+70% increase in the price of wood (+100% in Europe!). +25% increase in cement prices. This rise in the prices of building materials, which comes at a time when the sector is already struggling with a unprecedented labour shortage, has worried construction professionals for several months.

And rightly so! How to ensure the growth of your business when profit margins are shrinking? How can you save to remain profitable and competitive? What are the solutions available to construction professionals? We take stock for you.

Understanding the causes of the increase in building material prices

As with any alarming situation, the best way to deal with it is first to ensure that you fully understand the root causes that led to this situation. The surge in the prices of building materials did not happen overnight; it was the result of a multitude of factors and circumstances:

• The shortage of raw materials: The growing global demand for certain building materials (such as concrete whose consumption has increased by 4% every year since the beginning of the 2000s) coupled with extraction or production problems, leads to a scarcity of resources and therefore to an increase in prices.
• Supply and demand: Just after the COVID-19 epidemic, the Construction sector experienced a rapid boom that quickly put pressure on the market. As demand outpaced supply, prices soared.
• Disruption of supply chains: The COVID-19 pandemic has caused major disruptions in global supply chains and we are still suffering the consequences. Factory closures, labor shortages, and transportation difficulties associated with border and port closures have significantly increased the price of transporting materials and raw materials.
• Geopolitical Factors: International tensions and conflicts between countries, even remote ones, can disrupt the supply of certain raw materials, such as oil and gas, leading to an increase in energy prices and, in turn, in the prices of construction materials in Quebec.

The consequences of the increase in the prices of construction materials for professionals in the sector

The surge in the prices of construction materials has major repercussions on all players in the Construction sector, from General Contractors to Civil Engineering professionals, including Subcontractors, all companies are impacted, from the largest in the country to the most modest. Some of the main challenges your businesses face include:

• Rising construction costs: Obviously, the higher the cost of materials, the more the total bill increases for you and your customers.
• Difficulties in meeting project budgets and deadlines: Material shortages cause delivery delays, making it impossible to complete a job on time if materials are not delivered. As for the sudden rise in the prices of building materials, it can quickly undermine compliance with the initial budget, sometimes forcing companies to cut back on quality.
• Decrease in profit margins: To remain competitive and win tenders, many companies are forced to reduce their profit margins.
• Increased pressure on business profitability: To remain competitive and profitable, companies in the construction sector have no room for error. This makes them more vulnerable to risks.

What solutions to deal with the increase in the prices of building materials?

Fortunately, and although the increase in the prices of building materials continues to worry many professionals in the sector, there are solutions to deal with this situation. It is possible to implement best practices to limit the impact of this increase on your activities and maintain your profitability.

Negotiation and search for alternative suppliers:

As a first step, you can start a dialogue with your usual suppliers to try to negotiate a better price for your construction materials. Highlight your order history, reliability and loyalty. Do not hesitate, either, to ask for several estimates from different suppliers. By comparing prices and terms of sale, you could make good deals.

Optimization of stock management:

With prices rising, there's really no time to waste! Optimizing your inventory management is crucial to avoid mistakes and additional costs. Opt for precise planning of your needs for each of your construction projects and closely monitor all your uses and expenses. Investing in dedicated software can be an excellent idea, some software allows real-time monitoring of your stocks and a optimal resource planning.

Use of estimation software:

All professionals in the sector agree on this point, it is the estimate that determines the profitability of a construction project. And in a context of soaring prices, this is even more true! Adopting efficient estimating software is therefore an excellent idea to ensure the profitability of your construction company., because to make accurate and detailed estimates, it is an indispensable tool since it will allow you to:

• Keep an eye on the price of building materials in real time: By integrating up-to-date material prices, this software makes it possible to anticipate the real costs of projects and to limit unpleasant surprises.
• Improve the accuracy of your estimates: Estimation software makes it possible to take into account numerous parameters that influence the cost of materials, such as quantity, dimensions, technical specifications and supply conditions. Your estimates will therefore be more reliable and the risks of errors considerably reduced.
• Anticipate fluctuations in material prices: High-performance estimation software makes it possible to integrate data on the evolution of material prices (among other things, of course) and to simulate the impact of these fluctuations on the total costs of your projects. In this way, you will be better equipped to deal with the risks associated with price volatility and your estimates can be more competitive.
• Save time and increase efficiency: Using estimating software makes it possible to automate time-consuming submittal tasks, such as price research, quantity calculation, and quotation formatting. This will give you more time to focus on your job!

The increase in the price of building materials is not inevitable!

The surge in material prices is putting the construction sector to the test, but there are simple solutions to protect you: inventory optimization, negotiation, optimized planning, estimation software, project management software, etc. We have no doubt: you are fully capable of adapting and ensuring the growth of your business!

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