Overview
The construction and trade (plumbers, electricians, builders) industry tends to rely on wider economic factors for success, including the number of new housing applications; changes to zoning laws; investment by government in key projects and inner city development; and consumer demand for home improvements/ repairs.
World events have impacted all industries; limiting access to the workforce, causing supply-chain issues that limit availability of raw materials, and resulting in delays due to increased health and safety requirements. These factors have resulted in much longer timeframes for jobs and projects to be completed — and a subsequent increase in costs.
Construction is a major contributor to the economy, and demand supports a wide range of other activities. Trade businesses compete with other trades and the DIY industry. People love to tackle a good home project with many homeowners attempting their own repair or renovation. As competition among trades rises and new digital tools become available, the shift towards automating business administration, marketing and sales will increase.
Success characteristics
Experts in construction and trades should try to leverage:
- Referral and repeat business from word of mouth
- Developing partnerships and strategic alliances to collaborate when tendering
- Establishing a great reputation for credibility, quality work and delivering on promises
- A strong health and safety track record • Instant payments to avoid bookwork and bad debts
- Investment in and retention of quality employees
- The ability to quickly scale to meet demand, which could also assist in driving improved productivity
- Assets are well utilized and at maximum capacity, or there is room to grow
Challenges
As with all industries, construction and trades has its own dynamics to manage.
- The cyclical nature of contracting and the amount of time to win work
- Unseen delays (e.g. pandemics and foreign conflicts) and the legal implications of not completing work on time or on budget
- New insurance premiums and conditions to cater for a crisis
- Changeable weather which can restrict outside work
- Unable to access skilled labour if prevented from entering the country, or during times of high demand
- Limited ability of smaller business to quickly scale to take advantage of demand
- The cost of training and changes in practice
- Management capability, particularly when the business grows from an owner operator to requiring line management
- Collecting payments and managing cashflow/bad debts
- Complying with health and safety rules and regulations (especially for trades as their business grows)
- Construction and trade trends
Customers are more informed
When hiring trades for their home improvement or any other routine maintenance job, customers want instant access to information such as licenses, receiving accurate quotes and keeping tabs on job progress. Customers are also more aware of prices by using online quote services from online sites.
The rise of online trade portals
Customers can now access online portals to find a tradesperson and request quotes. These customer experience management sites will play an increasing role in connecting customers with community trusted trades in their local area.
The use of mobile payments
Trades will increasingly ask for payment as soon as the job is completed, reducing invoicing needs and the rate of bad debts. Card devices for your mobile phone allow you to be paid on the spot.
The need to comply
To work as a tradesperson you may need a license or be registered in your province. It’s also increasingly important to understand and be compliant with health and safety regulations. Some trades will have different codes of practice so spend time researching what may impact your particular industry and province. You may have your
own licensed authority so customers can check if you’re registered.
No more cash jobs
The integration of cloud accounting software into job management apps for trades combined with inventory tracking systems and electronic tax invoice generation, helps trades to cost and price, but also reduces the cash component of the business.
Reducing mental and physical health issues
Trades face significant hazards at work such as slips, trips and falls especially when working from rooftops, poles and ladders. More trades will be forced to be aware of the health and safety issues for themselves and staff as penalties increase for non-compliance.
More younger and female trades
In the future the average age of new trade business owners will lower as it becomes easier and easier to start a business. Young apprentices are digital natives and will adopt trade technology faster than ever before, including using social media channels to gain new work. This includes more freelance trades, who will be comfortable with irregular income. There are large numbers of female trades in the market, but this trend will continue to grow. Women worldwide are pushing towards gender equality in this traditionally male
dominated industry.
Better construction software
Construction management software has improved over the last few years, with a number of apps able to bundle together for bidding and estimating, project management, change orders, scheduling, human resources, billing, and accounting.
Use of drones
Drones are being used for the industry to access remote locations, reduce placing staff at risk, collect data, complete safety inspections, and reduce the time required for progress reporting. The relative cost of drones will drop.
Green construction
Green construction (to lower a building’s carbon footprint and to reduce the use of resources) is increasingly expected by home buyers, renters, and commercial tenants. Renewable energy will continue to grow as a percentage of overall consumption. It includes every aspect of construction including planning and design, demolition, and clean-up.
Sustainability
Closely related to green construction, sustainability can be defined as preservation of the natural environment. For example, a sustainable construction project may feature building designs aimed at bringing natural light into the center of a building, reducing electrical costs. Or, a building can be designed to reuse drain water from sinks to flush toilets.
Highly cyclical
Construction experiences the highs and lows of the business cycle more acutely than the economy as a whole, with high volatility in employment and GDP compared to other sectors. Periods of high demand create bottlenecks with the supply of trained and skilled labour, and immigration often fills the gaps. Skilled labour is lost during quiet times and some workers leave to work overseas. This volatility also acts as a disincentive for employers to invest in training and capital equipment, preventing the sector from building and
maintaining capacity.
High percentage of small businesses
Residential building is mainly made up of self-employed builders or small building firms that build two to three houses a year in addition to repair and renovation work. This characteristic of the sector makes it hard to invest in people and capital to boost productivity.
Growing material costs
Costs of building materials will continue to increase (the largest cost increases will be in iron, steel, manufactured steel products, and softwood construction lumber).
Augmented Reality (AR)
AR continues to provide new applications and helps efficient project staging and making pre-construction projects tangible for buyers and tenants. Being able to view partial or completed projects before they have started helps increase decision making.
Variable labour force
Builders will find it necessary to invest in training to equip existing workers with the skills necessary, and they will need to invest in the tools and higher wages necessary to keep those workers satisfied and productive. Training and development will need to be an integral part of every construction company’s policy.
Links and further help
- Canada Green Building Strategy (canada.ca)
- Understanding Building Codes (canada.ca National Building Code of Canada)
- Canadian Home Builders Association (chba.ca)
- New residential construction statistics (statcan.gc.ca)
Financing your expansion
In terms of external financing, talk to a Coast Capital Business Advisor to determine a funding strategy to support your goals. CoastCapital offers a full range of credit facilities to suit your needs, from operating lines of credit, equipment loans to commercial mortgages we have a product that could help.
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This content is for general information purposes only. It is not to be relied upon as financial, tax, or investment advice or guarantees about the future, nor should it be considered a recommendation to buy or sell. You should consult your own professional advisor for specific financial, investment, and/or tax advice tailored to your needs to ensure that individual circumstances are considered properly and action is taken based on the latest available information.
