As most construction and property development professionals will be acutely aware, the price of a wide range of industry-specific products and materials is currently skyrocketing.
This (alongside the various property sales costs) appears to be – at least in part – due to a huge increase in demand. Many also cite the inevitable backlogs created by various regulation changes resulting from the perfect storm of Brexit and the COVID-19 pandemic.
Most larger construction and development firms are well-placed to weather the storm and foot the rising bills. But what about SMEs?
The resources of smaller businesses are stretched much further by these challenges, and their owners and management teams are being forced to work tactically in order to keep projects on-budget and on-schedule.
In this article, we look at a few of the approaches taken by SME property developers as the price of equipment and materials continues to rise.
Planning in Advance
In many cases, savings can be made as long as construction firms are able to wait longer for materials. As a result, projects are being planned way in advance – and, in many cases, multiple builds are being organised in tandem despite the work taking place months apart.
This approach comes with its own challenges of time management and storage, but it does tend to reduce the amount of guesswork involved in projecting costs and timelines.
Ordering in Bulk
Of course, the cost per unit of building materials may be reduced by bulk ordering; a technique that many construction firms have long been familiar with.
The challenges inherent in this approach include cash-flow issues – namely, having access to the right funds at the right time – as well as problems with storage. What’s more, shortages may still have an impact, with many suppliers struggling to fill larger orders in one go.
This approach is beneficial in a number of ways. Naturally, the recycling of materials and equipment is great for the environment and provides a great selling point for any SME.
The price of recycled materials tends to be lower, too – and, if that recycling is undertaken in-house, a company may have immediate access to much of what they need.
Of course, it can be tough to find items in the right quantity or in the correct condition, so careful planning should always be implemented when taking this approach.
This is perhaps the least advisable technique on the list. Over-ordering can lead to greater shortages and delays for other firms, driving prices up further. It may also create needless waste when a company decides they have an excess of certain items.
Additionally, overspending is common amongst specialists who resort to this approach, resulting in major struggles when balancing the books.
Of course, in some cases, the only option is to press pause and focus on other areas until the delays subside and prices settle. This is not ideal, of course, but it may prove sensible – particularly for firms with multiple specialisms or income streams.
Some companies may decide to offer new or adjusted services until they are able to return to their parked projects, while others may use the time to improve their marketing or infrastructure, ensuring they are ready to rise above the competition when the time comes.
As is evidenced above, the current delays and price increases come with a great many challenges for SME property development firms.
Using a combination of the techniques explained in this article, many smaller businesses may be able to weather the storm – but this is unlikely to happen without significant sacrifice, intelligent forward planning and a flexible approach to project management.