Cash flow is looking good…
You are booked out for the next 18 months…
You have never been busier...
Head down, bum up, in all your years in business, things have never looked better than they appear right now...
However, below the surface a cancer is growing inside your building company.
And with every week that passes, it gets bigger.
Feeding off the constant price increases and the delays which are destroying the net profit on your projects…
But you’re too busy to notice.
Because you are spending all your time chasing up deliveries, rescheduling subcontractors and dealing with clients demanding to know when their home will be finished, or even started.
On The Surface Everything Looks Rosy
On the surface everything looks rosy because you have excess cash in the bank. But without retained net profit, every job becomes a liability.
A cancer that eats away at the equity you’ve built up over the years in your building company.
And when the music stops, and according to a recent report by the Housing Industry Association, it will stop very soon, a lot of building companies will not have the cash available to cover the hidden liability in their accounts.
The Work In Progress Accounting Adjustment.
Officially, the inflation rate stands at 3.8% in Australia (source: https://www.rba.gov.au/) and 5.4% in the United States (source: https://tradingeconomics.com).
However, every residential building company owner knows that the inflation rate does not correlate with what is happening in the construction industry.
According to a study by the Association of Professional Builders, between 40%-60% of residential home builders are not making a net profit on their projects due to rising costs and delays.
And while materials may have peaked recently, the worst is yet to come as the inevitable interest rate rises come into play, driving up the cost of labour as employees and subcontractors struggle to pay their mortgages as well as cover the cost of the weekly shopping bill.
Does that sound far-fetched?
Surely it couldn’t happen again?
You Need To Take Action Before It's Too Late
Well, history may not repeat itself, but it certainly rhymes (Mark Twain), and those who do not learn from history are doomed to repeat it (George Santayana).
So, what can you do about it?
After all, macroeconomic events are out of your control so all you can really do is carry on, head down bum up and what will be, will be. Right?
Well, if you do nothing, like the vast majority of residential home builders have been doing since April 2021, then when the dust settles you find yourself in hole that is too deep to climb out of…
You need to take action right now before it’s too late.
COVID-19 has presented the owners of residential building companies with a golden opportunity to take a giant step forward.
Demand has far outpaced supply placing building companies in a position of strength never experienced before.
However, rather than using that opportunity to increase their margins and put on more resources to streamline their operations through systemisation, most have carried on doing the same things while expecting a different end result.
Well, the clock is ticking and we are heading towards the end of the construction industry's ‘bull run’.
Now is the time to take action before it’s too late…