Times are tough in the Aussie construction industry, with rising costs, a lack of labour and a challenging economic climate. This is leading to a rising number of business failures.
About 1,400 construction firms filed for bankruptcy in the second half of 2023, according to a recent article from Inside Business.
And it’s not just financial challenges that sole traders and contractors are facing. There’s also the stress of the physical and mental pressure of running your own construction business.
So, what can you do to keep your small construction company on track?
As a contractor, it’s hard work balancing your on-site time against the administrative and business-focused time that’s needed to keep your company fit and healthy.
But without a razor-sharp focus on cash, business development, profit margins and your own wellbeing, the business is liable to flounder – making business failure a possibility.
To stop this, here are seven ways to keep your construction business healthy:
Avoid working with just one customer.
Putting all your eggs in one basket is a risky move, so look into working with a varied mix of big and small clients to spread that risk. Even if you lose a few clients, you’re still left with a viable income stream.
Diversify your revenue streams.
If all your income comes from one service, it’s time to diversify! Consider moving into new services or project areas, giving you multiple revenue streams and reducing your reliance on one source of income.
Optimise your cost management.
The major upfront costs and slow payment times in construction can make it difficult to keep cash in a positive position. Rising costs for raw materials are also a major headache. So, now’s a good time to explore strategies to reduce your overheads and negotiate better deals with your suppliers.
Build strong relationships.
Stable, long-term customer relationships are crucial to your success. So put some real effort into nurturing partnerships with customers and suppliers, so you have a secure pipeline of projects and reliable supply chains.
Make good use of technology.
If you can automate an administrative process, automate it! Use the latest AI business tools to automate the answering of your business phone, the booking of customer appointments and the chasing of outstanding payments etc. Using digital tools helps improve your efficiency and can also cut your costs too.
Utilise the available government support.
The Government wants construction to flourish, so it’s important to be aware of the available government grants, subsidies or tax incentives that can ease your financial pressures and help you to grow and prosper.
Take good care of yourself.
It’s crucial to not take on more work than you can handle. As with any industry, you need time away from work. Overworking and spending every waking hour on the business can be counterproductive.
Talk to us about making your construction business a success story
The construction industry is facing hard times: that’s the reality in the current market. But with careful planning, management and strategic thinking, you can overcome the challenges.
Talk to our team about managing your cashflow, cutting costs and coming up with a long-term strategy that plays to your strengths. We’re always here to help.
At the point of selling your business, getting a good price for the company will be a major goal. A key way to achieve this is to add value to the business as part of your ongoing exit strategy.
In this series, we’ll give you all the advice you need to plan your exit, add value to the business, negotiate a great deal and define your new pathway once the business is sold.
You’ve put blood, sweat and tears into this business. So, you’re going to want to achieve a sale price that reflects this hard work, giving you the funds to start the next phase in your journey.
Your potential buyer will be looking for a profitable, well-run business that can prove it’s a viable enterprise. To do this, it’s vital to look at core ways of improving the attractiveness of the company, gradually adding incremental value and allowing you to negotiate a good price.
Let’s take a look at some important ways to add value to the business:
Increase your profitability
A buyer wants an acquisition that will turn a profit. To boost the company’s profitability, look at improving your margins, reducing costs and increasing revenues. Ways to achieve this can include streamlining your operations, negotiating better deals with suppliers and increasing brand loyalty with your customers.
Strengthen your financial performance
It’s important to run a tight financial ship. Aim for the company to be in a positive cashflow position, reduce your ageing debt and strengthen the balance sheet to demonstrate financial stability. This will mean getting in control of your inventory and spending, being proactive about collecting outstanding receivables and exploring financing options, such as invoice finance or bank loans.
Nurture your customer relationships
Loyal customers spend more and provide a stable pipeline of sales and revenue. Building these strong customer relationships is a critical part of adding value, and can start by providing excellent customer service, offering loyalty programs and actively seeking (and acting on) customer feedback.
Invest in the company’s growth
A growing company is an attractive proposition to any buyer, so it’s important to continue investing in growth. Explore new products, services or markets to expand the business’s potential, add value and show the potential behind your business concept. The R&D, strategic planning and resourcing that’s involved will be an investment that pays off once you have an interested buyer.
Prepare for the due diligence process
Before a buyer makes an offer, they’ll want to carry out due diligence checks on the business. To be ready, you’ll need to get your financial records, contracts and other relevant documents in order, and make sure all the information is easy to find and access. Making these checks simple and straightforward helps potential buyers assess the business’s value and gain confidence in the company.
Talk to us about planning the sale of your business
Making your business more attractive to a potential buyer takes good planning, patience and a real focus on adding value. Starting this value-add process early is vital.
If you want to start adding value to the company, prior to selling up, come and talk to us. Our team can help you deliver an exit strategy that increases value and delivers a great deal.