Hand held compass

Navigating a Construction Business Through Economic Uncertainty: Lessons from Sailing

Financial Management, Owner

Running a construction business during these uncertain economic times can feel like sailing a yacht through stormy weather. Just as a skilled captain must adapt to strong headwinds and turbulent seas, you as a business owner must navigate choppy economic waters with foresight and agility. If you have a team under you, they will be looking for direction and confidence. In this post I share some strategies for steering your business through stormy economic seas.

cash flow cycle

Improve cash flow in your trades business

cash flow, Owner

In order to have a successful working capital (cash flow) situation you need to have the cash cycle going as fast as possible, or increase the volume of cash invested in the business. You also need to become good at the cash flow game: making the cash come into your business as fast as possible and in as much quantity as sustainably possible and pay it out as slowly as you can get away with.  There are multiple levers you can tweak to achieve this and the balance of this guide is about five of the key strategies you should look at implementing into your business.  Working with an advisor like The Trades Coach will be the fastest way to have these strategies, and other relevant ones, implemented effectively into your business and watch the working capital steadily increase. Until then, read on to find out what my top 5 suggestions are.

Mike Tyson on plans

Effective Business Planning

Owner

Over the past 4 years or so the business world has been turned on its head. No one could have predicted the Covid pandemic and the implications that flowed from it. More recently supply lines have been majorly affected and migration flows have gone from famine to feast. In this type of environment putting a business plan together seems in many ways like a waste of time. When I look at some of the traditional business planning models used, I would tend to agree.

In my opinion it comes down to the type of business plan that is produced and the length of time taken to produce it.  Many business plans are a waste of time because they are too long, too “corporate”, don’t motivate staff and are not connected to the day-to-day operations of the business. Learn how to put a simple and effective business plan together here.

stressed business owner

Circle of Influence

Owner

The fact that these are some of the most challenging times for builders in the past 10 years comes as no surprise. We have come through labour shortages, supply line disruptions and Covid lockdowns just to be faced with huge increases in interest rates and a drop in demand. Furthermore, the banks have factored in many of these events into their risk equation and made lending tighter for home buyers, further adding to the uncertainty.
The effect can be for people to worry about things they have no influence over and miss opportunities to improve those things they DO have influence over.

risk reward balance

Risk management – Getting the balance right

Owner

The construction game is a risky one. Probably don’t have to tell you that but it needs saying and it also needs to be proactively managed. On the other hand it can be a very rewarding industry and you can have a great life if done well…..and a bit of luck. No business however is risk-free. 

Part of your role as a business owner is to think about the risks in your particular part of the market, prioritise what risks to reduce first and put processes in place to manage those risks. Also decide on what level of risk you are comfortable with and not try to reduce all risks to zero. Here are the seven most important areas of risk for a construction company and some strategies for managing them effectively

marketing machine

Marketing in a softer market

Marketing, Owner

The market in New Zealand for construction services is definitely softer than it has been in recent years. With the rapid increase in interest rates and people spending their money on other things, like international travel, the demand for new home builds and renovations has reduced.

It is likely that this will continue for the next 12 months and so it has become more important to review your marketing and improve your lead generation performance. This video goes into what you can do in the short term and make the best of what you have, at the lowest cost possible.

Click on the picture below to start the video

Mental Health Challenges for Business Owners

Owner

If you take notice of the safety briefing at the start of every flight, the flight attendant tells you to fit your own oxygen mask first before helping anyone you are traveling with.  Seems a bit self centred, but you aren’t much good to those depending on you if you are not in the best position to help them. The same applies to mental health I believe, and as it’s Suicide Awareness week this month, maybe you should think about your own needs in this space for a change.

The Mental Health Foundation has some great resources that can be used in the workplace to proactively manage the issue of mental health. And, its Five Ways of Wellbeing offer constructive, positive advice for managing your wellbeing now and in the year ahead. 

grey haired man pondering his future

Exit planning for trades businesses

Owner

If you are thinking about selling your business over the next 5-10 years, do you think you will achieve the sale price you need to fund your ideal future in such a potentially crowded marketplace? Of those business owners who intend to exit their business in the next 10 years, 70% intend the sale to fund their retirement, but 87% have no formal plan on how they will do this. (Centre for Small Enterprises – Massey University)

The message of planning a successful exit from business has not yet been taken to heart by the majority of business owners and this may result in a lot of unfulfilled dreams of a long and happy retirement. The general attitude of: “I’ll get round to it when I have to,” is all too prevalent and the point of early planning to maximise value at exit is lost on many.

Husband wife working together

In business with your spouse

Owner

Owning and operating a business with your life partner or spouse is no easy task.

On the bright side there are upsides to working and living with your business partner. For one thing, you trust them. Another big plus for working together is it will save your business money. Hiring your spouse for a role they are well equipped to do, i.e. they have the education, skills and training, is cheaper than hiring someone else. Not only will there be no recruiting fees, but your spouse, like you, may also accept a lower than market rate salary.

However, there’s no way to avoid disagreements that will rise arise from work and personal interaction. Many couples just don’t navigate the obstacles of working and living together very well so if you are in business with your life partner the following tips may help keep you out of the family court going through a divorce.

Closed sign

Business is busy, but companies still going bust.

Financial Management, Owner

The NZ Herald reported recently that despite construction being very busy, small to mid sized businesses in the industry are still going bust. In fact construction has overtaken food service as the number one business category for liquidations in the first two months of this year. This is one first place award that we should be proud of!

Should you be worried?  Probably. If not worried, you should at least be aware that things are not all glittering out there and you should look at reviewing your financial systems and your understanding of some key numbers. What you can measure, you can manage. What you can manage, you can change. Here are two key financial areas to monitor in your business.