Tariffs + Timelines = Trouble
With tariffs rolling out and shaking up the industry, it’s not just material costs that are being affected.
JD Supra, a leading platform for legal insights, identified a few key areas to watch:
- Supply chain shakeups forcing contractors to find new materials and vendors.
- Uncertain timelines (and budgets) due to fluctuating prices and delays.
- Sureties and lenders accounting for heightened project risk.
- Cash flow crunches resulting from front-loading materials (especially with firms trying to outmaneuver price hikes).
And of course, rising costs across every phase of a project.
From sourcing to financing to final delivery, all of this uncertainty begs the question: “Is it smarter to move forward with construction now or hold off in hopes of more favorable conditions?” (JD Supra).
The answer to that question depends on your financial health. Clean books, accurate job costing, and an understanding of your numbers are key to remaining profitable amidst uncertainty.
Insurance Costs Are Rising
Insurance isn’t getting cheaper, and in construction, the risks are rising and evolving fast. According to this report from IMA Financial Group (IMA), insurance carriers are tweaking how they cover and price risk. From wildfires to cybercrime, here’s a quick summary of the main takeaways:
Climbing Property Premiums
Natural disasters like the California wildfires and last year’s hurricanes are increasing the cost of property insurance. Are your warehouses or job sites located in high-risk weather areas? Expect rates to rise (if not double) by 2030.
Liability Coverage Is Tightening
General liability and excess coverage rates are slowly rising. Plus, insurers are tightening their standards. High-risk industries like construction can expect stricter underwriting and less flexibility on terms.
Shifting Coverage For Workers’ Comp And Auto
Thanks to increased efforts toward jobsite safety, workers’ comp rates are steady and even dropping in some states.
Commercial auto coverage is a different story. The cost to insure work trucks or fleet vehicles could stay pricey, especially if you’re using higher-risk electric vehicles.
Increased Cyber Risk
Whether you’re using project management software or storing payroll information, cyber insurance is no longer optional. It’s the cost of protecting your business in the modern world.
With coverage getting harder to come by, it’s time to focus on what’s in your control. Having accurate numbers is one of the best ways to demonstrate that you’re a lower risk.
Stay ahead of the curve by keeping your financials clean and ready to share with insurance and surety contacts.
Backlog Isn’t A Safety Net
According to Associated Builders and Contractors (ABC), construction backlog has climbed to its highest level since September 2023, indicating a strong demand in the industry.
But while large contractors ($100M+) are seeing strong backlog growth, mid-sized firms ($30M–$100M) are seeing a year-over-year decline.
While backlog may be high, job delays can be more detrimental than project cancellations.
Why? Because you’re still holding labor. You’re still carrying overhead. And you’re unable to take on new projects.
Without the right contract terms (and an honest look at how you’re spending funds), a delayed job can quietly chip away at your margins.
To keep you protected, review your contracts to ensure you’re compensated for delay-related costs like holding onto labor.
Getting Ahead Of The Curve
In construction’s current climate, delays are costly, coverage is harder to secure, and lenders are digging into your numbers more than ever.
Clean books, accurate job costing, and a clear financial picture are essential to staying profitable and proactive.
At NLA, we can help you understand your current position. We’ll help you make sense of your numbers, uncover potential risks, and prepare your financials for conversations with surety, insurance, and lenders.
Start with a free Strategy Session + Diagnostic. We’ll chat about your goals and take a high-level look at your firm’s actual financial performance.
From there, you’ll walk away with a list of priorities and service recommendations suited to your organization.
