The 2019 CLA General Building Construction Benchmark Report

  • Industry trends
  • 10/24/2019
Sunrise Digger Workers

CLA surveyed 237 general building contractors throughout the United States to help you see how your organization compares to competitors. Explore the data.

General building contractors face daily challenges, both operationally and financially. They need to know how their company stacks up against their competition and if there is anything they can do better to improve their operating results.

CLA’s industry professionals have compiled data from privately held general building construction companies to create an annual benchmark report that provides analysis of critical ratios and national trends.

This 2019 General Building Construction Benchmark Report summarizes data from 237 general building contractors from across the United States. This report offers key financial and non-financial information to assist general building contractors in comparing themselves to their peers. Contractors included in the survey are engaged in general building activities related to residential homes, commercial buildings, condominiums, multifamily housing, hospitality, gaming, airports, industrial facilities, parking garages, and renewable energy projects.

General Building Contractors’ To-Do List

  • Attract and retain quality employees. Evaluate your company’s training programs and incentive opportunities to keep employees educated and engaged.
  • Discuss the new revenue recognition rule with your CPA.The standard is effective for calendar year-end 2019 companies. Implementation of this standard requires time and resources.
  • Consult with your tax advisor to determine whether your entity structure is providing the most benefit to your company.
  • The new lease standard has been deferred a year; however, it’s not too early to start gathering and summarizing lease agreements for the implementation of this standard in 2021 for calendar year-end companies.
  • Cybersecurity is always a risk. Consider conducting a cyberthreat evaluation to ensure your company is secure.

Overview and Executive Summary

Industry challenges and opportunities

Across the general building industry, gross margins (as a percentage of revenue) increased slightly from 10.1% in 2017 to 10.3% in 2018. Overall profitability (operating income as a percentage of revenue) also increased slightly, from 2.7% in 2017 to 3.2% in 2018. General building contractors were also able to maintain strong balance sheets while keeping margins consistent.

General building contractors face several challenges in 2019.

  1. The general building industry continues to face workforce issues. Without a succession plan, the aging population of employees at higher levels of management may leave companies with inexperienced leaders. In addition, labor shortages across the country remain a challenge for companies to attract, train, and retain employees.
  2. Cybercriminals continue to target small- and medium-size businesses through ransomware and online banking attacks. Ongoing security and maintenance are imperative to prevent cyberattacks.
  3. Recent natural disasters will further impact the construction labor market and put upward pressures on material prices.
  4. Tariff activity from the current administration has led to more volatility in supply prices, particularly from foreign suppliers. This has caused cost forecasting to be increasingly difficult, with lumber and steel prices changing significantly after bids have gone out.
  5. The recent tax reform presents opportunities for contractors to re-evaluate their organization structure, capitalize on incentives for re-investment in their business, and make updates to their employee reward programs.

Key Ratios and Trends

Margin on self-performed work ― More general building contractors are self-performing specialty work, such as concrete and electrical, reducing the number of subcontractors and increasing margins. Overall margins on this work have increased from 28.1% in 2017 to 28.7% in 2018. For general building contractors with revenues greater than $50 million, the margins increased from 29.5% in 2017 to 31.8% in 2018. Margins for contractors less than $50 million also increased, from 27.7% in 2017 to 28.4% in 2018.

Self-performing work is increasing; however, general building contractors need to be careful that they have the expertise necessary to perform this work and understand the potential for future warranty work. The increase in margins over time suggests that contractors are increasing their efficiencies and expertise.

Working capital turnover ― Working capital turnover for all general building contractors in the benchmark study decreased from 13.7 in 2017 to 13.1 in 2018. Contractors with revenues greater than $50 million experienced the most significant decrease, from 23.1 in 2017 to 21.0 in 2018; however, these larger contractors have the highest working capital turnover in the survey compared to companies with revenues less than $50 million, with ratios of 11.0 for 2017 and 10.3 in 2018. Larger companies are clearly able to more effectively use working capital to generate revenue.

Days in accounts receivable ― Days in accounts receivable, or the number of days it takes to collect accounts receivable, decreased for all general building contractors, from 49.2 days in 2017 to 46.0 days in 2018. Cash collection is of upmost importance in a business that relies on its ability to pay employees and suppliers to keep projects moving forward. The number of days in accounts receivable is significantly less for contractors with revenues less than $50 million, (47.8 days in 2017 and 45.2 days in 2018) than contractors with revenues greater than $50 million (54.3 in 2017 and 47.0 days 2018). In addition, days in accounts receivable is substantially less for non-union contractors than for union contractors. The average number of days in accounts receivable for non-union contractors decreased from 42.6 days in 2017 to 41.3 days in 2018. For union contractors, the days decreased from 58.9 days in 2017 to 52.2 days 2018.

Months in backlog ― This metric is increasing slightly for general building contractors overall. As more active jobs are circulating and contractors have secured more backlog, months in backlog increased from 6.3 to 6.4 months between 2017 and 2018. However, contractors with revenues greater than $50 million have seen a decrease in months in backlog, from 8.0 months in 2017 to 6.8 months in 2018. The union contractors, which experienced a decrease in months in backlog from 6.7 months to 5.7 months between 2017 and 2018, contributed to the majority of the decrease for contractors greater than $50 million. Overall backlog for general building contractors remains strong.

Report Methodology

Financial ratios and key performance indicators have been computed using information obtained primarily from audited and reviewed financial statements of our construction contractor clients. Participation in the study is voluntary, and data have been analyzed by representatives from our construction industry practice. This report summarizes data from 237 general building contractors with operations conducted throughout the United States.

Financial Ratios and Key Performance Indicators

Analysis of financial ratios and key performance indicators can assist in the assessment of a contractor’s financial health, operating efficiency, and profitability. A critical element in the review of a contractor’s financial well-being is understanding the magnitude of a variance compared to similar organizations, and then taking the initiative to investigate and understand the reason for the variance. Ultimately, understanding the cause of variances may lead to a series of operational changes that may both improve profitability and create efficiencies.

Consistently monitoring key financial and operational indicators can help management improve profitability and operations and provide information for developing competitive bids and maintaining healthy financial statements for bonding. Some of the advantages and limitations of using comparative indicators are outlined below.


  • Benchmarks provide comparisons to contractors with similar operations.
  • The data help identify unusual operating results and trends.
  • Performance indicators highlight areas of potential opportunities or challenges.


  • Variances alone do not necessarily reflect an opportunity or a challenge.
  • Potential for inconsistency in data collection can reduce the usefulness of comparisons.
  • Benchmarks should be used in conjunction with other analyses of a contractor’s operations.
  • In a highly specialized market segment, companies may face a broad spectrum of competition.

Ultimately, no single ratio or financial analysis should be evaluated on its own to assess a contractor’s financial condition. Variances from benchmarks should be investigated and considered in the context of the company’s specific operating structure, sub-industry, and the region in which it operates. In many cases, the most useful information is a combination of benchmarking data and the company’s own numbers.

Ratio analysis and key performance indicators

The following graphs present median results for each key performance indicator (KPI). The median values for each KPI were computed independently and represent the mid-point of the data set. Since median calculations are being used, mathematical relationships do not exist between the various KPIs reported.

Return on Equity

This ratio represents the owners’ return on investment and can be skewed based upon the amount of discretionary expenses a company provides employees. Contractors with revenue of more than $50 million tended to have higher return on equity than other general building segments between 2016 and 2018.

Margin Self Preformed Revenue Formula

This ratio represents the percent of self-performed contract revenue the company retains after incurring direct costs associated with completing the contract.

Subcontractor expense for general building contractors can be a significant portion of the overall cost associated with a project. Oftentimes subcontracted work yields little or no profit margin to the prime contractor and can result in total gross profit percentages becoming skewed based on the amount of work a particular company subcontracts to others. Analyzing a company’s margin on self-performed revenue often provides a better indication of the company’s ability to generate profit on the work it performs.

All industry segments experienced an increase in margin on self-performed work when compared to 2016. Margins on self-performed work are significantly higher for general building contractors than the overall gross margins.

Working Capital Formula

Working capital turnover indicates the amount of construction revenue generated by each dollar of working capital. The higher the ratio, the more efficient a company is in using working capital to generate revenue. However, very high working capital turnover (more than 35) can indicate the need for additional working capital to support revenue goals.

Working capital turnover varied throughout the industry segments; however, the larger, more established general building contractors with revenues over $50 million generally produced greater levels of revenue in each year compared to the other segments.

accounts receivable Formula

Days in accounts receivable (AR) calculates the average number of days that receivables are outstanding, or how quickly a contractor converts its receivables to cash. Fewer days in accounts receivable are desirable, as this suggests a company takes less time to convert its receivables to cash.

Overall, it is taking general building contractors less time to collect on their receivables than it did in 2016 and substantially quicker than 2017. Union contractors and contractors with revenue greater than $50 million consistently take longer to collect receivables than non-union and smaller contractors with revenues less than $50 million; however, all segments have improved collections over the past year.

Balance sheet compositions

The following graphs are the weighted average composition of the balance sheets and income statements of all the survey participants. This information can help assess a contractor’s overall financial position and results of operations in relation to its peers.

Asset compositions

The asset composition of general building contractors did not change significantly compared to 2016 and 2017. Receivables and cash make up the majority of their total assets. Inventory and fixed assets do not make up a significant percentage due to the use of subcontractors. Also note that a company’s asset composition may differ due to location and seasonality. Typically, seasonal contractors in the northern United States see a higher percentage of cash and lower percentage of receivables due to a few months with minimal billings.

Liability and equity compositions

Similar to the asset composition, the composition of liabilities and equity has not significantly changed since 2016. The largest percentage of liabilities and equity consists of payables, which is consistent with the large percentage of receivables. The level of long-term debt is low due to less need for general building contractors to finance equipment purchases. The level of overbillings is greater than the level of underbillings in the asset composition, which means companies are able to secure favorable billing terms in their contracts.

Overall, general building contractors continue to report healthy net worth, with equity approximately 22% of total liabilities and equity, to finance operations and support bonding capacity.

Income statement compositions

This chart shows the weighted average composition of direct contract costs compared to total revenue for 2018. These comparisons vary depending on the nature of the projects, status of projects at the end of the reporting period, and whether a company self-performs or subcontracts work. Therefore, the composition for a particular general building contractor will depend on operating capabilities, strategies, and the nature of the projects under contract during the reporting period.

General and administrative (G and A) expense composition

This chart shows the weighted average composition of general and administrative (G and A) expenses compared to total revenue for general building contractors for 2018. These comparisons may differ depending upon a variety of factors, including the company’s size, complexity, corporate structure, and culture. A related performance indicator is a company’s G and A expenses as a percentage of its revenues. This provides a gauge of overall overhead expenses relative to how well those costs are generating revenues. This can offer insight into a company’s cost structure compared to its peers.

Additional key performance indicators

Below are some additional key performance indicators that may be helpful in assessing a company’s overall financial health and performance.

How we can help

CLA offers this publication as a resource for companies in the construction industry. It is intended to assist management by providing comparable data, industry trends, and other information to help them make strong financial decisions.

A more detailed comparison of financial results is available through the CLA Benchmark Analysis service. This analysis provides a comprehensive comparison of a company’s financial results to a defined group of similar contractors that are selected using a number of factors, including geographic operating region, company size, union or non-union labor force, public or private work focus, and many other considerations. The analysis provides for easy comparison between different-sized companies and combines balance sheet and income statement analysis, along with a graphical comparison of approximately 40 key performance indicators.

The information presented in a benchmark analysis has assisted many construction companies in identifying areas for improvement and highlighting aspects of their business that need further attention. A company’s decision-makers can use the analysis on an ongoing basis for strategic planning, risk mitigation, internal budgeting, and to help define and track financial and operating goals.

Check out CLA's broader construction industry benchmarking report.

Experience the CLA Promise