End of a tough year ­­— what’s on the horizon?

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Nearly all of you have probably had to cut costs, reduce staff numbers and fight for work. It can be hard releasing staff, particularly if they have worked for you for many years, and I feel for you, them and their families.
But you have indeed survived, and the bottom of the cycle seems to be behind us after new building consent figures hit an all time low last year.

They have been slowly recovering and the mood is more optimistic. But we are picking a continued slow recovery, with spikes in Canterbury as the rebuild picks up momentum, and in Auckland in response to housing shortages there.
That will mean having to continue to be cautious and not lose the ground you have made and what you have learned from the past couple of years.

However, as the market does pick up we are conscious that businesses can be exposed to risks that can create severe financial pressure.
You can go broke going into a boom period just as easily as going into a bust. This is because of several factors relating to not having the systems and staff in place to control a sharp growth phase, and being caught with fixed price contracts that take a while to start but in the meantime costs go up (eg, subbies prices and materials).

There can be difficulty recruiting quality builders to accommodate the growth in work, resulting in building quality suffering. Greater oversight and management is required, including keeping track of greater cash flows and invoices.
Losses on projects can result in a scramble for more work to obtain the cashflow to fund the shortfall. This can be acquired through under-pricing which, of course, is a fatal mistake as the problem only gets bigger and the spiral grows exponentially.

So be very cautious about the allure of more work for the sake of it, and be sure you can control the growth. Just increasing your margins may be another option to increase your income without the stress of business growth.

The RMBF will be developing a seminar series in the New Year to help members in this area.
What do we see on the horizon for 2013? Well, clearly the changes to the Building Act will come into force at some stage. This will see greater consumer protection, including:
• Compulsory written contracts;
• Compulsory disclosure of certain information by the builder before entering into a contract (eg, your LBP status, and whether you can offer a guarantee) so the owner can make an informed choice;
• Greater fines for breaching the Act;
• A compulsory statutory one-year period where the builder must go back and fix any problems;
• The possible introduction of risk-based consenting; and
• The change of the Code Compliance Certificate to the Consent Completion Certificate.

There are many others, but until the final Amendment goes through the House it is a wait and see.

Finally, from me and everyone at the Federation, we wish you all a very Merry Christmas and a safe and enjoyable New Year. See you in 2013.