Category: Magazine Articles

Revolutionizing Construction: Using Drones for Site Surveys, Inspections, and 3D Modeling

Among the many technologies driving advancements in our world, drones are highly transformative, especially when it comes to the construction industry and their ability to increase accuracy, promote safety, and improve efficiency. Drones or Unmanned Aerial Vehicles (UAVs) are remote-controlled, high-tech devices that have become invaluable when it comes to site surveys and mapping, inspections, 3D modeling, and more. Adding drone capabilities to your business offerings is easier than ever thanks to an ever-growing list of options and resources.

What drones can do for your business

Drones complete critical tasks in less time and at a fraction of the cost of traditional methods. This includes but isn’t limited to, site surveying and mapping, inspections, and 3D modeling.

Site surveys and mapping are time-consuming, labor-intensive activities that pose safety risks. Drones significantly mitigate these challenges. They provide a bird’s eye view of a construction site, capturing high-resolution images and videos. This aerial perspective enables companies to identify potential issues, measure distances, and assess the landscape while reducing the need for manual labor.

When it comes to inspections, a drone’s ability to reach inaccessible or dangerous areas is proving invaluable. Previously, inspectors had to physically climb structures, risking their safety to check the integrity of buildings. Now, drones equipped with advanced cameras, sensors, and GPS technology can inspect structures with improved accuracy and detail.

As for 3D modeling, by capturing multiple aerial images from different angles, drones allow businesses to create highly accurate models and maps and enable construction teams to assess terrain, plan layouts, and identify obstacles. As a result, issues are addressed, plans are adjusted, and resources are optimized before construction begins.

In addition, 3D models can be used for progress monitoring. By comparing a project’s current state with a model, construction companies can track progress, maintain schedules, and manage resources more effectively.

Undoubtedly, the use of drones in construction will continue to grow thanks to enhanced capabilities from integration with the Internet of Things (IoT) and Artificial Intelligence (AI). AI-powered drones can already perform tasks autonomously, analyze data, and predict potential issues. Meanwhile, the IoT enables real-time data sharing and analysis, facilitating better decision-making and project management.

Construction companies using drones attest to the fact that they save time and money while promoting safety. The majority of large construction companies already use them. While uptake among smaller construction businesses has been slower, it is growing and presents an opportunity to be more profitable and distinguish your business from its competitors.

Getting drone capabilities off the ground

How do you get a drone program off the ground? Start by learning more. There’s an abundance of information online. Plus, drone manufacturers post valuable information on their websites, discussing everything from drone features and capabilities to use cases and important considerations.

Going a step further, you may want to explore online classes or certificate programs available at a growing number of community colleges to help you (or someone on your team) prepare to earn certification to operate a drone (as required by the Federal Aviation Administration).

Consider defining how you would use drones in your business. Create a budget and prioritize the drone capabilities you want, as both will prove useful when you research which drone hardware and software will best meet your needs.

You may have a few options for operating a drone. Depending on what’s available in your area, you can have someone on staff get certified to operate the drone; subcontract a licensed drone operator; or contract with a business specializing in offering drone services for construction.

Make sure whoever you use is familiar with federal, state, and local laws governing the commercial use of drones. Some municipalities don’t allow them to be used at all (largely due to privacy concerns). Others have restrictions, such as how close they can be flown to land. Requiring ongoing training is one way to stay up to speed on changing drone regulations, technology, and capabilities.

Finally, as your drone program and capabilities take off, develop a standard operating procedure covering aspects like mission planning, flight operations, data management, maintenance, and emergency procedures to ensure operations run smoothly and safely.

Investing time to launch drone capabilities as part of your construction business can have big payoffs now and in the future. Now is as good a time as any to get started.

Two Recruiting and Retention Advantages Small Businesses Have Over Big Businesses

Small businesses have two major advantages over large corporations when it comes to pay and benefits. That’s right – advantages!

First, you likely operate out of one location, which makes it easier to be well-versed on local economic conditions so you have deeper insight into what may be impacting your employees and how. Second, with fewer employees, it’s easier for you to find out what can make the biggest impact on retention and loyalty.

Let’s start with geography… It’s no secret New York is in one of the most expensive regions of the country and it’s a tough place to save money. According to the Federal Reserve Bank of New York, household debt is on the rise, especially when it comes to mortgages, credit cards, student loans and auto loans. Except for student loans, delinquency rates are increasing. As a result, anything you can do to help employees build savings and lower debt will undoubtedly be appreciated.

Next, consider how your employees’ demographics may impact pay and benefit needs. For example, a high school graduate may be mostly concerned about saving to move into his/her own place. A college graduate may be mostly concerned about student loans. New parents may be wondering where they’re going to come up with the estimated $25,000 needed for their newborn’s first two years. Middle aged adults may be more concerned about a mortgage or paying for college. Those approaching retirement may be preoccupied with wellness and whether they have enough retirement savings.

Based on what you know about your employees’ needs (or what you find out via a survey or focus groups), you’ll be in a better position to invest in rewards that help strengthen recruitment and retention. In addition, your business may be eligible for tax deductions and credits for offering certain perks. Consider:

Health care coverage If eligible, there’s a Small Business Healthcare Tax Credit worth up to 50% of the cost of employee premiums.
Retirement savings plans With SECURE 2.0, costs for starting certain plans may be covered 100%. What’s more, eligible employers can receive an annual credit up to $1,000/employee for contributions. Plus, small businesses can receive a $500 tax credit for automatically enrolling employees in its 401(k).
Paid time off For Paid Family Leave coverage, consider sharing the cost or paying the full cost of coverage, so employees keep more of their pay and have peace of mind that they’ll have an income and job protection should they have to take a family leave.
Early wage access or on-demand pay Allow employees to access earnings before payday, so they can avoid penalties for late payments due to cash flow issues, reduce the need to use high interest credit cards, and more.
Emergency savings accounts Help employees prepare for an emergency with an account set up at a local bank or credit union. Starting in 2024, under SECURE 2.0, add an emergency savings account to your 401(k) plan or allow for hardship withdrawals via self-certification.
Groceries How much would a membership at a local discount store mean to your employees? How about a meal allowance or food stipend?
529 College Savings Plan Help employees save for school for themselves or dependents. You can contribute and earn a tax credit. Savings can be used to pay for school or educational loans.
Tuition reimbursement or education assistance program In addition to helping pay for school, a program can also be used to help pay back student loans.
Child and elder care Depending on the type of benefit offered (i.e., onsite childcare versus paying for an offsite provider), your business may be eligible for tax credits or deductions.
Discounts programs or memberships Help employees leverage group buying power to save on everything from pet, car and home insurance to everyday purchases, appliances, and more.

Please note: The preceding are very brief summaries; a lot of conditions and requirements typically apply. To fully understand potential tax benefits of adopting certain benefits, it’s always best to consult a tax advisor. Also, before offering a benefit, it’s a good idea to run it by your employees to make sure it’s something they’ll value and use.

One benefit that may add value to all employees is financial education or advisory services. Whether you purchase classes online, hire a professional from a neighborhood bank to host classes, or take advantage of free online tools, helping your employees evaluate their financial situation, develop a savings plan, and reach goals is a valuable benefit given today’s economic environment. You help relieve the financial stress your employees may be under and build loyalty. (Avoid giving direct financial advice yourself, as it can backfire and lead to legal issues.)

Finally, if you’re struggling to retain employees there’s a good chance neighboring businesses are as well. Team up to see if you can offer discounts to each others’ employees – it can be a win-win for employees and businesses. (Your local Chamber of Commerce may be able to help.)

What if We Already Know How to Solve the Labor Crisis?

The current labor situation is different from any in our country’s history in one major way: there are simply more jobs than people to fill them.

A recent article on Bloomberg. com summed up the result, stating, “The time has arrived when America’s demographics are conspiring against its economic ambitions.” (Donnan, 2023) This sentiment holds true, according to a 2022 Manufacturing Institute/Deloitte study reporting almost half of manufacturing executives had turned down business opportunities due to the lack of workers (Institute, 2022). The situation is not going to get better any time soon, with the Congressional Budget Office predicting the American workforce will grow by less than .2% a year through 2031 (Office, 2023).

Many employers have set their sights on finding new, leading-edge solutions to address the crisis. No doubt innovation has its place, but so does creating a mutually beneficial, healthy employer-employee relationship and workplace based on fundamentals.

In January, Gallup reported that employee engagement is at its lowest since 2015, with the biggest declines in clarity of expectations; connection to the mission or purpose of the company; opportunities to learn and grow; opportunities to do what employees do best; and feeling cared about at work. The path to drive improvements isn’t new (ask employees for feedback; make changes based on feedback; clarify expectations; share and celebrate positive results); but, Gallup does have decades of proof that it works (Harter, 2023).

Another survey’s results issued in January, this time by the Conference Board, reinforce the crucial role fundamentals play in creating a workplace that works for today’s employee. The 2023 C-Suite Outlook Survey identified four strategies to create a better workplace: prioritize employee wellness to promote physical, mental, and financial health, as well as stress management; embrace flexible work arrangements; invest in all employees’ professional development; and strengthen succession plans. (Board, 2023)

There’s more. Executive Networks’ “The 2023 Future of Working and Learning Report” points to upskilling as the most critical aspect of organizational success this year. 45% of knowledge workers and 30% of front-line workers said people are leaving their company due to insufficient career advancement or development opportunities. About 83% of HR leaders and 79% of business leaders agree skills-based training should be used as a retention tool. (Networks, 2023)

Together, these survey findings and reports tell a powerful story: businesses need to get back to basics and walk the talk when it comes to creating the type of work environment that attracts, retains, and grows skilled talent. Still, this appears easier said than done.

The Manufacturing Institute with support from Colonial Life issued a report in November called: “The Manufacturing Experience: Closing the Gender Gap.” It says: “As it stands, women make up more than 29% of the manufacturing workforce. By raising the percentage of women in the manufacturing sector to 35% of total employment in the sector, there could be 800,000 more female manufacturing employees. This would be enough to fill almost every open job in the manufacturing sector today.” (Life, 2022) It sounds easy enough until you look at decades-old issues like pay equity.

The Pew Research Center issued a report in March stating, “The gender pay gap in the U.S. persists, and in fact, has 26 HV MFG barely budged during the past two decades.” In 2002 women earned 80 cents on the dollar as compared to men. Twenty years later, the pay equity gap improved by just 2 cents, with women earning 82 cents for every dollar earned by men in 2022. (Kochhar, 2023)

Another disconnect relates to diversity, equity, inclusion, and belonging (DEIB) initiatives. A survey commissioned by Indeed. com earlier this year found 49% of Black workers are considering or actively looking for another job due to unfair compensation, lack of career advancement, and lack of managerial support. Survey respondents indicate the actions companies take for DEIB (i.e., diverse hiring practices, diversity committees and awareness events) simply do not align with what Black employees want (i.e., pay transparency and equity; scheduling flexibility for work/life balance; and increased representation). (Team, 2023)

A presentation at the International Manufacturing Technology Show reinforced the disconnect. Cofounder of Thurgood Industries Darnell Epps said, “Black unemployment in our big cities is extraordinarily high, yet there’s very little outreach and recruitment in communities of color throughout our big cities. In Philly, LA, NYC…black unemployment in February was above 15%. In Detroit it was about 20%. More could be done with regard to the industry and with trade schools in focusing on those populations that have been underserved and have historic levels of unemployment and underemployment.” (Webster, 2022)

No doubt there is a place for innovations like artificial intelligence, employer/education/government collaborations, and more to address the labor crisis, but equal focus and effort should be given to getting back to the basics that create a great workplace, and really committing to drive long-lasting progress.

Resolve to Strengthen Your Bidding Process in 2024

Creating winning project bids is a science onto itself. Do it right and you open up opportunities to maintain or enhance your business’ profitability (pending actual performance on-the-job). The secret is to not forget to invest the time and attention to show the buyer why your business is the best for the job. In truth, that’s easier said than done, but there are ways to promote your chance at success.

Before anything else, consider whether a project is worth bidding on. If a job is simply a stretch, don’t do it. If there’s slim to no chance of winning, take a pass. Invest in bidding on projects that match your capabilities and business goals.

Make sure you completely understand the project scope. Become familiar with all project documents, plans and specifications, including bonding requirements, inspections, and security clearance. Review the request in detail, noting important points like whether you have to be prequalified to bid, the submission deadline, mandatory meetings, and any specific materials required. If you need clarification, ask! Not including all information requested can be an automatic reason for denial.

Research the company requesting the bid and any team members (i.e., architects) to gain insights into their values and priorities, client base, past projects, and more.

Assess risks and define how you plan on mitigating them. Are there any red flags that can cause problems like unknown site conditions, safety concerns, accelerated timelines, or inaccurate bidding documents?

Attend pre-bid meetings and conduct site visits to clarify project requirements and obtain answers to any questions. Are any bonds required? Does the client have participation goals for minority businesses or ESG? Can you substitute materials? Your goal should be to clarify expectations and identify any potential issues (like a work site not being easily accessible).

Define costs, accountabilities (who is responsible for what), and a project timeline. Estimates should encompass labor, mobilization, equipment (including fuel and transportation to/from a work site), and materials. If a job requires subcontractor work, get bids from at least three subcontractors and review closely for competitiveness, completeness, and accuracy. When it comes to accurate takeoffs and measurements, the importance cannot be overstated. Once you have a final bid, consider whether it will prove beneficial for your business. Sometimes not making a bid is the best decision you can make.

If you decide to move ahead with submitting the bid, have someone else proofread it and double-check all of the math. Confirm that all requested paperwork is included.

After submitting your bid, maintain communication with the potential client, subcontractors, and suppliers. Don’t hesitate to reach out to the potential client for periodic updates, especially if the project can impact other bids and work.

Finally, periodically review your bid process. How many projects have you won or lost? For losses, consider reaching out to the client or project manager for feedback. Learn whether there are adjustments you can make – without compromising profitability – to improve your hit rate going forward.

Power Your Small Business with Energy Tax Credits, Incentives, and More

If you have been thinking about upgrading your business facility or vehicle, there is no better time than the present.

Today’s tax laws and resources can help your small business reduce energy and maintenance costs; create a more comfortable and productive work environment; reduce your carbon footprint; and enhance your brand.

The Federal Inflation Reduction Act (IRA) provides tax credits for operating more efficiently and cleaner. New York state offers tax credits and numerous clean-energy programs. Add to that the incentives, special services, and financing available through energy-related providers and your small business may find significant energy and monetary savings. (Of course, eligibility criteria apply.) For example…

For New Construction or a Retrofit (addition of something new to something old) of a Qualifying Energy Efficient Commercial Building

With the IRA’s Energy Efficient Building Deduction (a.k.a. 179d), when construction or updates reduce annual energy and power costs by at least 25%, and prevailing wage and apprenticeship requirements are met, your business can receive a deduction of $2.50/square foot. For each additional percentage that annual energy and power costs are reduced, the deduction increases by $.10, with the maximum deduction being $5/square foot (up from $1.88 in 2022).

Lighting

One of the easiest ways to save energy (and money) is to upgrade to energy efficient lighting. Some LED solutions can save you up to 90% on energy related costs and some solutions can last up to 25 years without replacement. What’s more, if you make this part of new construction or a retrofit, upgrades may qualify for IRA deductions.

Building Envelope

Everything that goes into creating the shell of your building – walls, roofing, foundation, doors, and windows – is considered part of the building envelope. Improve temperature control, air quality, and condensation with building envelope updates like weatherstripping windows and doors, increasing insulation, and air leak sealing. Not only will your building be more comfortable, but you can also lower energy and operating costs, and possibly take advantage of IRA deductions.

Heating, Ventilation and Air Conditioning (HVAC)

Upgrading to a high-efficiency system can improve energy performance, especially if current equipment is more than 10 years old or malfunctioning. New clean heating and cooling systems not only save on energy, but also help your business reduce its carbon footprint. Plus, they have longer lifespans than older systems and provide more accurate temperature control. Make this part of a new construction project or retrofit to qualify for IRA deductions.

Solar

One of the cleanest energy options is solar. Businesses that adopt it can save up to 30% on installation costs with IRA tax credits, while potentially reducing energy costs by 75%. If interested, get started soon as these tax credits begin to phase out in 2033. In addition, New York offers solar tax credits (for the lower of $5,000 and 25% of installation costs). If your business is eligible for both the IRA and NY credits, you can reduce installation costs by more than 50%.

Vehicles

With the IRA’s Clean Vehicle Tax Credit, your business may qualify for up to a $7,500 credit for a plug-in EV or fuel cell electric vehicle (vehicles 14,000 pounds and over may qualify for up to a $40,000 credit). In addition, for cars, you may qualify for a $2,000 rebate under the Charge NY initiative, bringing your total potential tax credit to $9,500.

If you’re not sure where to start, numerous resources (including energy audits) are available through New York State and local utility providers (i.e., NYSEG, Orange & Rockland, or Central Hudson). Learn more about the many programs available to help your business operate greener and cleaner at https://www.nyserda.ny.gov/PutEnergyToWork/Industry-Energy-Solutions/Small-Business.

Construction Opportunities in the NYS Budget and Federal Acts

The New York Fiscal Year 2024 budget was worth the wait for construction businesses thanks to over $23 billion for infrastructure and capital projects across the state. At the same time, the budget makes history with the most progressive legislation on building decarbonization, continuing to incentivize the move to sustainable buildings with climate-friendly, clean, and affordable energy and complimenting certain Inflation Reduction Act tax deductions and credits.

On May 2, New York’s Fiscal Year budget was approved. While a housing compact that would have resulted in 800,000 housing units being built didn’t make it across the finish line, the budget does include $23.2 billion for capital projects that touch a variety of industries and fields.

The New York Department of Transportation’s five-year plan enters its second year with more than $7 billion budgeted for road and bridge projects.

State and City University of New York (SUNY and CUNY) campuses will see $2.4 billion in transformations, preservation and upgrades including building envelope, interior, electrical, HVAC and utility projects.

Design options for a new Wadsworth Public Health Laboratory for research in Albany will be funded with $1.7 billion so lab operations currently handled in several locations can be consolidated into one.

In addition, $1 billion is budgeted for healthcare capital projects; $890 million for mental health housing; $500 million for clean water projects; $446 million for the third phase of the Hunts Point Interstate Access Improvement project; $224 million for a seawall project on the South Shore of Staten Island; $135 million for New York City Housing Authority projects; $105 million for State Emergency Operations Center upgrades; $100 million for a State Police satellite crime lab; $51 million for Hudson Valley bridge replacements and rehabilitations; $50 million for a Homeowner Stabilization Fund to finance home repairs in 10 communities; $17.5 million to design and construct the Mamaroneck and Sheldrake River Flood Risk Management project; and more.

The new budget also makes New York the first state to advance comprehensive legislation for zero-emissions for new buildings and homes seven stories and under starting December 31, 2025, and all new buildings by December 31, 2028 (there are some exceptions and exemptions).

What’s more, $200 million is allocated to the NYSERDA EmPower Plus Home Retrofits Program to help 20,000 low-income families retrofit homes with insulation, energy efficient appliances, and clean energy solutions. Another $200 million is set aside for critical infrastructure projects at New York Parks.

This comes on the heels of the Inflation Reduction Act’s January 1, 2023 effective date for 179D Commercial Buildings Energy Efficiency Tax Deduction enhancements and new 45L tax credits for homebuilders.

For 179D, when prevailing wage and apprenticeship requirements are met and a building reduces annual energy and power costs by at least 25%, there is a $2.50 square foot deduction. For each additional percentage that annual energy and power costs are reduced, the deduction increases by $.10, up to $5.00/square foot (up from $1.88/square foot in 2022). The deduction is available every three years for commercial buildings; every four for municipalities, tribal governments, and non-profits. What’s more, municipalities, tribal governments, and non-profits can allocate to the deduction to the person/people who create the energy-efficient commercial building property installation technical specifications.

For IRC Sec 45L, there are two tiers of credits – $1,000 or $5,000 – for eligible new or substantially reconstructed homes and dwelling units (that are part of a building) that meet certain ENERGY STAR and Department of Energy Zero Energy Ready Home (ZERH) program requirements. The credit is available for homes/dwellings acquired after December 31, 2022 through December 31, 2033. (For details, visit 45L Tax Credits for Zero Energy Ready Homes at Energy.gov.)

Between state and Federal efforts, one thing is clear: a lot of opportunities exist – and undoubtedly there will be more to come – for construction companies and builders that embrace clean energy and climate-friendly practices and materials.

Managing ASC 842’s Ripple Effect from Financial Statements to Bonding

Now that financial statements reflect ASC 842, construction companies need to understand the potential effects on bonding and business so they can plan accordingly.

Last year, private companies were focused on identifying and categorizing leases to ensure they were accurately reflected on financial statements to comply with the lease accounting standard ASC 842 (which replaced ASC 840). Financial statements for year-end December 31, 2022 and beyond reflect the new standard. (Public companies adopted the standard for reporting periods starting January 1, 2019.)

Impact on Bonding

To work on certain projects, you may need a bond from a surety company to guarantee the terms of a contract will be fulfilled, as well as a certain bonding capacity (the maximum amount of coverage a surety company will provide). Sometimes a project owner may not require bonding, but instead uses bonding capacity as a prerequisite for being able to bid on a project.

Having a high bonding capacity shows a project owner that your business can meet its contractual obligations. It also allows you to bid on larger projects, enhancing your business’ ability to grow. There are even times that bonding capacity can mean the difference between winning and losing a contract.

ASC 842 impacts bonding and bonding capacity because financial performance is one of the primary factors a surety company will review when determining whether to issue a bond and for how much (they may also look at your work portfolio, experiences, references, business practices, and more). ASC 842 requirements can significantly impact financial performance reporting, potentially increasing challenges in obtaining bonding approvals or leading to higher bonding costs.

Impact on Financial Statements

Before ASC 842 took effect, operating leases simply had to be disclosed in a footnote on financial statements. With ASC 842, all leases – financing and operating – are recognized as assets and liabilities on the balance sheet. There is one exception: short-term leases, defined as leases with terms of 12 months or less at the lease commencement date, are not included.

The change enhances transparency and enables a more apples-to-apples comparison of companies’ debt related to leases and overall finances. At the same time, it can also impact key metrics on your financial statement and ultimately your ability to secure bonds (or loans), your bonding capacity, and more.

For example:

Debt-Service Coverage Ratio (DSCR) measures a company’s available cash flow to pay current debt obligations (principal and interest). As a result of ASC 842, DSCR may decrease, putting your ability to service existing debts into question and impacting perception about your business’ financial stability.

Working capital shows a company’s ability to pay current liabilities with current assets. It’s calculated by subtracting liabilities from assets. ASC 842 reporting requirements may result in a decrease in working capital, impacting perception about your business’ health and operational efficiency.
Debt to equity ratio (D/E) compares total debt to shareholder equity, revealing how much your business relies on borrowed funds to operate. A lower D/E is favored because it means your business has a lower risk of defaulting on a loan. However, a ratio that’s too low may be interpreted to mean a business isn’t using debt effectively for expansion. ASC 842 can increase liabilities and ultimately D/E, signaling potential issues with your company’s financial leverage.

The changes resulting from ASC 842 can affect a number of other metrics as well (i.e., interest coverage, return on assets, debt coverage ratio, and more).

Managing the Impact

Nobody likes surprises, especially when it comes to finances. Considering the broad impact of ASC 842, no doubt your stakeholders – including banks, surety companies and others – are aware of the new disclosure requirements for leases. Proactively communicating the impact ASC 842 has on your financial statement may help manage perceptions. (If you need assistance, you may want to consider speaking with your accountant.)

This may also be a good time to re-evaluate your leasing strategy. Is leasing still a better option than ownership? Is there any benefit to moving to shorter-term leases (i.e., 12 months or less) to minimize potential impact on financial reporting?

Finally, consider the longer-term. Based on how ASC 842 impacts your balance sheet and financial statement, are there business or operating changes you should consider to bring financial metrics back to where you want them to be?

When Hospitality Thrives, The Entire Community Benefits

When people eat, partake in entertainment and travel, they are setting in motion a series of interactions that can help a local community’s economy thrive.

According to Cumberlandbusiness.com, “When you choose to shop or dine at a local business or restaurant, you generate almost four times more economic benefits for your local community.” Fundera reports that when you spend $100 at a local business, about $68 stays in your local community. How is that possible?

It starts with the money a customer spends at a restaurant, hotel, and/or entertainment venue. In turn, those venues pay taxes on income earned and, at least a portion of those taxes get reinvested in the local community’s schools, roads, infrastructure, and more.

The money spent at a local restaurant, hotel, or entertainment venue also helps cover payroll for a business’ employees. In turn, those employees likely spend some of those earnings at other local businesses, whether it’s to put gas in their cars, food on the table at home, or just some retail therapy during breaks. If those employees and business owners live locally, they’re also adding to the local revenue and tax base every time they purchase oil or wood to heat their homes, pay for local recycling services, and more.

Additionally, restaurants, hotels, and entertainment venues are likely purchasing supplies – from food and toiletries to furniture and more – from local businesses. They may also be spending locally on business-related services like accounting, banking, cleaning, maintenance, printing, plumbing, heating, marketing, legal, and snow removal, to name just a few.

Hospitality businesses oftentimes serve as sources of referrals for one and other, as well as local tourist attractions, via flyer displays, placemat advertisements, and verbal recommendations. So, the cycle of spending – and collecting tax dollars within a community – continues.

There’s more. Community-based organizations and non-profits often depend on local hotels, restaurants, entertainment venues and other businesses for financial support, donations, and volunteers for their own fundraisers. According to TheFulfillmentLab.com, “52% of small business owners donate to charity, and of those that donate, 90% donate to local causes.” Again, a portion of funds raised likely get reinvested back into the local community.

There are also big picture benefits. When local hospitality establishments succeed, it can help a community attract and retain other employers, which can translate into more jobs, skills, and tax dollars.

Beyond financial benefits, hospitality businesses fulfill important social and emotional needs. In fact, a study conducted by TheCustomer, Brand Keys, and Suzy during the Coronavirus quarantine found that the first thing people wanted to do once quarantine restrictions were lifted was eat in a restaurant (that was followed by get a haircut/go to the salon and shopping.)

When hospitality businesses take advantage of all the opportunities available within a local community, and combine that with disciplined business practices as measured by key performance indicators, they not only promote their own success but that of the surrounding community as well. That benefits everyone.

Overcome Staffing Challenges with Customized Compensation and Benefit Plans

As an accountant, I can always depend on numbers to make sense, until they don’t. Take the talent shortage, for example. According to the AGC 2023 Construction Hiring and Business Outlook Report, 69% of survey respondents expect to increase headcount this year. At the same time, 80% indicate they’re having a hard time filling some or all salaried or hourly craft positions. Results are higher for respondents in the Northeast (76% and 88%, respectively) and New York (83% and 86%, respectively).

Add to that the existing shortage of 650,000 construction workers, plus the expectation that more than 40% of the current U.S. construction workforce will retire in the next decade, and the math just doesn’t add up.

The equation gets even more complicated. There are 67 workers for every 100 open jobs in the U.S. according to the U.S. Chamber of Commerce. People are staying out of the workforce. Immigration is at an all-time low. Headlines are screaming about shortages in doctors and nurses, government employees, teachers, accountants, public service employees, techies, and more, making competition for limited human resources fierce and the need for a comprehensive, multi-faceted talent acquisition strategy table stakes.

Put simply, there are more jobs than people and that’s not going to change. What has to change is how companies acquire and retain talent, while reinventing how work gets done. This includes coming up with engaging compensation and benefits approaches that strategically differentiate your company from competitors’.

For example, what if an employer created a customized benefit for different employee classes that provides a modest benefit for less experienced team members, but grows as they become more experienced? It could have a multiplier effect based on length of service but allow the team member to receive payments at milestones so the benefit is real now and not 30 years away. The employer could contractually put money away for an employee, get a tax deduction, and gain a competitive retention and attraction tool.

According to Lou Bach who leads RBT CPA’s Spectrum Pension & Compensation affiliate, “These Non-Qualified Deferred Compensation Plans are usually reserved for top executives and have a salary deferral component, like 457 plans; however, since they are employment agreements, they are not limited to highly compensated employees. Rather than salary deferral, all contributions are provided by the employer. I’ve seen them referred to as ‘Tactical Employer Compensation Arrangements.’ We have actually done a number of these for clients, dating back over the last decade. Given today’s shortage of skilled labor, I believe we’ll be seeing more of these types of arrangements going forward.”

Willard Financial Group out of Springfield, MA, for example, has been custom designing select incentive plans since 1996 for key employees with specialized skills, ranging from executives and project managers to machinists and nurses. According to James D. Percy, J.D., CLU, ChFC, “Because these are non-qualified plans, such as deferred compensation and SERP (supplemental executive retirement programs), we can provide companies with the ability to pick and choose who participates and the benefit level for each employee. Once the company decides which employees will participate, we custom design a simple plan tailored to each selected individual or group.” That custom-designed deferred bonus plan with ancillary benefits can be tailored to the needs of each employee.

So, an employee with young children may find an agreement that pays a child’s college tuition in ten years, plus offers life insurance meaningful, while someone retiring in 10 years may prefer a payout equal to three times compensation at the end of a long-term project. The key is to design the custom plan to be meaningful and motivate each individual employee.

In addition to adopting creative approaches to pay and benefits, you may want to check out recruiting and retention resources at the AGC, U.S. Department of Labor, U.S. Chamber of Commerce, National Center for Construction Education and Research, and the Building Talent Foundation (BTF). Also find unique talent resources via organizations like Helmets to Hardhats, the Rework America Alliance, and Opportunity@Work.

Real Estate Markets: Which Way Will They Go?

While I originally set out to write about interest rates and inventory, research into the housing and commercial real estate markets left me feeling that there are a lot of mixed messages out there, and that’s probably because there are. With so many different ways to measure what’s going on with these markets and so many different indices, I feel a need to take a step back and simplify what I’m seeing.

To start, let’s talk interest rates. The Federal Reserve increased them for the eighth time on February 1 by a quarter point. The fact that it was a lower increase than the past few may signal efforts to rein in inflation are working – which would be good news for real estate and ultimately construction…maybe.

While the Fed doesn’t set mortgage rates, which are influenced more so by 10-year Treasury yields, lenders do try to determine what the Federal Reserve’s actions mean and that eventually impacts mortgage rates, which have dropped from their high of 7.12% last October to 6.3% as of Bankrate’s national survey on February 1. (The Mortgage Bankers Association is predicting rates as low as 5% by the end of 2023.)

Home prices are no longer soaring upward. In fact, they’re starting to stabilize or even decrease a bit, which you would think would mean a pickup in demand and sales, but there are other factors at play. Inventory for affordable housing is down for the 39^th consecutive month and the number of properties for sale are down for the 37^th consecutive month, according to a report from the New York State Association of Realtors.

Rather than adding to inventory, homebuilders are focusing on getting rid of their existing inventory (and boosting new home sales) and people who locked in historically low mortgage rates will likely continue holding onto their homes. While single family home starts did increase in December, permits decreased. Then starts decreased in January, sending more mixed messages.

Still, the National Association of Homebuilders (NAHB) national Housing Market Index (HMI) increased for the first time in 13 months in January and again in February. The NAHB predicts this increase in homebuilder sentiment combined with lower mortgage rates will spur permits and new starts for single-family homes, which have fallen to the wayside in favor of multi-family homes due to the expectation that people would continue to rent versus buy. However, the NAHB anticipates higher vacancy rates and tighter lending conditions may lead to a slowdown in multifamily housing starts this year, while others believe multi-family housing remains attractive to investors especially during an uncertain economy.

Turning to commercial real estate, what the Fed does has a bigger impact. When rates increase, there are corresponding slowdowns in investor activity on the commercial side. The 2023 Dodge Construction Outlook expects total construction starts to decrease, with retail, warehouse and hotel projects falling dramatically and office and warehouse sectors seeing pullbacks. There’s still a high volume of unfilled office spaces in big cities, although Moody’s Analytics indicates vacancy rates haven’t dropped below 2019 levels.

Thanks to onshoring, CHIP manufacturing and data centers, U.S. industrial real estate needs are on the rise. E-commerce continues to drive the need for warehouse and industrial space. Neighborhood retail is doing well, but malls are not. While the Dodge Momentum Index, which measures nonresidential building projects in planning and leads nonresidential construction spending, was down 8.4% in January it’s still up 32% year over year. It also doesn’t hurt that when interest rates are rising, commercial real estate is seen as a solid investment.

That’s where things stand as of 2:12 PM EST on February 23, 2023. If inflation starts increasing again, the Feds change direction, and/or mortgage rates start increasing again, the message will likely change once again.