Every so often, in the construction cycle, we need to turn the comfortable, cruising yacht into a racing yacht.
For some this may have already happened, but for others, particularly if your field of expertise is residential, the time is now.
It’s time to remove the fully laden galley, the spare set of oars and the “hangers on” passengers. You need to sail point to point — the scenic route is not an option.
Yes, I do mean the construction industry. To trim the ship you have four choices: increase income, increase the market, reduce overheads or reduce project costs.
In the current market the first is probably not an option, and if you have a solution to the second, please share it with your fellow Master Builders.
This leaves the third and fourth options where $1 saved is $1 on the bottom line, or project cost reduction where $1 saved on each project multiplies on the bottom line with each project built — eg, 20 homes x $1 = $20 saved.
We all need to have a good look at our books and ensure that we’re on top of our figures. It’s really important that your accounts are always up to date so you know exactly how you’re tracking at all times.
My advice is to have a look at your Profit and Loss Statement to the end of your financial year (usually either 31 March or 31 July), start at the top and assess some of the expenditure:
Accounting — don’t skimp here, you might even need to upgrade to ensure you have the right processes and information readily available to help your future financial decision making.
Marketing and advertising — is what you’re doing working or do you need to change tack? Direct marketing to your current client list is a very cost-efficient way to drum up new business.
ACC — get accredited and save 10%.
Cleaning and gardening — is this possibly something that can be done internally as opposed to external professionals?
Entertaining — perhaps this is something that could be reined in or put on hold for a while.
General expenses — what are they and are some of them really necessary?
Insurance — too often we stick with the status quo because it’s easy. Maybe it’s time to shop around?
Office equipment — upgrades on some equipment, eg, photocopiers, can often result in cheaper rates to run. It also means a more professional look for some of that marketing mentioned above that could be brought in-house.
Power — what’s left running on a daily basis that could be switched off until you need it?
This is only a start. It might sound easy but often we think that we can’t do without. It helps to let someone else (perhaps your partner) have a look as they will probably be more ruthless about what you can do without.
As I mentioned earlier, increasing your income by raising prices is not necessarily an option. We found that working closely with our suppliers helped us come up with some really good ideas where we could make significant savings and, therefore, reduce our prices and pass those savings on to our customers.
Another useful exercise is to take a look at your last home costings and really challenge each line item. Don’t be shy, really pull it apart and analyse where savings could have been made — you might surprise yourself!
Question things such as:
is some of the equipment hire over the top?
do you really need the additives in the concrete or the concrete pump for the front of the home?
did you cross quote?
can you recycle some of that skip content? Give the untreated off-cuts to the pensioner next door — you’ll feel good too.
We did this with our homes and challenged our specifications. Our clients really helped by letting us know that they didn’t want some of the stuff we thought they did.
This resulted in a fairly sizeable drop in the price of each house — great news for the client and, as it turns out, we ended up better off too.
The market has really changed — niche markets are less affected by recession, but the bargain hunters are still out there. With a trimmed ship you should be fast enough to bag a few! Good luck.
I would like to close by thanking departing chief executive Pieter Burghout for the passion and integrity he has demonstrated over the past three years, and to also acknowledge the support of his wife Sindy and family.
Both the Boards of RMBF and MBS (and me personally) wish him only the best, as he takes on the largest of challenges, and we look forward to our continuing involvement with him in his role as BRANZ chief executive.