News Articles
Construction Industry
Re-think the way we approach business in 2022
By Christina Gulliver, Partner
2 May 2022
The road out of the pandemic remains uncertain, and businesses may need to re-think their strategy to forge a path ahead.
2022 marks the second anniversary of COVID. It’s hardly a date to celebrate, and while Australian businesses have had to adapt, shift and pivot over the past two years, the road ahead calls for a further rethink.
It’s a fair bet even the best laid contingency plans didn’t address lockdowns, border closures, supply chain pressures, and more recently, record volumes of staff on sick leave.
That’s exactly what many small and medium enterprises (SMEs) have had to deal with, and few industries or sectors have been spared.
“The constraint on home building is not demand but the availability of land, labour and materials. The shortage of labour and materials has led to construction timeframes increasing significantly.”
Support has been a double-edge sword
While a number of sectors have benefited from targeted government support, this has, in some cases, created problems of its own.
By way of example, the Federal Government’s HomeBuilder program delivered a tremendous shot in the arm to the construction industry. But it has also fuelled supply shortages and delivery delays, which are leading to price increases across house and
apartment construction.
Thomas Devitt, Economist at the Housing Industry Association1 believes we’re seeing a ‘super cycle’ of housing demand across Australia. However, he adds, “The constraint on home building is not demand but the availability of land, labour and materials. The shortage of labour and materials has led to construction timeframes increasing significantly.”
As the Australian Financial Review noted, the stimulus measures pitched at the construction could turn out to be a double-edged sword, potentially worsening the construction industry’s boom-bust cycle2.
New strategies to plan ahead
All this highlights the need for SMEs to re-think their business model. There are still hurdles to cross but some outside the square thinking can help you manage them.
As part of the planning process, look back at what you have learned over the past two years. What steps have you taken to make your business more resilient? Can you build on these initiatives to make your business sustainable over the longer term – by which time the pandemic will (hopefully) be a distant memory?
Areas to focus on
As part of this re-thinking, some key areas deserve special focus.
"It's not just about taking care of permanent employees. The same approach needs to be applied to contractors, who may be able to step up to the plate when you experience gaps in permanent staff."
Attracting and retaining talent
According to recent analysis by IbisWorld3, the Omicron outbreak is forecast to exacerbate existing labour shortages as people with the virus and close contacts are forced to isolate, significantly restricting staff availability and business output.
It comes at a time when the labour market is already tight. ABS data shows that at the start of 2020, around one in ten business were reporting job vacancies. Today, that figure is closer to one in five.
This makes it essential to review your approach to attracting and retaining talent. In particular, consider if you are offering market wages or salaries at the very least. It’s also worth planning ahead to manage the possibility of a COVID outbreak among your team that could leave your workforce thinly stretched.
It’s not just about taking care of permanent employees. The same approach needs to be applied to contractors, who may be able to step up to the plate when you experience gaps in permanent staff.
Review contracts and pricing
Take a closer look at contracts with suppliers to see whether you are protected from price rises or possible delays – be it as a result supply chain hold-ups or other issues.
On the flipside, your own pricing can also be a powerful lever for your business right now. A forward pricing approach can factor in price increases so your margins aren’t heavily impacted.
Build a war chest
In uncertain times, cashflow management is critical. Businesses need to ensure they have cashflow under control, and building cash reserves can help your business ride out the worst of the situation.
The catch is that research by small business lender OnDeck shows many businesses had their cash reserves depleted by lockdowns. Only two out of five had adequate cashflow to make the most of lockdowns lifting in mid-late 20214.
This makes now the time to review your cashflow management – and nurture relationships with your business bankers.
You’re not alone
In the current climate, businesses need to have the right strategy, culture, and execution plan to succeed. This calls for having the right people, and making the right decisions at the right time.
Being agile, adopting a strategic focus and having time set aside to plan for any potential headwinds can help you navigate the months ahead until hopefully, many of the main issues facing the business community settle down.
This call can be easier said than done. But remember, you don’t have to go it alone.
The team at Brentnalls Construction is here to help. At times like the present, having an expert in your corner can be the strategic advantage that helps you chart a course for a sustainable future. If you would like to discuss this further contact our office to make an appointment.
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2. AFR Stimulus worsens construction’s boom-bust cycle 4 November 2021
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Disclaimer
The information provided in this article does not constitute advice. The information is of a general nature only and does not take into account your individual financial situation. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you contact Brentnalls SA before making any decision to discuss your particular requirements or circumstances.
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