Financial experts often warn contractors to be aware of unplanned costs associated with project change orders. Direct costs (labor, materials, and equipment) are only one piece of the puzzle. Unless you also recover your overhead, indirect costs, and a reasonable profit, you could end up losing money on a change order.
It appears that many custom integration companies are becoming more aware of change order pitfalls, turning a potential loss into a win. According to exclusive new research from Data by D-Tools, change orders are overwhelmingly positive for integration companies. Specifically, integrators are more than five times more likely to increase their revenues from change orders than they are to lose money on them.
According to data in the 2023 D-Tools Change Order Special Report, which is gleaned from actual projects built using D-Tools Cloud from June 1, 2022 to May 31, 2023, more than half of all integration companies broke even on their change orders. Specifically, 49% of integrators reporting their change orders were neither a net positive nor net negative to their revenues over the 12-month period, while another 43% used change orders to boost project revenues.
Overall, change order revenue equated to an additional 2% in revenues for the average company for the year and an additional $256 per project. Combining data from all integrators (those who increased revenue, broke even, or lost revenue), the average company earned an additional $13,394 via change orders for the 12-month period.
“While David Bowie said, ‘Ch-ch-ch-ch-changes, don’t want to be a richer man,’ integrators that do ch-ch-ch-change orders are indeed richer, adding an average of 2% in topline revenues to their projects,” said D-Tools Data Solutions Architect & Evangelist Jason Knott,. “Our 2023 D-Tools Change Order Special Report digs deeper into the culture of change orders, addressing whether dealers should have a business model built on minimizing the number of change orders, or have a model that intentionally starts with a lower price point and counts on getting more change orders. The report also looks at the root causes of internal change orders that can cost dealers money.”
To download the free report, go to D-Tools 2023 Change Order Special Report Reveals Startling Data.
