Alan Gayle is a sales and marketing consultant specialising in the construction industry. In this column he offers advice on how to make an impact in the market. This time he says: It’s now or never to improve margins.
It’s good to be back following a four month hiatus. Many thanks to Paul for stepping in. I hope, you enjoyed his articles as much as I did. He has promised he will be back making further contributions later in the year.
Since I last put pen to paper much of the doom and gloom that has permeated the industry over the past few years has been replaced by optimism and talk of sustained growth. Good news all round… at least, it should be.
While the national and global economy affects every business to some extent, no matter how deep the recession or how depressed the market, some businesses continue to grow regardless of the overall market conditions. Unfortunately, the opposite is also true. Despite increased optimism and growing opportunities in the building industry, some companies will fail to take advantage.
An old boss of mine (name withheld to preserve his modesty) told me that more companies will go bust while coming out of a recession than during the recession itself.
Why? He never told me that part but it seems to me that while the cost of labour, materials and utilities are increasing all around them, they fail to increase their own profitability. This quickly turns their meagre profits into losses.
No matter what service or product you supply, the time for suicide pricing has passed – if there ever was a time for it. For those of us who want to increase our profitability, it’s now or never.
A couple of months ago a report in Construction Manager magazine reviewed November’s inaugural Talk Construction conference at the Queen Elizabeth II Conference Centre. The event was organised by the Chartered Institute of Building (CIOB) and was attended by 500 of the industry’s biggest hitters.
As you might expect, many of the delegates were large contractors. They included Balfour Beatty, Lend Lease, Morgan Sindall, Mace, BAM Vinci and the like. The big boys were there and where the big fish lead the little fish usually follow.
Both the Head of Construction at the Cabinet Office and the Government’s Chief Construction Adviser were on the programme. I wasn’t invited, but the report was pretty good so I can summarise some of it for you.
Andrew Wyllie, Costain’s Chief Executive, said that the industry’s quest for higher margins will only be met by adopting the customer focus of the High Street. He used the example of John Lewis offering TV sets ranging from a £149 low-margin commodity product to a £1,700 top-of-the-range, internet-enabled, plasma screen set.
In recent years Costain has successfully reinvented itself as an ‘engineering services provider’. It has changed from providing 200 clients with various services to providing 40-50 key clients with a focused service. The company says the value of its order book increased by 25% during 2013, so Mr Wyllie knows what he’s talking about.
What can we, the little fish, learn from the big fish in this growing market?
The first thing is that now is the time to focus on what we’re good at and what separates us from our competitors.
We should focus on finding out what our customers/clients really want from us and delivering exceptional service to a smaller, more manageable number of key clients/customers.
Above all, now is the time to focus on finding customers that want to buy our equivalent of that £1,700 state-of–the-art, margin-raising TV set and let competitors continue to sell the low margin £149 products.
You can read Construction Manager’s full report of the Talk Construction conference on the magazine’s website at bit.ly/morefromless