What does ‘good’ look like?

WHAT DOES ‘GOOD’

LOOK LIKE?

Small to medium construction businesses are currently facing a barrage of challenges, making it more crucial than ever to have a good, resilient business. But what does good look like? We talk to Graham Burke about the 5 biggest industry issues... plus a powerful new tool to help you gauge how well your business is faring.

1Supply chain disruptions Supply chain issues have been top of mind with the Covid-19 lockdowns, but they don’t come out of the blue. What the lockdowns have highlighted is how fragile New Zealand’s supply chain is in many instances. We have far greater reliance than ever before on product from overseas—and increasingly from one country. This means if there are issues offshore, such as shipping problems, our supply chain is affected straight away... and so are product costs.

2Product cost increases Today’s businesses tend to use a ‘just in time’ model, ordering everything as we need it and holding less stock. Perhaps we need to consider more forward planning—ordering further in advance and holding more stock—to avoid project delays and resulting product cost increases. Here and overseas, product prices have been escalating at a rate we haven’t seen since the 1980s. Businesses essentially have two choices: to have contracts that pass product price increases to the client, or to purchase stock up front and lock in the contract price.

3Labour shortages We are experiencing a critical labour supply shortage that is likely to remain for some time, given the current high work demand. Even with the recent acceleration in apprentice numbers, we can barely keep up with the numbers retiring in our ageing population. Some businesses have looked

Graham Burke is Executive Director of the Construction Industry Council and past President of the Specialist Trade Contractors Federation.

overseas for staff, but labour shortages are an international phenomenon, and we’re all competing for the same skills. New Zealand has a housing and infrastructure deficit, and a huge forward pipeline of work. We all need to recruit people into the industry and lift productivity to stay competitive.

4Workplace stress Workplace stress is not a new thing. Staff shortages, long working hours and client demands can all lead to stress. Today’s workforce is more cognisant of the need for work/life balance, and good mental health and wellbeing is an absolute positive. We also live in a society that wants instant gratification, which means clients can be more demanding—perhaps because they too are under pressure to deliver. Stress goes in circles. Setting clear expectations upfront and keeping clients informed goes a long way to keeping customers happy and managing stress. 5 Cashflow concerns Cash is king. Cashflow is the lifeblood of a business, but many don’t understand it well. This is why a similar amount of businesses fail in boom times as in lean times. They just don’t have enough working capital to maintain growth. For the average business, a lot of costs go out before you get paid—wages, petrol, rent etc—and this capital outlay can be significant if your payment terms are 30 or 40 days, or if you don’t have good debtor control. In times of growth, it may seem like you’re making a healthy profit— but if you’re spending money faster than it comes in, you might not be able to pay your bills. Just like a household budget, it’s all about understanding the demands on your cash. Putting money aside, having a good relationship with your bank, and keeping a good debtor ledger are all important factors.

NEW BUSINESS BENCHMARKING TOOL

When you’re working on your own business, it can be hard to know how well you’re doing compared with others in the industry. A powerful new online tool will change all that, by giving small to medium construction businesses the ability to measure their financial, commercial and operational performance against an industry benchmark.

Due to launch early next year, the tool will enable businesses to input their data anonymously, which will then be collated with data from other businesses to set the industry standard. Not only will the tool help businesses assess their performance against a wide range of criteria, but it will also provide practical information and resources to assist in areas where a business wants to improve.

The new tool is a collaboration between numerous specialist trade associations, including Master Plumbers, and is supported by the Construction Sector Accord and PwC.

It is being developed along similar lines to a successful programme already available to the vertical construction sector. We’ll have more information about the new online tool in the next edition.