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Top 10 Issues Facing the Construction Industry in 2019

Top 10 Issues Facing the Construction Industry in 2019

Last year we covered the top 10 issues facing the construction industry in 2018, which was read by thousands of people and helped construction companies solve their problems.

We decided that we should update this list, and check in on the new challenges that construction business owners were facing.

The new year is upon us, but the construction industry challenges are still fairly similar to last year.

If you are running your own construction business, you are likely experiencing many of these yourself. Or perhaps you haven’t realised that these problems have been holding you back, and you’ll find the piece of advice you’ve been missing.

Either way, there’s a lot to be gained by recognising the key issues in your construction business and working towards fixing them.

Maybe by 2020 there will have been more significant improvements made in the construction industry!

Without further ado, let’s get into the top 10 issues facing the construction industry in 2019!

1.    Skilled Labour Shortage

When it comes to the success of your construction projects, the experience and skills of your workers can really make it or break it. Literally.

There is a definite labour shortage when it comes to skilled workers in the construction industry, and this can cause several problems. Unskilled workers can make costly mistakes, causing delays or adding stress to your budget.

They can also make a bad impression with the client and potentially lose you business. Your workers are the face of your business and will shape how clients perceive you, so it’s important to get a good crew.

Take a look at your hiring process and see where you can make improvements. Good workers are out there, you just need to find them.

A few simple things you can do to find the best construction workers include writing better job ads, advertising in more places and calling references.

For more tips on hiring the write workers and beating the labour shortage, check out our 5 tips to recruit top construction workers in Perth.

2.    Poor Cash Flow

With the complex nature of most construction projects, it can be very difficult to maintain good cash flow.

You’ll have no shortage of payments to make, including employees, contractors, suppliers and other various costs. This will only be offset by invoices from the client, which are frequently late and often don’t come in until after the job is complete. Or in some cases, you struggle to get your invoices paid at all and end up in a time-consuming debt collection process.

To try and keep the cash flowing, make sure your projects are properly budgeted and you get your invoices paid on time.

If you are already behind on cash flow, you can get a business loan or equipment loan to help get things back on track and be ready for your next project.

3.    Small Profit Margin

When it comes to running a construction business, having a good list of regular clients is only half the battle. With small profit margins, your long list of clients won’t get you very far.

Trying to increase profits or even maintain decent profits has always been hard in the competitive construction industry, and this year will be no different. Clients are always looking for the best price, and the expenses are often quite high and unpredictable.

Here are a few tips for getting your profit margins up:

  • Take a closer look at your expenses, especially your suppliers, and see whether you can find any discounts or savings.
  • Keep following up on any unpaid invoices and outstanding accounts
  • Don’t offer discounts to clients that you can’t afford. New business is only worthwhile if the profits are good enough.
  • Sell excess stock or supplies that you don’t use

Check out: Top 5 Reasons Why You’re Losing Money On Construction Projects

4.    Poor Planning & Safety Risks

While finding areas where you can reduce your expenses is good, cutting corners is definitely not.

It only takes one unforeseen event to cause big delays, lose profits and many other problems.

It is important to make sure you have a plan in place for your project from start to finish, accounting for potential risks and worst-case-scenarios. This will help reduce these costly mistakes.

Check out: The 10 Steps to Creating a Project Plan

Proper training and safety measures will also help keep your projects running smoothly, so it’s worth thinking about what you can provide to your workers to avoid mistakes.

5.    On-Site Theft & Vandalism

When talking about expenses that you didn’t account for, there’s one other big one that can’t be ignored: theft and vandalism.

Theft and vandalism on worksites has become more and more of a problem for construction businesses, and the costs of additional supplies can cut even further into your product margin.

Here are 5 simple steps to protect against theft and vandalism:

  1. Install cameras and alarm systems
  2. Have sufficient lighting on site
  3. Build fences
  4. Schedule supply delivers only when needed (don’t overstock)
  5. Use on-site containers to secure equipment and supplies

You may have to spend a little money to do these, but the cost of theft and vandalism can be much greater.

6.    Communication

Communication is critical to keeping everyone on the same page and avoiding costly mistakes. In today’s age of technology, there is no excuse for improper communication on the worksite.

What are the benefits of communication in a construction project?

  • Building a strong team that works well together
  • Sharing of ideas and innovation
  • Improved management
  • Feedback loops to identify areas of improvement
  • Better results

Effective construction communication can be extremely valuable, and isn’t too hard to implement. Make sure you establish clear lines of communication, with communication methods that are working for you. Listen actively to your team, and be clear and concise.

A few simple changes could help you run your construction projects more smoothly.

Here are a couple of examples of construction communication:

  • You get a call from a crew member about some damage that has occurred on site. They describe the damage to you as “not too bad” but how do you know if this accurate? If they are equipped with a tablet or smartphone, they can take a photo, and you can see that the damage is worse than you would have otherwise thought.
  • When trying to communicate with clients and suppliers, it can seem like you are caught in a never-ending game of phone tag. Resulting in never getting the information needed to continue your project. This can be avoided by using emails as another form of communication

7.    High Cost of Insurance

You need insurance for your construction projects. All the planning, safety training, security cameras and communication in the world can’t escape the fact that construction is a high-risk industry, and things can always go wrong.

However, just because you need insurance, that doesn’t mean you need to keep paying the same price as you are now.

Shop around and see what insurance options are out there. Take a deeper look at the policies. Are there any unnecessary costs or add-ons that you don’t need? Find out if there are any discounts available, such as by combining other insurance policies.

It doesn’t hurt to ask, and any money you can save on your insurance will go straight to the project profits.

Use online tools like Finder to compare insurance quotes and policies easily.

8.    Equipment Breakdowns

Construction equipment maintenance and replacement causes around 40% of total construction project overrun costs. Basically, it’s an easy way to blow your budget!

All equipment has a life-span, and eventually you will have machine and equipment breakdowns causing delays on your project.

While equipment breakdowns can just happen, you can still try and prepare for them. Make sure you are performing regular maintenance on all of your equipment. If something starts to show signs of failure, take it in for a check-up rather than waiting for it to break down in the middle of the job.

If you do find an equipment breakdown holding you back, it’s important to act fast and minimise the delays.  An equipment loan can help you get the machinery you need without waiting for the required funds.

9.    Document Management

We certainly don’t need to tell you that running a construction business is full of documents.

Contracts, change orders, material orders, receipts, invoices, employee paperwork, certificates of ensure… the list goes on and on.

Now, if your business hasn’t gone paperless yet, then you’ll be feeling this one even more!

Take advantage of the technology that is available and save yourself a ton of time and stress when it comes to document management.

Aconex Construction Document Management Software will help you keep your projects organised, easily keep track of your documents and ensure your payments are on-time.

Make sure you backup your data and avoid costly losses, by transferring files to a cloud service or hard drive regularly.

10. Lack of Business Plan

Just like how you need to plan your construction projects for success, you also need to plan your business.

Having a good business plan is essential to running a financially successful construction business!

A good business plan should cover your finances, business operations and the marketing of your business. These are all integral to your business growth, and you will find that taking the time to review your business plan regularly will be worthwhile in terms of profitability and business success.

If your business plan is still a work in progress, we need to talk!

We have lots of experience in the Perth construction industry, helping our clients overcome their financial problems for over 40 years. Book a free consultation with us and let’s see how many issues we can fix for your business!

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