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Saturday, 5 September 2009
Optimism?
A time for optimism in Construction?
With few encouraging signs of “green shoots” what should business leaders in the construction industry be doing?
From conversations with business leaders across the industry it is clear there is still little reason for optimism, if anything, things appear to be getting tougher. There is increased competition for every piece of work. Tender prices are now firmly set at suicidal levels and everyone is trying to cut the throat of everyone else, including the big guys, who are now feeding at much lower levels.
Why then should there be any reason for optimism? Well it is my firm belief that despite the current economic difficulties there are still opportunities to grow or develop your business. Walking round Glasgow and Edinburgh there is still plenty of evidence of construction activity; work hasn’t come to a complete standstill.
A recent report by the Bank of England indicated that mortgage lending in June 09 has risen from 47,891 to 50,123 the highest figure since April 08. This must be encouraging news for house builders. The most recent CIPS, Purchasing Managers Index for August reported that the rate of decline eased slightly from the July figure, its lowest rate of decline in 18 months. The CIPS also reported that despite the continued decline in current construction activity, UK construction companies reported a sustained optimism over future business activity. Although not yet conclusive, forgive me but are these not positive trends?
Yes, it is getting harder to win work, but not impossible. In the very recent past the industry had grown accustomed to being able to pick and choose what projects to go for. Demand for construction exceeded supply; it meant that even average or below average companies, for that matter, could prosper. The industry had reached a state of equilibrium. In nature, equilibrium is the precursor to death, as you become comfortable with the status quo and are unwilling or unable to adapt should circumstances change.
Recession is a time of dramatic change with only the strong surviving. When the recession ends, and it will; it is these companies that will grow and prosper. Those companies who are not as well prepared will struggle, they will cut costs and then margin in a desperate attempt to maintain cash flow. We are seeing it already, with bids of 10% below cost, not uncommon. This is corporate suicide for those businesses that cannot produce significant improvements in performance and the companies who find themselves in this situation will not survive, nor should they.
Recession is hard on everyone, and particularly construction, with its very low barriers to entry, associated risk and wafer thin margins. I believe recession will bring an overdue clear out of weaker companies who are poorly managed or poorly financed. This will undoubtedly mean significant opportunities for those who remain.
So what does this mean? It means that sticking to what worked in the past or what you’re comfortable with will not necessarily ensure survival. Business Leaders need to step outside of their comfort zone and take control of their future direction. It is a time for new thinking and radical change.
Recovery from recession demands change and that means:
changes in strategy
changes in direction
changes in services offered
changes in performance levels
This is no time for average performance; we will not return to a state of market equilibrium for many years to come, businesses therefore need to respond now to changes in market need.
Those who survive, and very many will, need to be anticipating the changes needed; this means refocusing their strategies and communicating to their own people, supply chains and demonstrating to existing and new customers how they add value. If you haven’t done this already, now is the time to start.
There is cause for optimism because our industry needs this shake-out and change that recession brings. Just as with forest fires that initially cause extensive damage they are essential in promoting new growth and sustainability. Better times will come and those who have adapted accordingly have every right to feel optimistic as they will be best placed to benefit.
With few encouraging signs of “green shoots” what should business leaders in the construction industry be doing?
From conversations with business leaders across the industry it is clear there is still little reason for optimism, if anything, things appear to be getting tougher. There is increased competition for every piece of work. Tender prices are now firmly set at suicidal levels and everyone is trying to cut the throat of everyone else, including the big guys, who are now feeding at much lower levels.
Why then should there be any reason for optimism? Well it is my firm belief that despite the current economic difficulties there are still opportunities to grow or develop your business. Walking round Glasgow and Edinburgh there is still plenty of evidence of construction activity; work hasn’t come to a complete standstill.
A recent report by the Bank of England indicated that mortgage lending in June 09 has risen from 47,891 to 50,123 the highest figure since April 08. This must be encouraging news for house builders. The most recent CIPS, Purchasing Managers Index for August reported that the rate of decline eased slightly from the July figure, its lowest rate of decline in 18 months. The CIPS also reported that despite the continued decline in current construction activity, UK construction companies reported a sustained optimism over future business activity. Although not yet conclusive, forgive me but are these not positive trends?
Yes, it is getting harder to win work, but not impossible. In the very recent past the industry had grown accustomed to being able to pick and choose what projects to go for. Demand for construction exceeded supply; it meant that even average or below average companies, for that matter, could prosper. The industry had reached a state of equilibrium. In nature, equilibrium is the precursor to death, as you become comfortable with the status quo and are unwilling or unable to adapt should circumstances change.
Recession is a time of dramatic change with only the strong surviving. When the recession ends, and it will; it is these companies that will grow and prosper. Those companies who are not as well prepared will struggle, they will cut costs and then margin in a desperate attempt to maintain cash flow. We are seeing it already, with bids of 10% below cost, not uncommon. This is corporate suicide for those businesses that cannot produce significant improvements in performance and the companies who find themselves in this situation will not survive, nor should they.
Recession is hard on everyone, and particularly construction, with its very low barriers to entry, associated risk and wafer thin margins. I believe recession will bring an overdue clear out of weaker companies who are poorly managed or poorly financed. This will undoubtedly mean significant opportunities for those who remain.
So what does this mean? It means that sticking to what worked in the past or what you’re comfortable with will not necessarily ensure survival. Business Leaders need to step outside of their comfort zone and take control of their future direction. It is a time for new thinking and radical change.
Recovery from recession demands change and that means:
changes in strategy
changes in direction
changes in services offered
changes in performance levels
This is no time for average performance; we will not return to a state of market equilibrium for many years to come, businesses therefore need to respond now to changes in market need.
Those who survive, and very many will, need to be anticipating the changes needed; this means refocusing their strategies and communicating to their own people, supply chains and demonstrating to existing and new customers how they add value. If you haven’t done this already, now is the time to start.
There is cause for optimism because our industry needs this shake-out and change that recession brings. Just as with forest fires that initially cause extensive damage they are essential in promoting new growth and sustainability. Better times will come and those who have adapted accordingly have every right to feel optimistic as they will be best placed to benefit.
Friday, 7 August 2009
Crazy Prices and Prequals 5 ways to Win
We live in very difficult times with fierce competition for every piece of work leading to ever cheaper prices. We all have to live with a combination of the following:
Crazy pricing
Burdensome prequalification and tender processes
Ever more onerous marking with no leeway
Bigger companies feeding at lower levels
Longer tender lists
Long established relationships counting for little
For how long can this continue? Is this what it is going to be like for the foreseeable future? The last recession took 5 years to shake off and get back to a more even market, but the unfortunate truth was that prices were lower, margins still squeezed and productivity down due to the loss of key people.
What can be done now to improve your situation?
Brian Jukes from Business Fix is currently working with a number of clients to do exactly this. His top five tips for improving your winning ratio are:
1. Use your resources wisely, don’t just fill in every prequal you can get your hands on. Be selective and put the effort into the one’s you can win.
2. Make sure the people completing the documents fully understand how to answer the questions and are able to interpret exactly what the client is looking for.
3. Brainstorm with a diverse team for the most important bids.
4. Get feedback on every submission and act on it
5. Develop a clear business strategy and communicate it to all staff. Revise every 2 or 3 months as the market changes and develops
Remember this is not a lottery where more chances increase the opportunity to win. This is competitive race that will be won by the smallest of margins. It is also worth remembering that each PPQ and each tender costs you money to submit. The best prepared have the best chance and waste the least amount of money
Crazy pricing
Burdensome prequalification and tender processes
Ever more onerous marking with no leeway
Bigger companies feeding at lower levels
Longer tender lists
Long established relationships counting for little
For how long can this continue? Is this what it is going to be like for the foreseeable future? The last recession took 5 years to shake off and get back to a more even market, but the unfortunate truth was that prices were lower, margins still squeezed and productivity down due to the loss of key people.
What can be done now to improve your situation?
Brian Jukes from Business Fix is currently working with a number of clients to do exactly this. His top five tips for improving your winning ratio are:
1. Use your resources wisely, don’t just fill in every prequal you can get your hands on. Be selective and put the effort into the one’s you can win.
2. Make sure the people completing the documents fully understand how to answer the questions and are able to interpret exactly what the client is looking for.
3. Brainstorm with a diverse team for the most important bids.
4. Get feedback on every submission and act on it
5. Develop a clear business strategy and communicate it to all staff. Revise every 2 or 3 months as the market changes and develops
Remember this is not a lottery where more chances increase the opportunity to win. This is competitive race that will be won by the smallest of margins. It is also worth remembering that each PPQ and each tender costs you money to submit. The best prepared have the best chance and waste the least amount of money
Thursday, 9 April 2009
Do what you can - waiting is the strategy of failure
You have now done all you think is possible to survive the recession. Cut costs, reduced or eliminated discretionary spend, reduced the staff numbers, increased bidding and cut prices.
Now all you have to do is wait for the good times. How long will you wait? Three months, six months, till March 2010.
When will life get back to normal? From past experience the answer is never.
Business life will now be different, possibly very different to what we have experienced in the last ten years. The last ten years were in themselves totally unprecedented, None of us have ever experienced 10 years of growth before.
Waiting is the strategy of failure. You can't change the Banks' strategies, you can't force clients to do more business, public spending will happen when they get round to it.
What you can do is take action on the elements you control or have real influence.
One key area is to take action where you can influence performance. Having made all the cuts you now need to take the following three steps for decisive action.
Now all you have to do is wait for the good times. How long will you wait? Three months, six months, till March 2010.
When will life get back to normal? From past experience the answer is never.
Business life will now be different, possibly very different to what we have experienced in the last ten years. The last ten years were in themselves totally unprecedented, None of us have ever experienced 10 years of growth before.
Waiting is the strategy of failure. You can't change the Banks' strategies, you can't force clients to do more business, public spending will happen when they get round to it.
What you can do is take action on the elements you control or have real influence.
One key area is to take action where you can influence performance. Having made all the cuts you now need to take the following three steps for decisive action.
- Create a strategy for performance improvement in all parts of the business
- Communicate this strategy to everyone in the business and the supply chain
- Implement the strategy NOW
Done properly immediate benefits will flow from taking action, the workforce will become energised, waste will be driven from the business and costs will reduce further without losing more key people. If necessary a significant performance improvement will allow you to compete more aggressively for new work.
Business Fix have the knowledge and tools to help you move quickly to transform your performance, contact brian@businessfix.co.uk or 07788 102306 to discuss or for informal advice.
Remember, waiting for the good times to return is not a business strategy.
Best wishes
Brian
PS Performance improvement is like losing weight, it is more dramatic in the early stages.
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