As travel restrictions lift, trades businesses face both risk and opportunity, Findex Accounting and Business Advisory Partner Larry Mitchell says
Immigration is expected to rise again, and with it, the need to be aware of the requirements of employing employees with specific immigration and employment rules. Skilled New Zealanders are also expected to travel abroad to seek a change in living and working environments.
The construction industry finds itself at a crucial juncture. With reported high-profile construction company failures across the sector giving rise to caution, we see a decrease in both the volume of residential property sales and their value after a two-year high. At the same time, household budgets are under pressure as they experience inflationary cost increases across the board.
Optimistically for the trades industry, the Government and Infrastructure spending is continuing across many national and local projects.
The impact of COVID-19 on trades businesses
While each business has its unique story and experiences from navigating COVID-19 and its downstream effects, we’ve observed at least four distinct phases that most trades businesses moved through.
- The honeymoon period: Following the original lockdown in April/May 2020, most tradies experienced pent-up demand and strong pipelines from pre-COVID projects. With the supply chain still intact and worker engagement strong, this meant a period of solid performance for most.
- Reality setting in: Around late 2020/early 2021, the reality of COVID operating conditions really set in. The first signs of supply chain constraints, cost inflation and worker shortage became evident. Life as a tradie became more difficult.
- Momentum killer: These challenges were cemented by the August 2021 lockdown, which killed off momentum. Supply chains ground to a halt, shipping challenges became worse, and locally, employee fatigue and wellbeing became key issues. Most trades businesses limped their way to a well-earned break for Christmas 2021.
- The hangover: As everyone returned to business for the 2022 year, there was a cautious optimism, with most people returning to work following an outstanding Aotearoa summer period. Enter Omicron. Omicron brought a new set of challenges for businesses with owners faced with the realities of working with the virus within our communities. Up to 25% of employee absenteeism has been commonly reported, with significant and prolonged disruptions to supply chains now the norm.
Whilst the future is as uncertain as ever, what is emerging is a clearer picture of trades businesses that are best placed to prosper, and those likely to struggle. Below are the critical success factors we see moving forward for trades businesses.
Attracting and retaining key staff
Research shows that values, culture, and alignment of purpose are critical to the long-term success of attracting and retaining staff. Pay rates need to be competitive with market rates but are not a long-term strategy for success in this area.
Staff wellbeing
The mental and physical health of employees will continue to be a major factor in successful performance. Those that can provide management advice and support to staff will be more likely to prosper.
Passing on cost increases
The inability to pass on cost increases has been the number one factor mentioned in recent construction company liquidations and failures. Those that manage contractual obligations carefully and transparently will ensure profitability is maintained.
Management and delivery of projects
The current supply chain challenges are placing significant value on long-term relationships and partnerships. Those who have established and trusted reciprocal values are prospering currently and will continue to do so.
Access to sectors likely to grow
Several tradies have found themselves exposed due to specific sectors experiencing constraints. Those that can pivot towards industries where growth is still likely will be most successful: particularly accessing the Government, Infrastructure and Education sectors.
Get help supercharging your trades business
This can all seem overwhelming as a trades business owner, but with the right tools, resources and expertise you can be confident that you’re moving forward with purpose and stability in this uncertain economy.
Get access to industry-specific and in-depth learnings from your accountant or business advisor. They work with many trades businesses and will be able to advise on the top industry practices that you can implement in your own business to help it grow and thrive during challenging times.
