Navigating challenging times: A roadmap for trades business

In recent years, the trades and construction sector in New Zealand has experienced a surge in activity driven by pent-up demand and low interest rates following the initial COVID-19 lockdowns.

However, as we face increasing inflation, rising interest rates, and a downturn in house prices, it’s important for trades business owners to prepare for more challenging times ahead. To help you navigate through these uncertainties, we’ve compiled our top tips for successfully managing your trades business.

Cash is king: protect your business

Cash flow is the lifeblood of any business, and it remains the number one reason why businesses fail. It’s crucial to focus on building up reserves to weather the storm ahead. Aim to have a cash reserve that covers several months’ worth of expenses. Consider holding off on big purchases, and instead explore the possibility of selling under-utilised assets. Additionally, ensure that you collect payments from clients on time, manage expenses carefully, and keep a close eye on your bottom line.

Identify profitable services and customer segments

Take the time to review your services and customer segments to identify those that generate the best margins and offer a positive outlook. By doing so, you can make informed decisions about where to allocate your resources. Reduce or eliminate lower-margin offerings and consider diversifying into new revenue streams that align with your strengths.

Master your numbers and monitor performance

Develop a capacity-based budget that outlines various scenarios based on your available resources. This will help you visualise the impact of poor, average, and strong performance. Identify the key levers that can influence each scenario and determine the trigger points that require decisive action. Set key performance indicators (KPIs), such as gross profit percentage, net profit percentage, and productive hours, to track your progress. Regularly monitor your performance on a weekly and monthly basis to stay on top of your productivity, workflow, financials, and cash flow.

Maintain a clear view of your pipeline

Keep a clear view of your workflow and future pipeline. Establish KPIs that define the ideal and minimum levels of work to ensure a steady stream of projects. Regularly update and monitor your pipeline, and as soon as it drops below the ideal levels, you know to proactively seek new opportunities and clients.

Seek efficiency gains and embrace technology

In challenging economic times, it’s essential to identify inefficiencies within your business. Review your structure, systems, and processes to uncover gaps and opportunities for streamlining operations and reducing costs. Embrace technology as a means to save time, cut expenses, and gain valuable insights for project management and decision-making.

Nurture your people and build social capital

Your workforce remains a top priority. With low unemployment and a competitive labour market, ensuring your trades staff are fairly compensated and aligned with market standards is crucial. Cultivate a values-based culture, communicate effectively, lead by example, and provide development and career opportunities to retain and attract talent.

Get support and have a plan

Surround yourself with a reliable support network that you can trust through both good and challenging times. Seek early advice from business professionals and stay connected with industry groups and associations. Additionally, develop a clear plan that incorporates all your analysis and serves as a roadmap for your business’s growth over the next 3 to 5 years. Maintain a clear head, stay focused on your long-term goals, and remember that business goes through cycles.

Supercharge your trades business with the Tradies Academy program

Discover how our Tradies Academy program can propel your trades business to new heights. Visit our website at www.findex.co.nz/tradies-academy for more information and to learn how you can benefit from our specialised coaching and support.

In these challenging times, implementing these strategies and staying adaptable will help your trades business thrive. By taking proactive steps, monitoring performance, and making informed decisions, you can steer your business towards long-term success.