Construction looks to build on the good times
The building boom in Auckland and Christchurch has provided a sustained upturn for the construction sector, but highlighted the risks that come with rapid growth, new ANZ research reveals.
The annual ANZ Privately Owned Business Barometer survey (in the first half of 2015) found the sector was generally optimistic and participants were taking a range of approaches to lay the foundations for sustainable growth, regardless of demand.
But despite a significant increase in work and revenues, some construction businesses were failing or finding profitability stayed the same as in more difficult times.
Respondents said maintaining reasonable margins on every job – and not chasing volume at the expense of profitability – was essential for a strong business in good times and bad. Careful cash management and building strong relationships were also key.
Common issues that led to problems when businesses got busy include jobs not being priced, invoices not being issued in a timely manner creating cashflow problems, too much focus on certain clients leaving the business overly exposed and taking on a too-large project for the business owner’s equity meaning losses can’t be absorbed.
• 30% of Construction sector respondents said lack of staff has definitely impacted their business, compared with 18% of all survey respondents.
• Only 16% have boards compared to the Barometer average of 25%.
• When it comes to benchmarking against similar businesses, 15% said they do this annually while 28% said they never benchmark.
• Around 30% of survey respondents said mobile technologies had totally changed their business, 20% of respondents reported that it had made little to no real change to their business.
• 20% of construction respondents said environmental considerations bring significant extra costs (compared to an average of 9% for all businesses)
“In a sector whose fortunes are heavily impacted by the ups and downs of the wider economy, the number of firms building resilience is a positive development,” said Graham Turley, Managing Director Commercial & Agri at ANZ.
“Growth comes with challenges, and without strong business and financial disciplines businesses run the risk of becoming victims of their own success.”