Construction will need to reinvent growth strategies for the modern era in 2025

“Go forth and build” isn’t a growth strategy in construction anymore. Neither is crossing your fingers that your best field supervisor will magically transform into a technology-savvy business leader. The industry will need to move forward using sophisticated technology strategies, leadership development and private equity thinking that most firms aren’t yet equipped to deliver.

This shift is happening at an important time, as the environment for labor, production efficiencies and leadership models are becoming more sophisticated. The World Economic Forum predicted back in 2018 that by 2025, machines will perform more current work tasks than humans, compared to 71% being performed by humans then. And yet, there’s a silver lining: Younger generations are flocking to trades as disenchantment with the college track continues and rising pay and new technologies make plumbing and electrical jobs more attractive.

The death of bootstrap growth

For decades, construction firms followed a deceptively simple expansion formula: Identify a promising market, dispatch your most talented performer there and let them build the business from scratch through sheer determination. It was a model that worked when labor was plentiful and technology meant having the latest heavy equipment.

Unfortunately, that era’s over. Labor productivity in construction hasn’t improved in 20 years. Insurance costs have skyrocketed. Talent shortages plague every level, from skilled trades to leadership. Meanwhile, firms face pressure to optimize technology investments, yet most lack a coherent strategy for actually using these tools well.

Firms should approach growth differently. Mergers and acquisitions (M&A), once viewed primarily as exit strategies, are becoming essential tools for expansion. Private equity firms are entering the construction space with interest, particularly targeting high-margin mechanical, electrical, plumbing and HVAC businesses.

This is happening for a few reasons:

1. Lack of capital or risk tolerance to invest in essential technology infrastructure: When faced with a larger firm that has already made these investments, acquisition becomes attractive. For example, a Chicago electrical contractor might see more value in joining a larger Wisconsin-based firm that has already invested in advanced technology systems than in trying to build that infrastructure themselves.
   
   
2. Geographic expansion: Some regions are seeing fewer large-scale projects in certain specialties like heavy highway construction. Rather than struggling to find workers willing to travel to other states for work, firms can look to acquire established companies in growth markets in other regions.
   
   
3. Post-election climate: Private equity firms are preparing for increased deal activity, which creates opportunities for both acquisitive companies and those looking to sell.

A hidden leadership crisis

Construction firms can’t find their next generation of leaders. Worse yet, many of their best performers don’t want the job.

Experienced leaders are retiring just as the business becomes more complex. When firms tap their top field personnel for management roles, they’re hearing, “No, thanks.” These skilled workers often prefer to stay in their current roles rather than take on the mounting complexities of modern construction leadership.

Today’s leaders must understand technology strategy, cybersecurity, capital planning and sophisticated financial operations — skills that aren’t naturally developed in the field. The old model of promoting based on technical excellence no longer works.

And many middle-market contractors haven’t thought about their own transition, let alone developed programs to cultivate their next generation of leaders. They’re operating under an outdated “sink or swim” promotion model, tapping someone on the shoulder and saying, “We want you to be a leader,” without providing a support structure.

The skills that make someone an excellent individual contributor are fundamentally different from those needed to lead a team. Emotional intelligence, people management and strategic thinking can be developed — but only if companies invest in structured leadership development programs.

This leadership vacuum is driving some companies toward private equity or strategic buyers that can provide the sophisticated corporate governance structures they lack. Others are recognizing they need to fundamentally reimagine their approach to leadership development. The most forward-thinking firms are moving away from the traditional command-and-control style of construction management toward more collaborative, inclusive cultures that appeal to the next generation.

Rethinking the technology approach

Many construction firms are stuck in the “crawl” phase of technology adoption when they need to be walking confidently into 2025. They’re investing millions in new systems while their basic data infrastructure is fragmented and unreliable. They’re chasing AI solutions before they’ve mastered basic reporting.

Firms will want to optimize their existing technology investments before adopting cutting-edge solutions. Many firms are spending significant sums on technology without understanding how their competition uses similar tools or whether their employees feel more productive than five years ago. They should assess their current technology stack and develop clear road maps for improving productivity with existing systems before chasing the next innovation.

Unlike other industries, contractors are accustomed to building tangible things they can see and touch. When vendors pitch AI and other advanced solutions, contractors struggle with the abstract nature of the investment — they want concrete demonstrations of value.

Yet, those who’ve taken the time to understand their existing technology report that it’s becoming a bigger part of every planning conversation. The key will be to help contractors visualize how technology creates value.

Looking ahead in 2025

Change can be hard, but the industry has to be willing to evolve. Firms that will thrive in 2025 will:

• View M&A as an inorganic growth and capital accretion strategy, not just an exit plan.
• Focus on optimizing existing technology tools before chasing new investments.
• Create formal leadership development programs that balance technical expertise with business acumen.
• Create cultures that make leadership roles appealing to their top performers.
• Think like private equity firms about operational efficiency and capital creation.

The master builders of tomorrow will know how to construct buildings and build sustainable, scalable businesses. And they’ll do it by embracing the complexity of modern construction.

How Wipfli can help

Modern construction needs more than technical expertise — it requires sophisticated business operations, strategic technology adoption and structured leadership development. As private equity reshapes the industry and technology investments become more critical, construction firms need partners who understand both building and business.

Wipfli can help. Our construction industry specialists can guide your strategic planning, evaluate technology investments, develop leadership programs and assess M&A opportunities. Learn more about our construction services.