Wise Up Wednesday: “It’s Still Tough Out There…”

“It’s still tough out there …

So says David Hurcomb, who is chief executive at NG Bailey. And with group turnover of £365 million he is probably in as good a position as any Specialist Contractor to comment on the state of the construction and engineering industries.

What he said was; “It’s still tough out there, particularly in building construction. Margins remain under pressure across the supply chain, which is why we seek to avoid bidding high-risk, low margin work.”

Please stop and think about that for a minute.

As you can imagine I talk to lots of Specialist Contractors, and what some tell me is that there is always someone who will cut the price and do the job cheaper.

But here’s the man responsible for securing a turnover of £365 million, and he is saying “… we seek to avoid bidding high-risk, low margin work.”

So if NG Bailey can do it, so can you!

A Long Term Sustainable Business

Hurcomb also said; “… all of our divisions performed profitably, which gives us a strong platform for developing a long-term, sustainable, business. We firmly believe our strategy of creating a much more broadly-balanced business is the right one.”

So, here are a couple more clues to their ongoing success (they have been around since 1921).

First off, they are absolutely clear that profitably is the key to creating a long-term, sustainable business.

In other words no profits – no business!

Secondly he says; “We firmly believe our strategy of creating a much more broadly-balanced business is the right one.”

And in doing so he reveals that not only have they got a “strategy”, but they “firmly believe … it is the right one”. In other words they have evaluated more than one strategy and have decided on the one they are going to implement.

Don’t Put Your Business At Risk

More than 23,000 construction firms said they have experienced “significant” financial distress over the last 12 months, according to new data from business recovery specialist Begbies Traynor.

The firm’s Q2 2015 Red Flag Alert, which monitors the financial health of UK companies, said the number had leapt by 31 per cent year on year.

Eleven per cent more firms reported financial distress in the 12 months to the end of June than the 12 months to the end of March.

Smaller businesses make up the vast majority of the struggling firms, with 95 per cent of those reporting financial distress classed as SMEs.

What About You?

What about you and your business?

Have you got a strategy for success?

Are all the different aspects of your business performing profitably?

Do you have a clear strategy for creating a long term sustainable business?

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Our experts reveal their most important ideas for the success of your Specialist Contracting business, and provide all the expertise and support you need to resolve your problems and grow your business.

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“Only Those Who Are Asleep Make No Mistakes…”

“Only those who are asleep make no mistakes”

-Ingvar Kamprad, founder of IKEA, world’s largest furniture brand

It’s only 7 words long, but what a great quote that is!

Everybody makes mistakes, especially in the business world, and as a Specialist Contractor making mistakes can be extremely costly for your business. So, it’s important to ensure that we don’t make mistakes that we could easily have avoided with a little bit of forethought.

And although what we install, and how we do it can be extremely complicated, avoiding commercial and contractual problems can be surprisingly easy with the right approach.

So, here are my 7 top tips for avoiding costly commercial and contractual mistakes.

1 Who Are You Actually Contracting With?

Even in good times Contractors will still become insolvent, and when G B Building Solutions failed earlier this year they owed over £30million their Specialist Contractors!

If the Contractor you’re working for goes bust you will get nothing!

Watch out for contracts that allow the Contractor not to pay you if the Employer becomes insolvent, because you are then taking the risk of not getting paid if they go bust.

2 Scope of the Works

It’s a chore but you should carefully check that the scope of works in the contract matches what you have priced.

At best Contractors don’t care if you get it wrong – their terms will protect them.

At worst some Contractors will deliberately manipulate the scope of works to increase their profits.

3 Time/Programme

Make sure the contract period is agreed and properly documented before you start the works.

Don’t agree to work “in accordance with the Contractor’s programme” or “in accordance with his directions.”

Failing to protect your interests in respect to time can prove extremely costly!

4 Price and Discount

If you have made important qualifications in your tender make sure they are not lost when the contract is formed.

Make sure you know the fundamental basis of the contract (e.g. lump sum, re-measurable, cost plus) and therefore who is taking the risk of quantifying the scope of the works.

Don’t allow one off discounts to be applied to variations.

5 Payment Terms

Make sure the payment terms are clear and unambiguous, and that you understand how they will work in practice.

Watch out for pay when paid, or pay when certified type abuses, and make sure you know what has to be done to ensure you get paid on time.

If the payment process is linked to valuation dates make sure these are agreed and recorded and go beyond the end of the anticipated contract period.

6 Design Liability

It is very easy to acquire design liability even when you think you haven’t got any responsibility for design.

If the contract does not expressly limit your design liability to “reasonable skill and care” you will get the more onerous liability of “fitness for purpose.”

Fitness for purpose obligations will void your professional indemnity or product liability insurance cover!

7 Non Payment And Dispute Resolution!

Being able to suspend performance for non-payment is a very effective remedy.

Adjudication (used correctly) is a very effective legal solution.

Neither remedy is automatically available, and you need to ensure that these rights are not taken away by onerous drafting of the contract.

Free Advice And information

If you want to know more, our unique web site has lots of free advice and it’s exclusively for Specialist Contractors, and it provides you with information about 40 different aspects of your business!

Our expert team of professionals provide all the expertise and support you need to resolve your problems and grow your business. Our goal is your wealth and security, now and in the future.

We look forward to keeping you up to date and helping you to resolve all your business problems.