For the construction industry, 2022 is sure to be an incredibly challenging year. Global supply chain issues, worker shortages and the new hurdles presented by Brexit have all taken their toll on the sector. According to a Statista report, between July 2020 and July 2021, material prices increased by a staggering 20%. In this difficult climate, should businesses in the built environment be focusing more on profits or growth?
The answer depends on the unique circumstances of each business, its share of the market and the funds it has available. Generally speaking, a business needs a finely tuned balance of profitability and growth if it is to survive long-term, beyond this impending crisis. Combining specialist support and world-class training, BBI Services are helping businesses to strike this balance by streamlining and enhancing their operations at every stage.
The Pursuit of Profits
Profit is, of course, the primary objective for any business. Without profits, no business can hope to survive. There are some exceptions to this. For example, a brand new start-up may take a few years to turn profits, but will still be a valid enterprise, worthy of investment. However, with the problems that 2022 pose, now is not the best time to be launching a new construction company.
For any construction business that is lacking in investors or external financing, profit will be the only capital the business can acquire. In 2020, BDRC Continental reports, small and medium enterprises (SMEs) in the construction sector made a median profit of £11,000. In the same year, a government survey found that the top source of external finance for SMEs was bank overdraft facilities. This paints a clear picture of the challenging landscape created by the pandemic. With more problems still to come, profits will be paramount to many businesses if they are to stay afloat.
The Cost of Quality
Swift, timely and error-free programme delivery will be essential for securing profits. Research from the Get It Right initiative found that “the annual spend due to error is around 7 x times the total annual profit of the UK Construction Industry.” The industry can no longer afford to waste money on quality defects, rectification and material losses. BBI help construction businesses to engineer robust project schedules. Combining long-term and short-term planning, we help businesses to visualise their progress and clearly identify any problem areas where vital profits may be lost. By investing in quality the first time around, you can drastically reduce the amount of money wasted on rework.
Long-term Growth
Growing a business is imperative in order to sustain success. Growth could come in the form of expanding the market, increasing the workforce, taking on more projects etc. Companies that are heavily reliant on external investors may feel more pressure to grow, as investors will want their investment to bear fruit. However, it is vital that businesses fully understand their present circumstances before attempting to build. Growing too much too quickly could land businesses in serious trouble.
In the construction sector, premature growth could entail hiring workers you don’t need. It could entail taking on projects you don’t have the right skillset of resources for. All this can lead to mistakes on site, project inefficiency, and an overspend on personnel and materials that are currently more expensive than ever. In the past two years, only 23% of SMEs in the built environment had plans for growth, down from 48% in 2019.
Business growth in 2022 needs to be carefully calculated and implemented. BBI perform end-to-end diagnostics with each business they work with to create new, optimised processes that help them to grow sustainably. Once we understand the full picture, we can identify the exact areas where growth should be targeted. This prevents businesses from losing money on expansions that they don’t have the capacity for.
Should my business prioritise profits of growth?
With the challenges lying ahead in 2022, generating enough profits to survive will be the priority for many businesses. However, amidst the difficulty, businesses must not forget about future-planning. A careful balance needs to be struck if the construction industry is to prosper.
Whether your business is pursuing profits or growth, it needs to run efficiently. Now more than ever, construction businesses cannot afford to waste time, effort, and resources. For the sector to succeed, all manufacturing systems need to be optimised, site time reduced, rework eradicated. BBI Services’ team of industry experts will work with you to streamline your operations and implement a right-first-time mindset across the business. For more information, please contact us online or call 01608 664589.