A bit of lateral thinking can come in handy. As an example, some objects most builders have to hand can help direct your thinking about how best to do business in today’s challenging environment.
THERE’S NO DENYING these are unusual times to be in construction. Residential building consents are at a record high, meaning plenty of work to go around, but materials and skills shortages – and now, rising interest rates – mean workflows and cashflows are harder to manage than ever.
Six strategic tools for your toolbox
These days, as well as a nail gun and a saw, every builder needs to have some extra tools in their toolbox to manage the tricky operating environment.
Here are some of the most useful tools to help keep your business’s foundations strong.
A builder’s pencil
Rather than inking in something that can’t be changed later, pencil in your costs and avoid fixed-price contracts. One of the advantages of consents being at such a high is that tradies can pick and choose the jobs they want to take on.
Choosing a contract that allows for flexibility helps protect contractors and subcontractors from loss should costs and timelines blow out. If fixed-price contracts can’t be avoided, allow enough margin around costs and deadlines to absorb inflation and supply chain hold-ups.
As every builder knows, building on dodgy foundations never ends well. Always run a torch underneath the floorboards to check everything is sound before signing a new contract, adding credit checks into your terms and conditions.
Sign up to credit reporting agencies that tell you who are not paying their bills in the building industry. You should also check retentions are held in trust and ask for statements to see if money is moving in and out of the retention account – a danger sign funds are being used for working capital.
A safety harness
If you’re supplying materials, there are some ways you can help ensure payment if things go bad. If a customer misses a payment, ask for cash on delivery in future.
Registering on the Personal Property Securities Register (PPSR) is like a safety harness, helping you to collect the goods or trace the proceeds if your customer goes into liquidation. However, it’s essential to register before supplying the goods, not when your bill goes unpaid.
With new projects booming and border restrictions still making it tough to recruit from overseas, each of New Zealand’s 275,000-odd construction workers now has many jobs to choose from.
Construction firms may have to consider a retention bonus to make their workplaces stickier and ensure they keep good people on to see projects through.
A builder’s apron
In this environment, it pays to have something in your pocket for a rainy day. Given the extreme shortage of materials, GIB is becoming the new toilet paper.
Builders who can budget to buy materials in advance where possible or order in a range of alternatives will have a better chance of avoiding budget blowouts and time delays waiting for products that hold up the whole project. Just be careful that any substitutes are of similar quality and will indeed be Building Code compliant and work with the systems you’re using.
A surge protector
Having a steady flow of work on the go is great – but too much, and it can lead to burnout. Several Baker Tilly clients have already sold their construction businesses and moved into new careers because of the toll their workloads have taken on their mental and physical health, as well as their families.
It’s important to realise that saying no to new work can be a wise business decision when undertaking it could overstretch you or your teams and result in more sickness, resignations, downtime or inability to meet deadlines or ultimately impact your business’s reputation.
Be frank and honest with yourself and your clients, while keeping your lines of communication open. Tell them you want to ensure they’re getting your best work – the best clients will respect that.
This is intended as an overview. Please contact your advisor or local Baker Tilly Staples Rodway office for specific advice.
Articles are correct at the time of publication but may have since become outdated.