Why building a business in a boom is not as easy as it seems
The defining characteristic of today’s built environment industry may be an unprecedented construction boom, at least in NSW and Victoria. But that doesn’t mean it’s plain sailing for consultancies operating in the sector, says Roger Collins-Woolcock, Director of Collins & Woolcock.
Instead, those firms that fail to come to terms with the downsides of doing business in the growth stage of the business cycle may actually find it harder than ever to survive and thrive in the long term.
To make sure your consultancy can seize today’s opportunities without compromising its ability to do the same tomorrow, here are the top five things all business owners should be doing right now.
1. Formulate a plan
Collins-Woolcock believes that the outlook for the built environment is overwhelmingly positive. Every current challenge is surmountable” he says. For that reason, Collins-Woolcock believes that if a business does fail, it usually won’t be because of any outside factor but because of a lack of planning internally.
You don't need to go down the path of being a specialist unless that's you want to do
According to Collins-Woolcock, that internal planning should be based on three factors:
- analysing where you want the business to be,
- analysing where you want to be personally, and
- making sure you have the right people in place and they’re committed to helping you achieve your objectives.
Using this strategy will force you to start saying ‘no’ to work – a critical step in a growth market.
This may seem counter-intuitive, but it is a view shared by Danny Chung, National Head of the Built Environment with Macquarie Business Banking.
“The mind-set that ‘all work is good work’ is one of the main impediments to growing a sustainable long-term business,” he says.
“It will quickly mean you’re spending all your time doing the wrong kind of work, while the right kind - the work that you’re best at, that is most profitable and that your staff enjoy doing - goes elsewhere.”
2. Know what makes you different
Before you can start saying ‘no’ to work, you first need to know what work you want to accept. That means understanding what work is most profitable, what work you enjoy doing most and also what separates you from other consultancies in the space. In other words, you need to know what makes you different and then have this point of difference permeate everything you do.
Collins -Woolcock says that most built environment consultancies could be better at this.
“Look at the websites of most engineers or architects or surveyors and you’ll soon realise that they all say essentially the same thing. Most people don’t spend enough time thinking about why people should use them and how they’re different from their competitors.”
Many firms struggle to grow beyond a certain size because the owners can't let go of doing the work
According to Chung, contrary to what many people believe, knowing what separates you from your competitors doesn’t necessarily mean specialising.
‘“In engineering especially, you can still be a generalist and make good margins. You don’t need to go down the path of being a specialist unless that’s what you want to do,” he says.
However, at the same time, many business owners may find that, when they do think hard about what work they enjoy doing most and what their team is best at - it will naturally lead them to a specialty
3. Lift your head up from the work
The theory that growth comes from ‘working on the business’ as well as ‘in the business’ has been well publicised. But in any professional services firm, where what is being sold is the skill of the people, finding time to focus on anything other than billable work can be difficult.
“Many firms struggle to grow beyond a certain size, usually 10 people or so, because the owners can’t let go of doing the work. That’s not necessarily a bad thing if that’s the model of business you want,” Chung says. “A lot of professionals really enjoy the technical side of what they do.”
However, Collins-Woolcock says that if you want your business to break through this barrier, it’s vital that your senior staff members focus on building relationships and selling your services just as much as doing the billable work. And that, in turn, means having senior people who know how to win work as well as how to do it.
That said, he knows not everyone will have the same aptitude for business development. “You still need your team to play to their strengths,” he says. “Otherwise, it’s like asking a star full forward to play defence.”
In a busy market, it's easy to grow a business, but it's harder than ever to grow a sustainable one
For this reason, he suggests that you concentrate on letting those senior people who are actually good at business development use their natural talents rather than try to turn technicians into salespeople. He also says you should try to avoid the trap of using a full-time business development professional who has no background in your field to try and win new work for your firm.
“They will never fully understand the complexities of what you do,” he warns.
4. Protect your greatest assets
Collins-Woolcock believes that, in today’s hot market, nothing is more important than looking after your people. Otherwise, your greatest assets and the key to your business growth will walk out the door and it will be close to impossible to replace them.
“The problem with a labour shortage is that you never lose your C graders because they have nowhere else to go, even now. You lose your A graders first, then you lose your B graders.”
Chung agrees, arguing staff retention isn’t simply about throwing more money at your employees.
“Most people’s driver isn’t money, it’s about the chance to do good work. Incentivising people through money, with bonuses, profit share and equity should be a consideration but it shouldn’t be the only one,” he says.
Although Collins-Woolcock says that the short-to-mid-term looks rosy, he notes that not all parts of Australia are growing equally - with mining and commodity-focused states lagging behind the big cities on the Eastern seaboard. But he says it would be wrong to ignore those areas outside of Sydney and Melbourne, as they offer a form of diversification to help mitigate the risk of the boom/bust cycle.
“There are some reasonable opportunities in regional areas, particularly,” says Collins-Woolcock. “And the established players tend not to be interested because the regional markets aren’t quite big enough for their business models.”
“For that reason, I think looking out for regional Australia is a big opportunity for smaller players.”
But diversification can come in other forms too: it can also mean offering a range of services, taking on projects from different types of clients or looking at other ways to tap into markets with a low degree of correlation.
In a busy market it’s easy to grow a business, but it’s harder than ever to grow a sustainable one. But by taking these five steps Collins-Woolcock says you should go some way to making sure your business growth can last beyond the current boom stage of the cycle.