Forbes magazine's 1994 Annual Report on American Industry stated that publicly traded construction companies had a median net income of 0.5 percent of sales, and a median return on equity of 8.4 percent. The construction industry ranked 19th out of 21 industries on level of return on equity. The previously mentioned Forbes list of 1,340 firms earned net income of 4.6 percent and a return on equity of 21.4 percent. Only 4.7 percent of the companies lost money. The risk vs. reward relationship is clearly out of balance in the U.S. construction industry.
Competition is the reason most commonly given for low profits.
Construction capacity is significantly greater than the demand for construction services. Since 1967, the volume of non-residential construction in the U.S. has increased a total of 7 percent in real terms, while the number of contractors has increased 140 percent. However, the theory seems to have broken down, and the oversupply of contractors appears to be permanent. Ease of entry into the industry is certainly one of the problems. Anyone with a small amount of experience and a lot of intestinal fortitude can and frequently does become a contractor.