Thriving in 2025: What Top Subcontractors Do Differently

The construction landscape in 2025 presents a mixed picture of high demand tempered by new challenges. After two years of rapid expansion, growth in nonresidential building is expected to slow to about 2% this year, down sharply from nearly 20% in 2023 [1]. Sectors like data centers and manufacturing facilities remain bright spots, while commercial and institutional projects see more modest gains [1]. At the same time, input costs have reaccelerated – nonresidential construction expenses were rising at a 9% annualized rate early in 2025, the fastest in two years [2]. This inflation, coupled with tariff uncertainties, is squeezing profit margins and even causing some project delays [2][3].

These headwinds are not affecting all contractors equally. Successful subcontractors position themselves by targeting growth markets and maintaining a robust pipeline of work. Many are pivoting to larger-scale projects and private-sector jobs – in fact, a majority of subcontractors plan to bid on bigger private projects in the coming year [4]. By contrast, about 35% are pursuing government contracts, tapping into infrastructure and public investments [4].

Top performers also recognize the value of an experienced workforce amid persistent labor shortages. Instead of cutting headcount during lulls, contractors are holding on to skilled workers – the industry’s layoff rate hit a record low in early 2025 as firms anticipate a rebound [2]. By investing in employee training and productivity, leading subcontractors mitigate labor constraints and ensure they can capitalize when opportunities arise. This proactive approach to navigating economic trends – adapting to sector shifts, controlling costs, and cultivating talent – gives high-performing subcontractors a competitive edge even as the market’s growth cools.

Financial Resilience: Cash Flow and Capital Strategies

If one theme separates the most successful subcontractors from the rest, it is mastery of cash flow in an industry notorious for slow payments. The latest data reveal that payment delays remain the norm: general contractors may assume payouts occur within 30 days of invoicing, but subcontractors report waiting an average of 56 days to get paid [5]. This funding gap forces many subs to become their own bankers. A startling 40% of subcontractors retain half to all of their profits in the business just to fund operations [5]. Nearly half admit they lack sufficient working capital to cover unexpected expenses or project delays [5]. The consequences are tangible – 29% of firms say overdue invoices have impeded project progress, and 35% confess to prioritizing which bills to pay on time due to cash shortfalls [5].

High-performing subcontractors tackle this problem head-on with proactive financial strategies. They don’t simply hope for faster payments; instead, they secure financing before a crisis hits. Notably, 41% of larger subcontractors (>$15M revenue) obtain extra working capital in advance, whereas the majority who don’t are left scrambling when a crunch arises [5]. By lining up credit facilities or specialty financing, these firms ensure they can cover payroll, materials, and other expenses through the lengthy billing cycle. In short, they treat liquidity as a strategic priority.

The 2025 National Subcontractor Report identifies several cash flow tactics common to top performers, including the following:

• Leveraging construction-specific financing to bridge payment delays instead of depleting cash reserves. Purpose-built financial tools (like material purchase funding or invoice advances) help subcontractors cover upfront costs and keep projects moving despite slow pay [5].
• Accurately calculating the cost of capital and credit for each job. Leading firms track the interest, fees, and opportunity cost associated with floated expenses, giving them a clear picture of how financing impacts the bottom line [5].
• Incorporating working capital costs into bids and change orders. Rather than absorbing financing costs as lost margin, top subcontractors bake these expenses into project pricing [5].
• Paying suppliers on time to secure preferential pricing. Suppliers often factor payment reliability into their unit prices. A subcontractor who pays within 30-day terms may receive better pricing than one who delays payment [6].

By rigorously implementing these financial practices, the best subcontractors turn cash management into a source of strength. The payoff is evident in the numbers: firms that account for working capital in their bidding and operations enjoy markedly higher profitability. According to Billd’s report, these top subs achieved profit margins around 24% in 2024 – a 41% increase over peers who did not use such strategies [5]. This is a dramatic jump from the prior year’s 11% margin gap, highlighting how much more effectively savvy subcontractors are converting revenue into profit.

Crucially, financially disciplined businesses also win more work. Nearly one-third of subcontractors who include financing costs in their bids win more than half of their project bids, compared to just one-fifth of those who ignore these costs [5]. In short, a robust working capital game plan not only buffers a subcontractor against the industry’s notorious payment lags – it directly fuels greater profit and growth.

Operational Excellence and Strategic Growth

Beyond financial management, top subcontractors differentiate themselves through operational discipline and forward-looking strategy. In practice, this means continuously improving how they execute projects and how they plan for the future. One common focus is investing in workforce and skills. Experienced labor is at a premium in construction, so leading firms put heavy emphasis on training, safety, and retention. Over half of subcontractors say that upskilling employees is a key goal for the coming years [4]. By cultivating more versatile, efficient crews, subcontractors can take on complex jobs and maintain quality with limited manpower – a critical advantage when labor markets are tight.

This commitment to people goes hand-in-hand with selective adoption of technology and process improvements. High-performing subs streamline their operations with tools like digital project management platforms, prefabrication techniques, and data analytics to track job costs. These innovations yield productivity gains that offset rising material and labor costs, enabling firms to “do more with less” without sacrificing performance.

Another hallmark of successful subcontractors is strategic focus in the jobs they pursue. Rather than chasing volume for its own sake, they seek out projects that fit their strengths and profit criteria. Many of the most successful firms are shifting toward larger, higher-value projects, as evidenced by the 68% of subcontractors who are interested in bidding on larger-scale work in the next year [4]. Bigger projects often mean steadier work pipelines and better economies of scale – but they also demand careful risk management and capital, which top subs are prepared to handle.

In parallel, the majority of subcontractors (about 56%) are focusing on private-sector opportunities [4], where relationships and repeat business can flourish. Commercial developers and private clients often reward consistent, quality performance with future contracts, so building a reputation for reliability becomes a growth strategy. On the other hand, roughly a third of firms are eyeing public projects and government contracts, leveraging the wave of federal infrastructure spending [4]. The most adept subcontractors evaluate these avenues shrewdly, balancing their portfolio between public and private work to stay resilient through economic cycles.

Crucially, top subcontractors plan for sustainable growth rather than unbridled expansion. Industry veterans note that “unhealthy growth” is often marked by cash-flow stress and overextension [5]. The best firms set realistic growth targets and ensure the capacity (both financial and operational) to support them. For some, this includes expanding services or trades offered, a route about 43% of subcontractors intend to take to remain competitive and diversify revenue [4]. Others have longer-term aspirations like succession planning or eventual sale of the business, which require building a strong foundation now.

Sources

• [1] American Institute of Architects – Consensus Construction Forecast, Spring 2025
• [2] Associated Builders and Contractors – Construction Inflation Watch: Q1 2025
• [3] Construction Dive – Megaprojects Dominate Pipeline
• [4] Billd – 2025 National Subcontractor Market Report
• [5] Billd + Construction Dive – Cash Flow and Working Capital Challenges
• [6] Billd Research – The Hidden Cost of Paying Suppliers Late