which cover all of the core parts of running a professional building company. While we'll talk about the stats, I think the most important thing is to talk about the implications for builders and how they can apply this in their company. So, sky, let's start with sales. What sales strategies and insights did you notice come out of the report this year?

I think, again, just to highlight how important systems are and the fact that we've got data from previous years, I think it's really worth highlighting that 53% of builders follow a structured approach to sales and that's up because it was only 43.9% from last year. So the fact that it's improving year on year and we're getting more people respond, we're casting a much wider net in the industry. As, as Russ has mentioned, like the more partners that are coming on board, this isn't an insular survey. We're not just surveying everyone in the APB network and who are just members. This is casting quite a wide net. As long as you're the owner of a residential building company doing new homes or remodeling, the answers are included. And just to highlight on what Russ said, we are deleting responses and not including them in the finished data if they don't fit that profile. Just so it's as as niche as possible. So to do all of that and to still have more respondents and have more of those respondents this year compared to last year, actually have a structured documented approach in their sales process, that's really, really encouraging. Especially when you look at any builder who has a documented sales process that contributes to the profitability of that building. It was, I think we looked at the median gross markup that builders with a documented sales process. It was about 25%. And that's compared to 20% gross markup for a building company that doesn't. You might be thinking like, okay, that's like a 5% difference. That's markup, not margin. So that's your ability to price the project. And the only difference there is just having a documented sales process. So having one system in place just in your sales side gross profitability, you're already up. But if you then go net profit where it's the bottom line, arguably one of the most important points for a building company, that was an 8% net profit margin For a building company that had a documented sales process compared to 5%. So they're not insignificant numbers if you look at certainly our profile of participants and the revenue that these guys were earning. And fun fact, again, not surprisingly enough, everyone's optimistic about the next year. So everyone is expecting more revenue the year after the year after the next year. 8% versus 5% isn't small numbers. And that's just from having a documented sales process where a lead comes in, you know exactly what you're doing next, or your team know what to do next, what gets sent, what script you're using to say who and what. And that's not just net profitability and gross profitability. We then were able to dig further and go another layer. And it actually impacted that owner of a building company is income, which is crazy. The guys who had a documented sales process statistically were actually able to earn higher salaries. On average, they paid themselves over $157,000 compared to the guys who didn't was just a smidge under 136,000. So they're not insignificant. These are, it's proven again and again and again, not just one sales process and your gross profit, it's their net profit, how much you're paying yourself. And it just has this knock on effect, which I found was incredibly satisfying, but really fascinating to see on the sales side for a building company.

Maybe it's the marketer in me. I'd probably like emphasize the net profit even more by saying 50% higher percent more net profit. And when you look at what sky just mentioned on the salary as well, I think that's close to 20%. You know, it's just. Why wouldn't you, yeah, why wouldn't you put this repeatable process in place? Because it does work. And now, you know, with the numbers to, to back that up, it clearly works. I think in terms of sales, one thing that stood out for me was the number of builders that are now charging for quotes. There's now more builders charging for quotes that don't. And I think that's the first time in the survey history that we've, we've seen that. And again, that's something else that we've been beating the drum on for quite a few years now. You've got to be charging for quotes. You've got to have a systemized, repeatable sales process. And it's just great to see the numbers trending in the right direction over time. Sales training was another one as well, I think where we, yeah, we saw in sales, but it's going in the, in the right direction. And the builders that do invest in, in sales training, again, they've got higher gross markups, 27 and a half percent versus 22%. So all this stuff works. And now, you know, you got the data to actually see that as well.

I mean, it's like causation, correlation. But while we're on that topic, you mentioned the amount of builders charging for quotes. The amount of builders actually using sales scripts actually increased as well. So is it the confidence in having a, a documented sales process that you're following, but then even something scripted so that everyone, not just you, but everyone in the team then knows where to go to next? And that is charging for a quote. I mean, that went up From I think 19.6% up to 26.7%. And if anyone by the way, wants to follow along, like make sure you have the download. I don't know whether you have the hard copy or the digital version, but all these stats here, they're across pages, what, 24 and 25 in the sales section. And you can actually go and look even at the breakdown, how that compares to a new home Builder how it compared to a remodeler. And it's really fascinating to see how that really looks. And you can benchmark your own building company against those that answered this survey and then you can see where you're sitting compared to the mean or the median that's actually documented in here. But to see that that trend is increasing not just in. Yeah, you've got the procedure, but then to go the next step with sales scripts. That's so encouraging because I think when you first introduce the idea of sales scripts to a lot of builders and building company owners, it's the fear of sounding quite robotic and insincere. But it's as simple as having a qualifying checklist. Right. That's still a script. How are you qualifying people on the first phone call every single time, how are you moving them to the next step and then how are you disqualify them? These all count and I think it's just simplifying each step in the sales funnel. You can see it's actually getting implemented now, which is awesome.

Yeah, great. Just to reinforce what you said, sky, the sales section runs from page 19 to 28. For anyone that wants to dive into the sales section in particular, I think what stands out for me from what you both just said is there really isn't any excuse. The 47% of builders that responded that don't have a documented sales process. With something like the sales blueprint for builders available to APB members and ChatGPT, you could get a documented sales process up within a day or two. Is no excuse. Right.

And it doesn't have to be perfect either, does it? Yeah, you just got to start, you know, start with something. If it doesn't quite work, you refine it. But yeah, make a start.

That's the thing. Like what have you got to lose? It's actually proven that you end up making more money. So yeah, why wouldn't you?

Yeah, we didn't, yeah, we didn't analyze like if the sales script was any good or not, did we? Or the sales process was any good. Just having it is, is an improvement.

But I think that shows so much in itself, doesn't it? Someone who's willing to go out, systemize and document something. It's that act of never ending improvement. So you're right, it doesn't have to be perfect. Just begin, get something in place. Because having something, suddenly you're going to follow it, you're going to tweak it and yeah, the results speak themselves.

Great point. Well, let's, let's dive into marketing then, which does start on page 30 in the report. For anyone that's following along at home. This is my most enjoyable section, being in marketing myself. But Russ, do you want to dive into some of the key insights you took out of what builders are doing in the marketing advertising space?

Yeah, and I'm right with you there, will, I think marketing it, it gets even more exciting with the numbers and the analytics because this is where we're actually spending money, isn't it? It's where we're gambling. We're putting bets down on campaigns and advertising strategies. So this is where we really do need to see a return on investment. And again, with the analysis that we've done on the been able to prove that that marketing works, I guess is the first thing because there's a lot of people out there that think advertising and marketing doesn't even work, but proof that it, it works. But I guess maybe one of the things that came out that was a bit of a concern was that more than half of builders, so close to 55% of builders, said that more than half of their sales are still coming from referrals, which was even higher than a year ago. So, yeah, that's a trend that's not going in the right direct because, I mean, don't get us wrong, referrals are fantastic. They're the, they really should be the icing on the cake though, because once you start relying on them, then you're gonna find yourself in trouble at some point. So yeah, you really, you don't wanna be relying more than half of your sales coming from referrals. You gotta be able to generate sales from paid advertising because otherwise you don't really have a business that you can control. In terms of marketing, though, we also, we look at what the biggest pain points for build. Once again, it was generating quality leads that was the number one challenge for builders. Almost half of the respondents reported that as being a challenge. And of course the other builders that are overly reliant on referrals, then of course those two match up. It just shows that they're not doing enough in terms of their marketing. We've seen what builders aren't doing in their marketing. Again, that's been highlighted to us. They're not producing articles. And the mere fact of just producing like a couple of articles a year, that will transform your building company, that will transform your margins. Yeah, we've seen it in the data. The builders that do create just a couple of articles, I mean ideally you're going to be producing one a month. But even if you started small, it will have a significant impact and that's because it educates your audience. Another thing builders aren't doing, they're not using a CRM system or, or even using the CRM system that they've got. You know, not enough builders are emailing their, their databases. And again, a massive, massive missed opportunities. You know, you do those two things, you're going to transform your lead generation. And it's ironic, isn't it, because, you know, we, we, the biggest problem is generating quality leads. The way you generate quality leads is by educating them and following up. You know, so write articles and send emails and you know, you're halfway there. And social media, again, that, that remains a missed opportunity. Something like 37% of builders are, are not using social media to promote their business. And whatever your thoughts are on social media, Facebook and Instagram, the fact is it works. And the larger building companies are utilizing social media and smaller building companies are simply, it' missed opportunity for them. So they were, they were kind of the main things that stood out for me in marketing. What, what jumped out to you, Sky?

Maybe it's just my generation thing, but it was the social media for me that was, I don't even know if it was mind blowing or just a good confirmation bias because having to repeat certainly myself, I know I've said it on like member coaching calls multiple times that if you're not on even Instagram and Facebook, like what are you doing? You're number one, your B2C, you're, you're selling to consumers. And these are some of the most used platforms. Yeah, there are so many other ones coming about. But go where the user count is, these are the biggest ones. And if you're not on there, and then like worse if you're on there but you're not posting, it's just a crazy missed opportunity. And it was awesome to be able to actually cross reference and bring even more data this year. It was, it was crazy. It was something like builders who post on Facebook and Instagram at least once per week. So some kind of regularity. They typically achieve over 70% higher sales revenue. And that to me was really significant. Like that's the difference between $4.5 million and 2.6 million. It's not insignificant posting not terrible photos either on your Instagram. But again, we didn't, we didn't even have a criteria on the quality of your posting. This is just posting on those social media channels at least once per week. But this is a concept of proof. Right. This is showing your work. That's just showing your quality and being present online where your audience are like you mentioned, Russ, that doesn't matter what you think about social media, if you like it, odds are your audience are actually on there and that contributes significantly. That, to me, was the standout.

Yeah. And I think another thing that came out as well was the sweet spot of 3%. We've been beating this drum for a long while now saying that 3% is where you need to be as a builder. But we saw a lot of data coming in from builders that were spending more than 3%. But we were able to see that it's hitting the law of diminishing returns once you go into 4 and 5%. So, yeah, I'm not saying you shouldn't spend 4 or 5%, because if you're going for growth and you're doing a lot of experimentation, then, yeah, that can be a good strategy. But it does show that 3% of your revenue is where it's at. And the builders that invest 3% of their revenue, they have the highest gross markup. So, you know, it all comes back to you. It's an investment that comes back. And that money that comes back flows down to your bottom line as well. So, yeah, these building companies are more profitable, the ones that invest 3%.

That's a good point. Like, none of this is doing it for the sake of it. We were actually able to point out that it does deliver a bottom line value, a return on the investment through sales and then revenue, and then what your gross markup is and then what your net profit is. It's. We're not asking none of these questions are leading you down a garden path in the complete wrong direction. You know, it's really trying to understand what will actually help your building company, not hinder it.

Yeah. And I'd say on that as well, always remember what Wayne Gretzky said, and that is you skate to where the puck is going. So if you are in a growth mode, that 3% figure will come from your budget for the year ahead, not for what you just did.

Really good point. Yeah.

That's on page 48. Those stats, if anyone wants to check them out. One thing that stood out for me, and I'm interested to get your thoughts on this. RICE 2.5 referrals. It takes for builders to sign one contract, but when it comes to signing contracts from paid leads, it takes new home builders 30 paid leads and remodelers 20 paid leads. Do you think that plays into the psyche of investing into advertising.

I think if you maybe you don't fully understand how advertising, marketing and business all comes together, you could look at that and come to the conclusion, well yeah, I'll just double down on referrals and go for that strategy. But you've really got to separate those things. And the only thing that matters is can you afford to generate 30 paid leads? So, you know, you look at how much a contract is worth, you know the margin you're going to get on that contract and then you work out what it costs you to generate 30 paid leads. It is incredibly profitable for residential home builders and it's a number that you're completely in control of. Now I know people will argue, well, 2.5 referrals. Yeah, virtually free. It's free money. But that's where we come back to. It's the icing on the cake. So yeah, I think a lot of people do get hung up on the, the cost of advertising and how much these leads are costing. But just like having the. It's why having a documented sales process is so important. When you know your numbers and you've got a repeatable process, you will know that for, I mean, let's say it' a hundred paid leads. Because that's pretty much where our advice is with builders that that's what they need to be prepared for is to generate 100 paid leads in order to get one sale. So 30 is extraordinarily low but even at 100 it is wildly profitable and you can't be looking at, oh yeah, that lead cost me 30, $40 and I, I need a hundred of them. Yeah, so what, how much do you make on the actual contract? Now you're in a position to scale up, up. Yeah, really build a business.

We've worked with some extremely high end building companies actually that even after teaching the, we call it the 100 to 1 ratio. So 100 paid leads to one highly profitable building contract. And I remember this one member just saying, look, for us it's closer, 200, 250, but they're in the upper, upper, upper end of the market. Like literally the aspirational sale. So think of like the Ferrari Aston Martin dealerships that you get a lot of walk ins, you'd have a lot of time wastes, people just window shopping. Right. But again to him it just didn't bother him. It was just the cost of doing business and that drove his margins up. So he was fine collecting those extra leads. That's fine. Get the supporters, they can stay in touch. They will go digging for the ones. It's the quieter ones, the ones not making quite as much noise that then joined the database and he could get them into a contract. But these for significant homes as well. And it's that the only reason he was confident with that is because he knew every other number inside out. And I think that's what gives you the confidence and peace of mind to go a hundred bucks a lead. Whatever. It's, you know, you know what you're investing in.

Yeah, I think part of the problem comes if you say you needed 200 leads for, for a luxury home deal contract and then you're relying on referrals and no referrals come in. You can't get 200 leads overnight. I mean that's good. That's when it goes up significantly.

So advertising, when you need leads, it's too late. That is not the strategy. This isn't always on. Yeah, this is, this is why you should be doing your content marketing. Your CRM system is in place. You're posting on social media, you have your thought leadership pumping as well. And then you are paying to amplify that content via advertising.

And the other side to that as well is if someone's looking at saying, well I can't afford to invest that much to generate that many leads and only get one sale from 30, well that is a sure sign that your margins are too low. And the reason your margins are too low is because you're competing on price. You're desperate to close everyone that comes across your doorstep, in which case it's a sign that you're not generating enough demand, I.e. you're not advertising enough. So it becomes this vicious cycle, self fulfilling prophecy really.

Well, I could talk about the marketing section all day, but we need to move on page 54. Let's jump to that, which is the beginning of the projects section. Now sky, do you want to dive into some of the challenges that you noticed builders were facing when it comes to projects?

Yeah, well, I really like to, don't need to sugarcoat it. Inflation is real, we all know it. But it was really clear to actually see that the projects or contract values over the million dollar mark actually increased. And that's reflecting the landscape that is inflation at the moment. So at least those contracts are getting increased and those contract values are going up. Interestingly enough, there was a particular range of, I don't know, project size. You can call them those hundred thousand dollar jobs up to $300,000 jobs that dropped. That was About a quarter of respondents were doing those projects in last year's report. But that dropped to about 21.7% this year. So a lot of those smaller entry level projects, I don't know if you could say are disappearing or maybe it is just inflation. They're going into the next bracket, you know, they're just sort of aging out. They're going into the next one. I don't think it was a surprise, but it was a little bit of consistency. The top challenge for building companies at the moment are again subcontractor delays. But the situation is improving. When you look at the numbers for. So about 2023, it was 31.1% of builders said subcontractor delays were their biggest problem. But that's gone to 18.5% in 2024. So I think that's pretty encouraging.

That's good, isn't it? The post Covid boom. It was tough for a little while, but it does show that things are settling down that labor pool.

Yeah. And it's. And it's kind of nice certainly if you're in that position to with anything to do with projects or obviously any other part in sourcing to actually go and reference because it's like you get that confirmation of you're either not alone or it's kind of a confidence boost that oh, it actually is improving. And I think that in itself can actually improve your mindset and you go, okay, it's not that bad. Like it is improving and you actually change your mindset when you go out and solve the problem anyway. So. So it's reassuring in either which way you sit. But we talk a lot about post project completion audits and essentially these audits are when you finish a project. Once you finish a project, you review everything to do with the budget, the schedule, what was on track, what was off track, what could we have done better? You do an entire audit after this project is completed. We were able to see that builders who conduct these audits achieve a median net profit of 7. Again, just being able to cross reference this data like they're long meetings, they're intense, they, they take a lot of effort. It requires having a system and process in place to do them after every project. But if your median net profit when you do them is 7%, it's a little bit more encouraging to go out of your way and do them. And that's 40% higher than the 5% that's reported from the builders who don't do those audits. This whole idea of having a Documented procedure doesn't just help you in sales. It doesn't just help you in like the onboarding of team members or like, like business planning. This helps you in your projects and the bottom line is it helps you in your net profit.

And we should probably highlight that, although the report doesn't actually say this, but it's probably not just doing the audit that makes that difference and that improvement. You gotta, you gotta take action. You gotta like act on what the audit is telling you. So it's gotta highlight a gap in your scheduling, forecasting. Yeah, because yeah, as a builder, you should be setting a baseline on your schedule as you start that job and then measuring performance against the baseline. And part of this audit is to look at where the gap got stretched and can it be improved? Is that a problem that can be solved or do we need to factor in more time for that particular part of the build going forward so that when we do that our fixed expenses are going to be forecast more accurately and that's obviously going to improve our net profit? Equally part of that audit, we're looking at the estimated costs, we're looking at the actual costs and we're making sure that information is being fed back to the estimator to make our future estimates even more accurate. And just all round it's good having all the stakeholders together just to get on the same page and see what can we learn that. Yeah, what can we take action on?

It takes a lot of the blame away as well. You know, obviously when we, we teach this concept in our coaching, there's, there's a lot more to it, but it takes away a lot of the blame. Like you're not, you know, over budget or whatever because of this one particular thing. No, you get to do an entire audit and really pinpoint because often it's not actually just one pivotal moment. You're just bleeding, you were bleeding out over a series of unfortunate events or decisions or something that then snowballed one thing into another. So it does take a lot of the blame off and gets the team working as a team. But here's something really interesting. Probably the more most important figure about that whole section. Any of the builders who answered the fact that they actually didn't know what a post project completion audit is like, they don't know what they are, don't do a, don't audit their projects once they're finished. Their median net Profit margin is 0%.

And that is the danger of not knowing what you don't know, isn't it? Because at least Ones that knew that they weren't doing it, they weren't quite as bad as the ones that didn't even know what it was. So I think what this does as well, this whole audit, is it shines a light on all the different cost centers. And if you don't do that, you're basically looking at one number at the end, like. Like, how much are we. Are we under budget? Are we over budget? And what that tends to lead to is a bit of sandbagging going on and little cubby holes getting created where bits of budget get buried so that a few mistakes can be quite easily masked up. Pull a little bit of profit from another nominal. And that doesn't help anyone because what we need on these projects is accuracy across all the different cost centers. We need to know what's over, what's under. It's no good just looking at one number at the end. That doesn't help us improve at all.

Cool. Well, I'll stick with you, Ross. To move on to the next section, which is about Technology on page 65 in the report, if people want to jump to that page. Now, I found this section fascinating. It's probably the one area where we've noticed change year on year in terms of how much builders are investing into software in particular. Do you want to dive into some of the insights you took from this, Ross?

Yeah, look, an encouraging thing, and you would hope it would be the case as well. Wealth, now that we've got inflation to contend with. But 46.7% of builders spent more on software compared to the previous year. And again, that is a trend that's increasing upwards year on year. So that really demonstrates that builders understand the importance of improving systems, adopting more technology to make them even more efficient and to really back that up. But we saw spreadsheets being used for project management continue to decline. Incredibly, spreadsheets are now only being used by 10.5% of builders to do their project management, which is fantastic news because they're not designed for project management. They're not the ideal tool, especially when you got so many fantastic tools out there. But it's down to 10.5. Yeah, it was 12 and a half percent the year before. It's been a continued decline over the years and that was reflected in estimating as well. A lot of builders, you know, maybe, yeah, there's a subset of builders who will never move from. From spreadsheets, but that figure has now dropped to 21.9%. And again, you know, just a year before, it was 25.8%. So yeah, that is a significant, significant drop. And if you go back Even further to 2022 data, you know, just two years ago it was 36.4%. So it's quite dramatic the way spreadsheets are being phased out by builders and for good reason as well. We've all heard the stats about how you know how many, the percentage of spreadsheets that contain errors, I mean, depending on which report you use. So why would you use it for an estimate where, you know, one mistake can cost you your entire profit. But I guess the big news when it comes to technology and in particular adopting technology, the thing that you can't look past these days is AI. And we were amazed to see 37.8% of builders now integrating AI into their businesses. I mean it was a high number, but really, I guess maybe we weren't too shocked because we've been seeing our members talking about how they've adopted AI. AI in the Facebook members group, you know, for the past two years. Now what is interesting is the way Australian builders seem to be leading the way in terms of adoption. 46% of builders in Australia using AI in their businesses. Now if we compare that to say Canada, which had the lowest rate, that was only 30.6%. So there's quite a big disparity there between builders in, in different countries. But it's being used in all manners of the this primarily across marketing, client communication and sales. But we're seeing more and more uses in terms of technology.

I think stats are fun and it's nice to see that as a high level. But I don't know about you, but the immediate question I then have is why? What is it about Australia that makes it a little bit easier to adopt? And you can put a lot of assumptions on it, but I wonder, is there less noise compared to other countries getting, getting maybe made about it and, and saturating the market? But it's really fascinating to see. Is it the level of open mindedness? Who, who knows? But it's really, I think it's all.

To do with the fact APB started in Australia, so we've been coaching builders longer here.

Obviously that presentation on AI at Summit was a, was a real hit, but.

That'S it, that's what it was.

But I mean like that's fascinating. You want to ask the follow up question, like why, what is it? What made you adopt?

Well, I'm going to stick with you, Russ. Again I'm going to dive into the financial section of the report which Is, I know it's probably your favorite section with all the numbers, but do you want to dive into your insights from the way builders are managing their finances in 2024 and moving into 2025?

So a big thing in financials is the percentage of builders who produce monthly financial reports. And this is encouraging because that has increased from 52.3% just a year ago to 58.9% in 2024. That's a fantastic increase and it's a big step in the right direction. And the reason that is so important is because the builders that do produce monthly financial reports, again, we've been able to cross reference that data and see that their net profit margins are higher. Again, it's around 50% higher 6% versus the, the 4% net profit for those that do not produce these monthly net reports. Monthly financial reports. Now, again, yeah, we're not going to suggest just doing the reports is going to increase your net profit by 50%. You've got to actually look at what the information is telling you and act on that. But of course, when you look at reports, it will get you acting on the right things and fixing the right problems. And that is why these builders are able to produce 50% more net profit simply by looking at these reports. The big area, I guess, of concern, and it has been a concern for a few years, is the work in progress calculation. A calculation that we call wipa, the work in progress accounting adjustment. Because if you're not doing this as the owner of a residential building company, then your financials won't be accurate. And if you're looking at inaccurate information, you're not going to make the best decisions. But there's probably only one thing worse than like knowing that you should do this and that you're not doing it, and that is doing the calculation wrong and actually producing inaccurate information and acting on that. That's a real big concern because 50% of builders stated in the survey, they do the calculation or they understand how to do the calculation. But when we then tested them with a further question to really demonstrate if they understood this calculation correctly, that figure dropped to just 11.4%. Now, that is concerning because that shows that 40% of builders are calculating this figure incorrectly and acting on incorrect information, which, as we've seen over the years, that could lead to massive, massive problems, especially for builders that are doing new construction where cash flow is positive, because that means large amounts in the building company are potentially being spent or invested in other areas when that money is needed to pay creditors as and when they become due and payable, there's a.

Lot of like eternal optimism. I think, especially with a builder's financials, especially like in WIPA, like you said, if, if over 50% of builders say they understand it and then it's such a small percentage that actually do, it's this, I would like to think I know and understand. But there's that gap, right, between what do you know? But then what do you, what do you not know that you think you know? I think that's so much more dangerous because you think you know, you have almost the confidence and that's like an even riskier position. Speaking of confidence, though, especially doing this over the last couple of years, comparing data each time, what was really interesting financial wise was it was in 2023, one of our questions was around net profit and really like what they're expecting to achieve in 2024. And in 2023 it was just under half of builders, 49.8% of builders said they anticipate getting net profit margins over like 10% or more in the following year. In 2024, we were actually able to get that data and say, okay, how many achieved it? Like, what, what did they achieve? And it was only 33.5% of builders were actually able net profit margin over 10%, which is really fascinating. But to not end there, the majority of builders in this report and in this survey, it was about 71% of builders, 71.4% of builders are targeting net margins over 10% in 2025. So this optimism just carries over year on year on year. And I think that's just really fascinating that it's gone from about half to almost the most, like to what, 71% of builders. It's, it's, yeah, that, that confidence of going year on year, like it's 10% or more. And I'm not sure if that's through maybe a lot of changes. You know, maybe they're like whatever they're implementing or if it is the confidence in the industry of, of their numbers that they know or what they've implemented systems wise or, or education or if it is just this eternal optimism that we do see in this industry, which is why these companies just go for, for decades and decades and decades, no matter how tough it has been. I think that was a really fascinating point.

I think that shows a confidence in themselves because, you know, a lot of builders or business owners might talk about, yeah, we're going to hit this revenue number, we're going to increase to this revenue but to actually look at the net profit percentage, to have so many builders like targeting this, this benchmark as a, as a minimum is, is fantastic to see. And I, and I think it clearly demonstrates like a tenacity, a knowing that they, they know this is no longer pie in the sky. I mean, you remember as well as I do sky, the builders that laughed when we, we talked about 10% net profit. And now we've got 71.4% of builders targeting that. Awesome.

Yeah, it's a lot more of acceptance potentially as well, that that is the standard and minimum. And that's why it's sort of maybe socially acceptable to go. Yeah, I have targeted achieving that, if not more in the following year. I think it's the awareness maybe that's been brought to that being the biggest bare minimum that should be getting hit for this industry.

Great. Well, for anyone that wants to look into the salaries and all the financial metrics in the report that kickstart on page 78. But my question is, sky, if 71% of builders are looking to get a 10% net profit in 2025, how are they getting there? And that leads us to the next section, which is around planning. So do you want to dive into the planning section a little bit more and what you took from that?

I mean, totally, it's spoiler alert. It's the same thing I've mentioned through the whole time. It's just, it's having the system in place and especially, especially in planning. This really highlighted it. The builders or building companies, I should say, that had business plans in place, like a strategic business plan, reported a median net profit of 7% compared to 5% for those that didn't. And again, it's just having, having that roadmap in front of you of knowing where you're going to go. What KPIs or benchmarks are you actually targeting and looking at hitting and do you have a plan to get there? That was, I think, the biggest takeaway. Not only that, I got that I think everyone needs to get out of that section because it's just having some kind of clear, direct direction. I think one other number just to highlight, which was really fascinating and not in a, in a great way, it was that builders are only devoting about 13% of their time to working on the business. So things like strategy, planning, building systems, improving their operations, that is crazy. That number, 13% of building, building companies devoting their time to working on the business. And I think it's really important to highlight that because that's a huge opportunity. There's huge potential for this industry as a whole. Number one, if we do increase that, think how much farther this industry could be. But I think for the industry leaders, especially if you see yourself as a leader in the industry, if you're already either achieving some of these great numbers or are looking to achieve that, there's your opportunity. It's about not doing so much of the work in the company. Company. It's about really building the business side of it. I think we need to look at that number and work to improve that so we can really just grab a hold of that opportunity.

Yeah, I think we've, we've seen over the last few years the builders that have a business plan, they make more net profit, they have higher salaries and they work less hours as well. It's those three important components of, you know, of having your own company.

I'm sure that's what they all want as well. Well, we've made it towards the end of the report and Russ, maybe I'll throw to you to kickstart this section, but I wanted to dive into the impact that builders are seeing in their teams and their training initiatives as well. And what we saw from the data.

Yeah, one interesting thing, and it really shouldn't be a surprise because it kind of makes sense, but new home builders, they've got higher productivity than remodeling companies. And that's when we look at the revenue per employee figures. So per employee, new home builders are generating $750,000 versus the remodeling companies, almost about half of that, $385,000. And really it all makes sense because new homes, new construction can be systemized a lot easier. There's a lot less high level decision making that needs to take place on site. That means to scale the remodel, you've got to have some highly skilled people in your team that can make those calls. So not really too much of a surprise there. Maybe the gap was a surprise. But if you are in residential construction, you're looking to scale up, maybe you've got some big numbers that you want to grow your building company to, then that's the kind of data you want to be looking at because maybe it's time to rethink your business model and, and think maybe it could be the time to make the switch into new construction if you want to be keeping that growth going into the tens of millions. In terms of the actual team and training though, less than 30% small building companies. So by that we're saying $3 million or less in revenue. 30% of them are adopting a formal onboarding process. So they got onboarding systems to bring people in and that's quite a, a shot because it is such an important part of the process. When you bring in new staff to have less than a third of those companies actually doing that, that is the kind of thing that's going to come back and bite you. Not just in terms of the, the productivity of those people and how quickly they get up to speed, but also the longevity as well. You start off with a good onboarding, these people are going to last. And when we've seen that staffing is an issue, then these are the kind of things you want to be paying attention to. Just under 40% of building companies are planning to increase their investment in training. Yeah. Which is positive. But really we'd like to see that number a lot higher because it is such a big gap at the moment in the industry. On a kind of a side note on this training the self improvement business books. We know how powerful reading is and how much you can learn from reading. But actually analyzing the books books that builders read and correlating that with net profit was quite surprising because we found that the builders that read just one business book per year. So if you're only going to read one book in the next 12 months, make sure you get professional builders secrets because that could be the key for you. But just reading one book will give you an improvement in net profit margin because the builders that read at least one book and they reported a net profit margin of six and a half percent compared to the builders that didn't read any books of just 1%. So it really does show again that the kind of knowledge that you're going to get from reading books, the, the ideas, the opportunities, etc, of course it all ties into action. You can't, you can't just read, you've got to take action. But again, there's another insight into what can really make a change in your business. How about you Sky? What did, what did you see there?

I mean the reading one is phenomenal. Just to repeat that right? Like that stat is like the gap I should say is huge. Just one book a year, you're not even saying one a month. Like that's so achievable even if you're the slowest reader on earth. And this isn't even distinguishing between listening and reading. So imagine like how many he get through actually driving around and listening to the book. I think that's insane. 6.5% compared to 1% in net margin is, is crazy. But we've plugged our book, may as well plug some coaching at this point as well. A really fascinating gap or step as well was the builders that actually engage a coach or a mentor increased. So it was like 35.4% in 2023 and it's jumped up to 41% in 2024. And that itself is really encouraging number one because it's showing really that this industry is open minded and they're looking for solutions and they're looking, looking outside their four walls of the office. It's actually like looking for third party specialist knowledge and even just help accountability, network and support. As much as that number increased, I think the more important number that increases, the builders who work with coaches or mentors, whatever you want to call them, report better outcomes across multiple metrics. Not just gross markup but revenue net profit as well. I think their gross markup on average was about 25% compared to 20, 21% to those who didn't have a mentor. And I think even if you just boil it down to one thing, it's probably accountability. You're not going to go back to your coach on Monday and explain that yes, you dropped your price on Saturday because you just wanted the contract signed. So I think that was a really huge one for me getting taken away from that section because certainly in an industry like this, it's been around for so long, it's having that open mindedness enough to know that there are more answers out there and people are going looking for them and actually paying and engaging aging professionals to help them improve not only their lives but their building companies as well.

There was another stat in there as well, wasn't there was out the builders that got coached, the ones that paid for coaching actually outperformed the ones that were getting mentored coached for free. So yeah, that was quite interesting.

I mean we all value what we pay for and this is why we teach our builders about as soon as you start giving things away to your, to your clients on projects, the perceived value is less. And it's the exact same with advice and coaching and mentoring. And you could have the best buddies in the world that are mentors. It's just a different relationship when you pay and engage someone. You have that deeper sense of accountability.

I think you put more pressure on yourself, don't you when you, you, you hand that money over. You know, I've got to get a return here.

Yeah, time is money. You, you know you're going to show up to that meeting. You're not going to be a minute late.

Well, thanks so much for coming on the show today, Russ. And Sky. Sky, where do you think the best place to go is now?

Oh, guys, if after this entire long episode, I don't even know how long it's been now, what, over an hour. But if you're at this point and you haven't downloaded or gotten your hard copy yet, I mean, just. Just grab it. We have referenced a bucket load of stats and they can all just be meaningless. Actually, go look at for yourself in the report and see where you fit compare. So we'll put links galore in the show notes, I'm sure, where you can get a digital version and even order your hard copy because having that in the office is so valuable.

Yeah, perfect. We'll include that in the notes. And I think one thing you said at the start of the episode, sky really resonated was even if it's just to see whether or not you're doing the right things, compared to other builders that are performing well, it could be a lot of value in there.

Totally.

Great. Well, thanks so much for coming on the podcast today.

Thanks, Will. It was awesome.

Thanks so much, Will. Really enjoyed it.

Also, a big thank you to our listeners wherever you are in the world. If you like the show today, please subscribe to Professional Builders and Secrets on your platform of choice. And if you're feeling generous, leave us a review. But until next time, have a great day.