Crippling Effects of Inflation on Construction Contractors (and Solutions to Overcome it)

Alex Kablanian, VP and GM of Commercial and Construction at ServiceTitan, provides a real take on how inflation is ripping through the construction industry.


IRONPROS: What parts of the construction industry are heavily affected by inflation?

ServiceTitan: Inflation impacts all parts of the industry, but the most significant impact will likely be on parts, materials and equipment, especially for long-term projects. Construction contractors typically run a tight-margin business and can’t always afford to pay months in advance for equipment needed for a job they’ve won the bid on. Therefore, they’re at the mercy of price changes for equipment, materials and parts for a project, which are highly susceptible to inflationary pressures.

This ultimately impacts the cost of a job and usually means that the contractor takes the margin hit as it’s very difficult to increase the price of a job post-bid. Margin hits apply to all types of construction businesses but are most painful for high-ticket jobs and jobs with long durations between winning the bid and completing the work. 

IRONPROS: How are construction businesses dealing with inflation related challenges?

ServiceTitan: We’ve seen construction businesses start to optimize for either winning jobs they have a history of high profitability on or increasing their price estimate for the project. In both cases, they are factoring in supply chain and inflationary risk to help optimize for net margin dollars, even at the expense of top-line revenue.

At ServiceTitan, we help our customers truly understand the profitability of past and current work so they can always make informed decisions on how to ensure their current projects are on time and on budget while also ensuring their future bids are profitable.

IRONPROS: Do you think high labor, equipment, service and material costs will be around in the long term or are they transitory?

ServiceTitan: Successful contractors are in business for decades - as a result, they see changes in labor and supply costs more cyclically. I predict this dynamic will continue. The one area I suspect will continue to increase is labor costs. Given the nature of the labor shortage across the trades, this is no surprise to those in the industry. It’s a serious issue that needs to be solved systemically, but until then, there will always be a supply and demand imbalance, likely driving up labor costs.

Therefore, the time of the technician or installer is highly valuable for these businesses and it’s more critical than ever to ensure they are as productive as possible, which is where technology and other tools can make the biggest impact for businesses. 

IRONPROS: What types of technology can businesses use to reduce the effects of inflation in their operations and projects?

ServiceTitan: For contractors, labor, material and equipment costs are typically the biggest expenditures. Therefore, finding any way to optimize those P&L line items will have the most significant impact on curbing inflation. Technology can be a big driver of optimization throughout the business and these approaches can move the needle the most: 

  • Optimizing the technician’s or installer’s time in the field by providing them with all the information they need to run their job as quickly as possible via mobile applications. ServiceTitan has developed a mobile application that provides all the information a technician needs right at their fingertips, from location details, job details, required forms, equipment information, timesheet activity and more. 
  • Reducing back office labor required to run the business by automating away manual tasks like dispatching or writing, sending and following up on invoices. ServiceTitan offers an AI-powered dispatching capability that automatically optimizes and dispatches the best technicians for the best jobs. We also offer generative AI capabilities to automate the creation of invoice summaries and follow-up emails for unpaid invoices.
  • Creating efficient procurement and inventory processes ensures no money is wasted on unused parts or materials. ServiceTitan offers a full suite of purchasing and inventory management capabilities, including automated replenishment, so you can always stay on top of your procurement cycle.

IRONPROS: What should businesses expect when implementing new technology in their operations?

ServiceTitan: Change management can be difficult without everyone in the organization understanding “the why” and without a trusted partner who is guiding your business through a big transition. It takes the buy-in of both sides (customer and vendor) for a big software implementation to go well. Typically, the first few months are difficult, as all employees are learning a new system for the first time, which comes with growing pains.

However, time invested up front on proper implementation and training will yield massive ROI for months and years to come and is well worth the investment. 

IRONPROS: Provide an overview of the company and its mission.

ServiceTitan: ServiceTitan’s mission is to build the operating system for the trades. The company’s co-founders, Ara Mahdessian and Vahe Kuzoyan, grew up watching their fathers, both tradespeople, work long days in the field followed by long nights back at home managing the business. They witnessed their parents tirelessly work their way up, from service technicians to proud owners of trades businesses. Ara and Vahe also saw a unique opportunity to use their backgrounds in Computer Science to help their dads, so they built software that solved specific pain points trades businesses face.

Armed with a distinct knowledge of the industry, what began as a desire to give their parents a better quality of life transformed into a mission to provide the trades with an end-to-end technology platform to help contractors grow their businesses and reach the level of success they deserve. Today, ServiceTitan is lucky and proud to serve thousands of Commercial & Residential contractors who perform Service and Construction work across many verticals.

IRONPROS: What can customers expect from ServiceTitan in 2024?

ServiceTitan: 2024 is another big year for ServiceTitan. We have several exciting developments on the roadmap ahead for contractors across both construction and service work. 

  • Bolster Project Capabilities: Our project tracking capabilities are integral to our platform. This year's initiatives focus on improving the management of complex projects, new crew & timekeeping capabilities, continuing to enhance visibility into project financials and revamping our sales pipeline to let you track and move leads to contracts throughout the funnel. 
  • AI as the Foundation: AI is at the forefront of innovation for our platform and will continue to be embedded throughout all of our workflows. From document OCR to equipment predictability and virtual assistants in the field, our planned enhancements are taking construction tech to the next level. 
  • Enhanced Customer Experience: Communicating and interacting with your customers is a key part of fostering a relationship. ServiceTitan is focused on a revamped Customer Portal, letting users showcase relevant data in a self-service and intuitive manner. We’re also adding to our CRM capabilities, improving how you manage your customers and how they interact with your services. 
  • Strengthen our Core: While we’re continuing to evolve our construction capabilities, we are constantly building the most robust service platform. We’re focused on usability improvements for Service Agreements, like the ability to e-sign and edit proposals in-app, a redesigned mobile app that creates a frictionless experience for field workers is currently in beta and rolling out across our customer base and mass improvements to the way you manage and track your assets/equipment. 
  • Further Partner Expansion: Our 50+ partners and pre-built integration ecosystem grows monthly. Our partner initiatives this year focus on additional accounting integrations (Netsuite, Sage 100 C, 300 CRE and more), supplier integrations (Ferguson and WinSupply) and more integrated facility/property management platforms (ServiceChannel and others). 

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