2012 Salary Survey
Who you are. What you earn.
February 25, 2012 by Robert Koci
This year, we received 50 per cent more responses to our survey than for any other year. The respondents were older, and are making more money than ever. Most of you have only one site supervisor and use subtrades half the time on fixed price subtrade contracts. Sixty per cent of you are not members of some kind of association, but those of you who join associations are making more money. As well, association members are holding the line on the amount of cash work they do, while non-joiners are doing more cash work than last year.
Who you are
The first four questions of the survey help us understand what kind of work those who answered the survey do. This year’s respondents said a little more than half of their income comes from renovations and improvements (55 per cent) while 19 per cent of their income on average comes from do mostly additions and the 30 per cent comes from custom homebuilding. (These numbers are averages of all respondents answers, so do not add up to 100 per cent.)
How you do it
A quarter of you have three jobs in progress at a time but beyond that, there is no clear trend in the number of jobs you run.
The split of labour costs between your own forces and subtrades is a close enough to call it 50/50, with employees getting the slightly higher percentage. When you hire subs, 56 per cent of your costs are tied into a fixed price contract, while 32 per cent come from time and materials contracts and 30 per cent from labour only agreements. (These percentages are averages across all respondents for each category so do not add up to 100 per cent.)
With the significant increase in respondents, the Canadian Contractor Salary Survey is clearly a credible, critical component for understanding what is happening in the renovation and customer homebuilding segment of the construction industry. The additional respondents seem to be coming from an older demographic. In 2010, 62 per cent of our survey claimed more than 20 years experience in the renovation business. Just one year later, that number is 67 per cent, with most of that number claiming more than 30 years experience. That’s one of the biggest jumps of any percentage in this year’s survey. In fact there is a steady rise in the “30 years or more” segment going back three years; from 26 per cent in ’09 to 30 per cent in ’10 and 38 per cent this year. Age wise, the number of respondents over the age of 50 jumped almost 10 per cent from last year to this. That bodes well for the accuracy of the survey and is a testament to how seriously it is being taken by committed, long-term renovators.
Where you are
With the increased response to the survey this year, we also have restored our representative distribution across the provinces. 2009 saw our best distribution where, except for Quebec, the percentage of respondents matched the percentage of national renovation expenditures in each province.
(Quebec is perennially under-represented as we have no French language edition). 2010 skewed heavily towards Ontario and away from Quebec, but 2011 has restored the 2009 balance.
The level of education of our survey respondents has remained within the ranges set by previous surveys. Over the four years, those with less that high school education counted between seven and nine per cent, for high school graduates between 34 and 37 per cent, between 50 and 53 per cent for college or university degree levels and between five and six per cent for post grad contractors.
Here also, the survey indicates a consistent representation. Membership in some kind of building association changed one percentage point between last year and this year. Let’s just call it about a 60/40, nonmember/member split. This survey is the only one in Canada that can reach contractors who are not members of some association.
As well, this survey is the only national survey that sheds light on the cash economy. What we are seeing is not necessarily good. Over the last three years of our survey–all post-recession years–the percentage of all contractors willing to do some cash work has steadily increased from 26 to 33 per cent. Importantly, the percentage of contractors that are members of an association that confessed to cash work stayed the same throughout those three years at 19 per cent. That means, of course, that the increase is entirely due to non-associated contractors where the number went from 37 per cent last year to 46 per cent this year. The most telling number, however, is the 18 per cent spread between association and non association contractors that do some cash work. That represents millions of dollars of tax money being remitted by association contractors that may not have been collected otherwise.
What appeared to be a rapid move toward online presence last year has apparently stalled. Where the increase of contractors online that occurred between 2009 and 2010 was the biggest of any change we saw last year, there was no change at all from 2010 to 2011. The use of social networking also stalled. Both last year and this, only 33 per cent of online contractors use social media. The only difference recorded this year was within the group using social media. Last year 50 per cent of them used social media to market their companies. This year, it’s 57 per cent.
And just to keep us all honest about the appeal of the internet, the number of you with websites actually fell by four percentage points from last year; 63 to 59 percent. Because no one who puts up a website ever actually pulls it down, even when it is abandoned, we suspect the drop is related more to a slightly different demographic answering this survey.
What challenges you
Marketing still eludes you somehow as it continues to score at the top of the “a-lot-or-some-difficulty” list of things that business owners deal with. Fully 25 per cent of you are struggling with it. After marketing and in order of difficulty are: Accounting and finance (12 per cent), administration (11 per cent), estimating (10 per cent). What you find easiest are project management, customer and employee/subtrade relationships.
Perhaps what you find easy is the real story here. From outside the industry, the expectation is that renovators are more builders than talkers; that it’s your hands that make you good at renovating, not your interpersonal skills. Of course, you know better. Renovations and custom homes are so complex in execution that the most important part of doing them successfully is managing the army of people involved. It’s nice to see you seem very comfortable doing it.
What you earn
In general, the largest proportion of you are taking home between $51,000 and $75,000 per year. That is not much different than last year. What is different is the drop in the number of you that are taking home less that $50,000 and the increase in those taking home more than $100,000. What do these tables say about our respondents? We know that the older you get, the more money you are likely to make (see below) and we know that the survey responders are generally older than last year. We think that has something to do with it. It could also mean that those that make less than $100,000 gross per year are dropping out of the business. Again, it is a weakness of volunteer surveys that the reason for such changes can only be guessed. We can certainly claim that the readers of Canadian Contractor who have responded to this survey are getting richer. An encouraging thought.
What makes more?
Now the question is, what are the indicators that suggest you will make more money in renovations than someone else? To answer that question, we have to match the survey’s findings on gross income or take home pay with a few of the other questions asked. Here’s what we found:
1. Experience increases take-home pay
The survey says that of all contractors taking home more than $75,000 salary, only 10 per cent have less than 10 years experience. As you go up the age scale, you find that for each additional decade of experience approximately another 10 per cent of you enter into the $75,000-or-more cohort.
We then looked at the same data the other way by asking, “At each level of experience, how many contractors are making more or less than $75,000?” We discovered a similar trend with an important difference. As levels of experience rose, the percentage of contractors making less than $75,000 dropped while those making above $75,000 rose—to a point. At 30 years or more, the trend reverses. Why? Does 30+ years of experience make
you dumber? Hardly. We think some of our most experienced respondents are making a choice to cut back, relax and let their income expectations settle to a level that doesn’t adversely impact their lifestyle.
And for the record, when we see that even after 20 years of experience running a business, working 50 hours a week and never taking holidays there is still only a 50/50 chance of making more than $75,000, we think there is something seriously wrong with the system. That has got to change.
2. Association members make more money
Here we matched the gross income of the company with association membership. Above the $250,000 gross income mark, it’s a push; half of you are members, half are nonmembers. But below $250,000 there are four times as many nonmembers as members. There is a chicken and egg argument here. Does being a member increase your income? Or does increase income make you want to become a member? Whatever the answer, the numbers make this fact indisputable; if you are an association member you are likely making more money.
3. Being online indicates higher income
The difference between those above or below $250,000 gross income is clear; below $250,000, only 13 per cent are online, above it, 47 per cent. We’ve noted elsewhere that the trend toward being online has stopped, yet being online remains an excellent predictor of greater income. It appears hard to ignore the impact of online presence to success. Let’s hope the stall is temporary.
4. More gross income equals less trouble with marketing
As noted above, marketing is biggest of all the challenges you face running your company, but for those of you who’s companies earn more than $1/2 million per year, it is less of a concern. Only 19 per cent of you over that threshold have a lot or some difficulty with it, whereas 32.5 per cent in the same income bracket have not much difficulty or none at all. On the other hand, 34 per cent who have companies that make less than $1/2 million in gross income per year have a lot or some difficulty with it. How much does your company have to gross?
We used $75,000 annual personal income as a watershed mark for most of our analysis because approximates the national average for income adjusted for the fact that you are self employed. One of the most important questions we wanted answered was how much gross income your company needs to make before it can afford to pay you $75,000. The quick answer appears to be $500,000. Less than that, and only 10 per cent of you manage $75,000 in take-home pay. At $500,000 to $1 million, 20 per cent are taking home at least $75,000. Once gross income reaches between $1 million and $3 million, 63 per cent of you are there. Of course, those of you with companies that gross more than $3 million make up the rest of the 90 per cent who are making $75,000 or more per year.
The surprise is that there are some (about 13 per cent) who’s companies are making $1 million or more but are still making less than $75,000. If that’s you, it might be the right time to read this issue’s Contractor U by Mike Draper on profit. Or maybe it’s just time to reconsider your career options.
Education doesn’t matter
The renovation industry may be the only industry where education is not a predictor of income.
When we matched income with education, this is what we found:
At every level of education, the percentage of you that made more than $75,000 per year in take home pay was equal to or less than those who took home less than $75,000. The largest difference is in the Post Grad category, but we think that might have something to do with the sample size. In any case, the implication is clear: the renovation industry is an equal opportunity employer where you can find success at ever level of education. In fact, a little too much education might do you more harm than good.
We always end the survey asking you to make some projections on how much money you expect to make in the coming year. Despite the volatility of the economy and much gloom and doom talk around the world, you continue to expect better and better. The trend is clearly toward a higher expectation every year. And when you realize that our 2012 survey also shows that you have indeed increased your income, both at the corporate level and the personal level, there is plenty to like about both your optimism and your execution.
This represents just a portion of all the information available from the Canadian Contractor Salary Survey. For a copy of the entire report, email at email@example.com and I’ll send you a copy.
How you buy
This year, we asked questions about how you buy your building materials, tools and supplies. Here are some of the things you said:
• When you were asked if you tended to be loyal to one store or shopped based on convience, 72 per cent of you said you were loyal to one store.
• You ranked Service and Price as the two most important factors in choosing where to buy. You ranked “incentive card program” fifth and last this year where it was ranked first last year.
• When you visit a hardware/building supply store, inexperienced staff ranks as having the biggest impact on your in-store experience. The factor with the least impact? The returns policy.
• It is a virtual tie between those of you who check pricing and availability on line before you buy and those of you that don’t.
• An incentive program being offered by a hardware/building supply store is note likely to bring you into the store.
For all the statistics on the your buying habits and the full survey on who you are and what you earn, go to www.canadiancontractor.ca and download the survey summary.