Despite the prolonged slide in the industry, the housing segment in the US construction market gained a record of $550.14 billion last year. This sector is also showing a steady growth for the next two years. Among the top revenue generating sectors in the segment is new single family housing construction, which comprised 67% of total residential construction in the US.
Over the years, the business model in the industry had shifted toward greater more cost efficiency. Low entry barriers (other than the need to obtain state-based licenses and registration) in the industry had spawned more service providers in the industry. However, competition is largely based on reputation and proven performance as many new competitors find it difficult to quickly establish a foothold in the market.
The existing firms have several advantages relative to new entrants. They:
- Have access to a pool of skilled subcontractors.
- Have ongoing arrangements with materials suppliers.
- Have ongoing arrangements with financial institutions and property developers.
- Can display completed examples of their work in a local market and leverage off "word-of-mouth" referrals.
KnaelHaed ASPware (KnaelHaed) is a provider of Web-based vertical market software applications. The DigitalSuspenders is an online software solution to be offered by KnaelHaed ASPware in support of the building construction process.
The construction industry lags behind other industries in research and development (R&D) investment. R&D investments for mature US companies are typically around 3.5% of sales. For some industries such as aerospace that number can be 7% to 14%. However, the construction industry only reinvests 0.5% of sales. The reasons for the low reinvestment vary, but are generally due to costs and complexity. Most construction firms are small (less than 10 employees) and operate on thin profit margins. So, technology spending is often seen as an unaffordable luxury.
The DigitalSuspenders will be an integrated family of Web-based software applications that support the entire building lifecycle from conception, to construction, to facility management. The suite will support the needs of small contractors by offering: online collaboration, digital takeoff, estimating, and project and property management capabilities, all presented in a format that's easy to understand and use.
The Market Size
The home construction industry is comprised of 163, 703 establishments and employed 796, 880 persons according to the most recent Economic Census. The industry had grown in the last couple of years to a record 175, 000 establishments, while the commercial and institutional building industry is comprised of 34, 588 establishments in the US according to the most recent Economic Census. The construction industry accounts for approximately 8% of US GDP.
KnaelHaed ASPware anticipates initially requiring $120, 000 to complete the beta prototype of the DigitalSuspenders, provide for legal and infrastructure expenses related to start up and to cultivate potential customers. To finance the start up we intend to seek initial capital from angel investors and corporate partners.