Following the Queensland Building and Construction Commission’s recent announcement revealing construction companies turning over approximately $30 million are most at risk of insolvency, big players in the industry have jumped at the opportunity to suggest co-operation with Government leading to an upskilling of new builders in business skills.
Organisations such as Masters Builders Queensland and the Housing Industry Association believe it’s time to upskill and teach people who are working in the sector how to run a business.
Brisbane-based legal firm Bennett & Philp regularly deals in matters relating to building and construction and has recognised an upswing of Queensland businesses in this field threatened with much harder times and in some cases insolvency.
“It’s a very competitive environment out there at the moment, both in the residential and commercial property spaces. There are a smaller number of jobs in the market and lots of very competitive tendering on small margins,” Bennett & Philp’s Legal Construction Expert Tony Mylne said.
“Anecdotally we hear of builders stopping tendering on projects, buying sites of their own and engaging with other builders to carry out the job at a cost the original builder turned developer cannot match.
“However, the cheaper your job is, the more pressure you have on quality and problems will eventually start to form.”
Mr Mylne added that the inevitable consequences of increased competition in a market that has reduced opportunities is a higher rate of insolvencies.
“From a regulation point of view, there are substantial changes in the pipeline that will have a significant impact on cost and risk,” he added.
“How long any slump lasts will depend on various factors such as taxation, borrowing capacity, levels of immigration and so on.”
Times are going to be tough for a while but the ones that survive this period will be producing quality work and have good business practices.”
Here Mr Mylne shares his top tips for employers in the building industry who want to ride this wave of uncertainty and come out on top.
1. Don’t put your head in the sand and ignore your cash flow problems
Nothing annoys creditors more than people turning a blind eye to issues with their cash flow. Keeping on top of your accounts receivable and making it a priority will reap strong benefits down the track and help mitigate the risk of you getting into financial strife.
2. Tender for work at a margin that will allow a reasonable return
Tendering is becoming more and more competitive, and at times, the margins can be very thin. Contractors valuable resources should only be devoted to tenders where there is a likelihood of success, as a result of existing relationships or some competitive advantage, for example experience or expertise in a certain style of construction.
3. Get a team of experts behind you
Surrounding yourself with the best in the business is paramount to your success. You need a specialised lawyer who understands the intricacies of construction legislation, a reputable accountant and a reliable system that generates estimates for tenders that are accurate. It’s extremely important to keep up with technology and use all the available resources you can to be as efficient as possible.
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