Dan Pollard, founder of trades software company Fergus, gives a breakdown of the current challenges facing the industry, and considerations to help get through the months ahead
August’s lockdowns and tight restrictions coupled with border closures and broken supply chains had a noticeable impact on the construction industry.
Fergus data reveals that, while there is a demand for work, the number of jobs created under Level 3 was still 30% less than before lockdowns began on 17 August. Under Level 2 it is still 10% less.
For those in Auckland, the extended Level 4 lockdown and continued restrictions under Level 3 are causing an even bigger strain – with average jobs created per company at 57% less than the rest of New Zealand in the week between 6 and 12 September alone.
Auckland’s lockdowns will continue to impact much of the North Island too, adding a layer of complexity for anyone attempting to travel through.
The challenges: work backlogs and broken supply chains
The halt on construction work has naturally caused more of a backlog of work than usual in the lead up to Christmas, making it even more difficult to cater to every customer.
The perpetual skills shortage in New Zealand has been exacerbated without access to international workers, making it difficult to capitalise on work when it does come in, including the raft of shovel-ready public infrastructure projects and affordable housing targets.
Construction workers must now be much more selective about the work they take on, and prioritise high-value work from customers that will be able to pay on time.
Another challenge, and perhaps the most concerning impact on the construction industry is how it has exposed the fragility of our global supply chains. New Zealand has been left off the global supply chain of many construction material suppliers.
Global shipping and building supply companies aren’t willing to supply New Zealand, with supplies only going as far as Australia. This can significantly raise the prices of importing much-needed materials, with one Kiwi company spending up to $65,000 a week in shipping costs alone.
Material shortages and the price fluctuations it causes make it very difficult to manage a job in a timely and affordable manner, and almost completely remove fixed-price contracts from the table.
There’s not a whole lot that a small business can do to combat the impact of a global pandemic, but there are a few tips that will help you keep your head above water during difficult times like now.
The considerations: organise your finances, communicate and support your team
Firstly, ensure your finances are in order. Making sure you have a strong grasp of your financial position is the first step to navigating uncertain times. It’s vital that you know your hourly rate in order to remain solvent and to pay your staff appropriately.
You also need to know what your overheads are so when you are pricing work for a customer, you will end up with a healthy profit margin. If you don’t know how to work it out yourself, ask your accountant or financial advisor, or lean on the bevvy of resources and tools out there to automate functions like invoicing and payroll.
That being said, it’s vital to have the money conversation with your customers right off the bat. Start pricing your work immediately and require your customers to pay a deposit upfront. Be sure to set a clear payment schedule and timeline for invoices.
You should also have your terms of trade signed and register a PPSR (Personal Property Securities Register) against the property. If the customer won’t pay a deposit or sign off on your terms, you know they aren’t a customer you want to work with.
Secondly, communicate. Your customers have also been feeling the strain of the pandemic, and may not necessarily know what work is and isn’t allowed under lockdown rules. When talking to customers, make sure to be transparent on the status of their job and what is and isn’t possible under current restrictions.
You also need to reassure your customers that you will take the necessary safety precautions if you’re working on their premises, as they may not know what they are.
Pay close attention to how customers want to communicate with you, as it may have changed during the pandemic. While lockdowns are still in place, it’s best to talk to customers remotely rather than face-to-face whenever possible.
One silver lining of the pandemic is that contractors can be more selective about the jobs they take on and who they work with. Now is a perfect time to reassess your customer base and focus on the type of business you want to build.
Reliable customers will translate into a more engaged workforce and therefore less staff turnover.
And finally, support your team. If you run your own business, chances are your staff will be just as lost as you are when the business world is so volatile.
Communicate your strategy for the pandemic to staff, explain why it’s the best course of action and how you can work together to make it happen.
Employees and co-workers are likely struggling with the mental weight of lockdowns too. Schedule regular check-ins with staff and make sure not just to talk about work, put measures in place to support the well-being and mental health of those around you.
The light at the end of the lockdown tunnel is drawing closer, but it’s likely we’ll still feel the impact of these lockdowns for years to come.
If you’re struggling to cope with the strain of lockdowns, know that there are resources available so you don’t need to bear the weight by yourself.
Getting a handle on your financial position and supporting your co-workers and customers will go a long way in helping the construction industry return to normalcy as soon as possible.
Dan Pollard launched Fergus in 2014. Having done the hard yards as a plumber for over 20 years, Dan was determined to come up with an easier way to manage the end-to-end operations of his trades business.