I know what you're thinking... another podcast to tell me what I already know.
We’re as frustrated as you are by the non-stop bad news (and given that we now have a recession in the forecast, this bad news ain’t stopping).
So, we decided that our podcast will unpack the challenges that builders are facing, lay all the parts out on the table, and then work out how to put it all back together again in way that’s inspiring and motivating, and makes you passionate about getting up at the crack of a donkey's a$$ to go to work.
If you got something out of this episode and want to find out how Construction Management can directly benefit your building business - contact Peter directly: peter@c2cpro.com.au
In this episode Peter and Kate discuss:
Why there is the lack of trust across the whole industry
Why trust is easily eroded during a contract between builder and client
The lesser-known reasons why builders are under stress
Why builders continue to put up with the problems of the industry
The alternative solutions and choices that builders have to stop working under a broken model
Peter: Hi Kate, how are you this morning?
Kate: Good Peter how are you?
Peter: So, this is actually our first podcast, so bit of an experiment for us, I guess. So, we've got some important things to try and get across and we've discussed the overall view of what the industry is facing is about - what?
Kate: Trust.
Peter: Trust yeah.
Kate: You know there's a lot of mistrust with regards to what's going on with some builders and what's what's happening with some of the companies themselves, but also too you know trades and suppliers - just everyone involved within a building project, is kind of questioning what is going on.
Peter: yeah, and it’s a very very important part and I've been asked a few times, is that OK, what do you see? And you know, you being a co-founder have also been through the mill like I have, and we've got the experience of knowing what can really go wrong and it's not your fault as a builder - It's just the industry that we're working in. And it's been really on a decline for a long time. When someone asks, what’s overall problem with the industry? And as you said, it's this lack of trust and if you don't have trust in it, it just stalls out doesn't it?
Kate: Ohh absolutely. You know you start off a project all nice and excited and slowly as you're moving along you the customers can be questioning ‘where's the builder at? Or what stage is he at? Or what's he done with my money – I'm not seeing much going on the site?’ So slowly, slowly the barriers start to come up and then everyone's questioning and then that trust really becomes a bit of an issue, isn't it?
Peter: Yeah.
Kate: It all comes down to the transparency of what's going on onsite, but even beforehand with the contracts or the preparation of what do you want in your project.... If there's no transparency, slowly those walls build up and you know it's questioned... the trust is questioned.
Peter: Yeah, you've nailed it when you use the word transparency, because it's like even in a personal relationship, if you don't have transparency of everything... You know....
Kate: Yeah, how do you trust?
Peter: Yeah, that's right. How do you trust? Yeah. And I think that the trap is, that people are looking at what today's current problems are and everyone's saying that’s in the known and active in industry...and all the mentors and accountants and all the other people involved in trying to help businesses along...and those particularly like me - that's been around since 1974,
is that we've got this perfect storm. And for the life of it, I've been through lots of ups and downs and so have you, me longer than you obviously, but I've never seen anything so really frightening that's happening at the moment.
So, you got to sort of say, well, what's changed? When my mum and dad got their house built. There was trust, you know, there was trust in it. So, I think to put it in context...is that even though there are problems with the industry and builders are actually seeing, and customers and trades and suppliers and designers the whole party that comes together and they're all needed together. You can't isolate one they're all needed to create project, correct?
Kate: Yes, the end - the completion of the project is all those parties yeah exactly so.
Peter: It's all the pressures that those guys (builders) are on their own. And it's important for them to understand that there are reasons behind it. And rather than us just listening to a whole heap of podcasts and webinars we're hearing and also like, you know, trade shows like Master Builders, where all it is about is what the problems are and just ‘hang in there’.
Kate: Yeah, there’s no real solutions.
Peter: And we want to be able to say ‘well there are actually solutions’ and whilst recording this - builders are actually now running into the Christmas period... you know once got Melbourne Cup comes it's downhill from here. And it's all about getting cash in.
Kate: Cash flow, signing contracts, getting contracts ready. So, from the beginning of the year, you're ready to kick off on jobs.
Peter: Yeah. And then on top of that, when the projections are that things aren't getting any better... you know, we're maybe facing a recession, is that everyone's bombarded with bad news. But we're here to say - we can't maybe solve your problem right today, but the good news is that if you focus on that there is an actual outcome - It gives you strength, hopefully to get through the work that you've got to do up to Christmas, knowing that there is a good outcome. Not just an outcome for yourself and your family, but for everyone else that's played in. That's what we're going to be talking today about.
Kate: And building trust back into your business, your relationships, with your family, with your trades and suppliers and with your customers, and giving that trust back to the customers so that everybody can enjoy a process that emotions are invested into. So why make it negative? Let's try and make it a really great fun experience for everybody involved.
Peter: Yeah, look it's interesting, we listen to podcasts over and over again and been to trade shows etc. and hear about it and seriously listening to all that I'd wonder why would you bother? But we've got to bother because it's generally, for most of us it's income you know, it's how we keep bread on the table and the important part is that also we want to convey through our information, we want to spread information that there is a better way forward. This is where your
experience comes to shine is that about the people that we don't talk about is the partner, you know the wives, the women particularly that are behind the business that are taking the day-to-day grind.
Kate: Yeah, because typically you know as a woman of a, you know, a small building company where they are dealing with the bookkeeping and the day-to-day runnings and taking the phone calls and so when the hard times kind of come then you know payments get dragged out and you're having to have those tricky conversations with either the customers or the trades and suppliers about payment and cash flow...you know it doesn't make a day very nice for a mum to then have to go and deal with the kids and do all the things and put all the hats on and still smile at the end of the day.
Peter: Yeah, and it’s not just about the builder’s partners, but it's also the trades and suppliers. I can remember, you know, my lovely wife being at tuck shop and having to console a poor lady that was in there and she was basically almost at breaking point, she said that they got a plumbing company and they've got guys in there and they're really worried – it was a Thursday Tuck shop day at school and that she was really distraught that she knew that there was no money coming in and she had guys to pay tomorrow. The builders are used to it. You know, we've always worked in an industry that you've gotta think on your feet.
Kate: and be thick skinned too I suppose.
Peter: Yeah absolutely. Because the psyche of a builder and also probably the trades and supplies that we deal with **** day in day out and we've become used to dealing with that and we and we solve one crisis to another today talking about the sh*tter - the sh*tter is actually full and you're trying to get it changed over but then the suppliers are saying ‘not until you pay your account’. That's just one of the blocks that you put up with every day. So, when someone actually dumps on you, that ‘look the sky is falling in’, you know, that we're talking about a recession and all that sort of stuff. And I can understand because we've been there and know what pressure they're under, but we've got some good news through our podcast - is that we hope that we can give you maybe 20 minutes of the day when you’re driving to the project that, rather than just dealing with the problem when you get on to the project, but also get some positive affirmation by listening, not just, say, some calming music, but hopefully some good news that's available to each and everyone.
Kate: But also, the news coming from people who've worked from the ground and has experienced, the good times and the bad times and failures and as a company, this is where we come from. This is the backbone of our company using our experiences to make sure that the building industry becomes a better place and that everybody gets to enjoy a job, that from the age of 15, 16, they’ve probably worked really hard to be where they are now. And you're never thinking that it could be tough. And we know it's tough, but we want to make sure that everybody knows it can be better.
Peter: Yeah. And really that we hope that we can convey that the switch is so simple. It's actually crazy. You know, we're not asking you to do something crazy. It's a simple, simple process. That the industry is now slowly starting to wake up too and we've got builders who have moved into a better way forward. And seriously, you don't have to take on our business model C2CPRO. This is something that we need to share because, we went through hell and back many years ago. And we said enough is enough. And then we decided we're not going to quit on this. And this is where we got significant Federal and State Government monies and working with the ‘ATO Fix It Squad’ because they all know that the industry really has always had the problems.
Kate: Yeah, it’s not just now.
Peter: We’re just seeing the blowout of what's always been there.
Kate: Or was there not a Senate Inquiry in 2015 regarding it?
Peter: Yes, it was about security payments in 2015 and then when you've got people like Dunn and Bradstreet, I don’t know if many listeners will know who they are, but they basically the highest-ranking participant in credit ratings of companies throughout the world and they said that the industry basically, and I've got some notes here and excuse me if I've got to read them because we want to make sure that we got it, that in 2012...they said that construction companies traditionally had the highest failure rate globally. So we've all chosen to work in the worst industry there is. But there can be change. So we've got to look back at, you know, why did this happen? Because most people that are coming to the industry are coming because they thought it was a good business didn't they?
Kate: Yeah, it was noble profession. You'd be builder... and you could build somebody's home and you know, you wanted your kids to be a builder because you looked up to them.
Peter: And you had that trust. And that was what we looked at when my mum and dad's house was built, that you, you had trust in the builder. If you wanted your kids to go into it, you had trust that they go into a great industry and that trust is evaporated and that's the issue. So, it's about restoring trust.
Kate: And I think too we find that all the parties involved in a project tend to feel a bit isolated they're little satellites running around the project. But it's important to be able to make sure that they can all kind of collaborate together and work together on a project. And not just on the project side, but from the design stage. Working together and understanding how the project is going to come together can make it seamless as well.
Peter: Yeah. And you're right with that because having that collaboration getting everyone together to work under a new methodology, and this is what is happening, is it makes it bomb proof and it actually starts to bring back trust. Because if everyone's going to work together, there is one thing that's needed for everyone work together is transparency. So effectively, what
the process is that we've actually discussed is the industry has changed and there's a number of factors, it's just that projects are more complex and there's more choices, customers are more demanding, they’ve got The Block and all the other shows.
Kate: Expectations...
Peter: So, the demand on the builder is actually increasing day by day.
Kate: And also, too the customers - they're not informed. They don't know how much things cost, they just see something goes up and they want that. But you know to step straight into a project and go, this is what I want, but the budgets are pretty important thing. So, you know to be able to have an understanding and be informed early in the piece, sets that, once again... the ‘trust’ relationship. With the builder and their designer as well... so there’s no, six months down the track going, I wonder what it's going to cost? Can we afford this?
Peter: Look, we're not going to badger you with what's wrong with the industry. You will know. You hear it over and over again, you know. And you get sick to death of being told the same thing and to ‘just hang on’. So we're not going to do that. You already know. But know that, It was noble. It was a great profession and we need to return to that.
Kate: Let’s bring it back.
Peter: So, what the key factor is and this was also sheeted back to in the 2015 Senate Inquiry and this is what builders have got to understand. There is one single path that drives the change and that is reported by the Senate Inquiry that builders should not be holding money that’s owed to other people in their own account.
Kate: For example?
Peter: For example, if you've got a $1 million contract - if you're working on a 20% margin and our construction managers are going 25% because of the service the customers want, so, let's work on that. Imagine if you're a customer or your trade and supplier, put yourself in their shoes (a builder’s shoes), that if you've got, your 20% margin - 80% of the construction costs is owed to other parties, and you're (the builder) going to have to handle it. So don't blame regulators such as QBCC in Queensland and other regulators that are going to put a lot of pressure on you to make sure that the money has some level of security.
Kate: Because you're responsible for that 80% of other people's money!
Peter: And because of the lack of transparency and there's no trust. From anyone. So that's it. So what the key is, and this is the golden egg or the golden ticket. That was Willy Wonder wasn’t it?
Kate: Hahaha, he made chocolate, not houses.
Peter: Yeah, but there was a kid that got a golden ticket? I’m showing my age but....
The change up is the fact that builders are now becoming more professionally what they do. So, they're not sticking to the old ways with what they do. They are starting to appreciate, when you look at a building and the best way to describe it is; think about you as a builder now becoming similar to a Structural engineer or certifier. A structural engineer actually signing off on your project on probably more value of works than what you are. It's a structure, you're signing off on waterproofing and a few things like that. It's signing off on the major part. They're not going through a crisis. They don't have to worry about someone picking up the phone saying why haven't you paid me the concrete laying. They do that, so they offer professional services because they're transparent. So what we've done, all we've done is see that construction management has always, always been a viable way of undertaking a project on behalf of the customer.
So the question you get asked is what is a construction manager? A construction manager is a builder.
Kate: is the builder at a domestic level. I think a lot of people might hear that construction management in more the higher end of town, but it can still be applied at a residential level.
Peter: Absolutely. So it's now thinking about you, as a business, of now not relinquishing the control of other people's money, because it's not working for you and it's not working for anybody. And that is the key part. Give up you holding 80% of other people's money, roughly in a contract that's not yours. That is the key.
So if you would embrace that and say, yeah, I need to really think about how I do my business, suddenly you're going to now open up a whole host of benefits.
Kate: So you're saying that the best step forward is to become a construction manager. So when someone becomes construction manager what are the knock-on effects, what are the benefits to them and the parties that are involved in the project?
Peter: And that's the important part is when you're driving along listening to podcasts and we're going to dive in deeper, but we want you to understand just that single thing. Think about ‘construction manager’ and then we will enlarge on that. But the important takeaway from today's session is, imagine this happening... Kate, you're the customer, I'm the builder as a construction manager. So we've got these great little books. The first one is ‘Construction Management Made Simple’ and they're ebooks available. So you can actually contact us to get copies of these. And Kate's got one, which is…
Kate: ‘Your Project Made Simple’, which is dedicated for the homeowner themselves and the benefits that the homeowner actually receives when working with the construction manager.
Peter: Yeah, So what we've created through the transparency of everyone working together. So the construction manager now steps aside and like any engineer - are fully transparent about
his operation at a high level. And this is what happens, it brings the customer and the construction manager together on the one platform. That's where everything's transparency and everyone gets trust. The construction manager gets trust in the customers going to pay them on time and give them cash flow.
Kate: And then the customer has trust in knowing that their project funds stay on their project. And that their trades and suppliers are going to get paid.
Peter: So yeah, we're going to do quickly go through these particular parts so that on finishing today, imagine this when you're driving to the site, hopefully listening to this podcast or having a beer on a Friday afternoon and thinking, Oh my God, is it all worth it? There is a way forward. And this is the point, you don't have to keep doing what you're doing and expecting a different result, which is just nuts. It's not working. It's just getting worse.
So now imagine I'm the construction manager from the book, at contract signing, how about this... You know exactly how much you're going to make. So your profit margin, which is that 20% is transparent. The customer knows and has proven that they know it. Then you get paid. As one of our construction managers said;
Recording of Marcel from Sun Built Constructions: look, I love this system so much that I really see the value and the benefit in my business and the peace of mind that I get every fortnight. I know I'm getting paid and I know exactly how much I'm getting paid. Do you find that in your business? They usually say we have no idea. We just get what's left in the tin.
Kate: As an owner is that you know, because of the transparency, you will have the confidence in knowing that your construction manager will be getting paid, but also to, he's got confidence that he'd be able to work on your project and enjoy working on the project because he himself has a full understanding about where his business is sitting, and also the trades and suppliers knowing how they're going to get paid as well.
Recording of Marcel from Sun Build Constructions: There's a real safety net there and a security for both the builder and the client. The builder knows that he's got funds to build that project, and the client knows that those funds won't be used for something else. It literally allows me to be confident that we can build it for that price.
Recording of Leona – past client of Marcel: Yeah well knowing the people that were involved also receiving their invoices directly and paying them directly we knew exactly what they were doing and when.
Peter: OK that's great and as a construction manager, you don't ever have to be worried ever again that you need to pay a trade or supplier. So think about what your partner's going to think about that. So suddenly the bookkeeping is going to become just purely looking after your profit margin, and only that. So all your bass will cover all the other reporting, the reporting to the regulators, and all that just disappears. And the customers benefit through that transparent because you're not holding accounts now and you giving the ability for your customer to shop...
Kate: Shop the open market, gain benefits of direct buying power you know...discounts because the payments are coming from the owner and you guys are sharing responsibility of knowing where these funds are going. If the owner wants to make savings along the way they can. Without relying on builder's accounts, their customers are fully aware of where their funds are going.
Recording of Leona – past client of Macel: I was able to go shopping. So I was able to go and choose my tiles and fittings and save some money there.
Recording of Peter - Leona’s Architect: And that's really important part of that team that we’ve got that wealth of information, the different consultants that are required that you can pull in, as you said the electrician, air conditioning. Plumbing and tiling experts.
Recording of Paul – supplier at Art Bathroom: I like that, we do get to deal direct to the public or direct to the customer like yourself. We don't need to get the builders accounts involved then we can just go one-on-one and really nut down what you guys want and get a happy deal hopefully. We knew what your budget was, so when you came in we knew what to push you towards, or just show you towards and keep you within that budget, so you don't go over budget and get any unnecessary scary costs.
Peter: And also from a builder's point of view or a construction manager's point of view, it also helps with that direct payment - because there's no accounts aside that we all know that if there's two sticks of timber left in the shed, who's going to get it? it's the one with the cash sale. And we know that the increasing problem that the industry has at the moment is that suppliers don't want to really deal with builder's accounts, they're actually tightening up on that. So remove yourself from that pressure. You make no money out of it. It's just a pain in the backside and it's got all the regulatory requirements and personal guarantees and all the other nonsense that's required, plus the phone calls of “why haven't you paid us”? It becomes the direct responsibility from the client to the actual person who does the work, which is the important part. And the client knows through transparency that the funds stay on their site.
Kate: That's right. And the other added bonus to that is those trades suppliers know that that's going to be a cash sale, they're going to prefer to come to that project. They're going to make sure that those windows are delivered on Friday because they're going to get paid, which in turn means projects happen quicker.
Peter: Yeah, the overall, the overall importance that for you is that when you're putting up with the sh*t of the day-to-day running and particularly the run up into Christmas, we're just about trying to get cash in the door... is that there are solutions. And actually, the solutions can be actioned very, very quickly and we've had great examples of that. So to summarise there’s some great news here and I think we'd like to keep you in the loop. And it's all about making the change progressively. And we have some help in those areas with some software offerings.
Kate: Yeah check it out on our website. We've also got our guys in house that act as mentors, so you know, we’ve also always got support from Paul, Ross and Matt in house, that not only will they give you support with the use of software, but you know coming from a building background – carpenters, builders, they're always going to be there for any problem-solving solutions and or, you know, to listen to you on a Friday afternoon. So I think it's time to wrap it up.
Peter: Yeah let's wrap it up, but we're going to try and keep putting something out to you at least once a week because it's so important to know that the daily grind that you're going through and also for customers as well because if you don't get customers having their trust in you you've already got a barrier right in front of you. There are so many gems that every week I'm sure you're going to start building up “Hey, I've had enough of this”. And it won't be just about you, it'll also be about all the other people who are involved in your business. And not the least - and that's your family. That's the most important part, because we're family. Yeah, and we do fight... anyway.
Kate: Haha, alright, well thanks for listening. Check out our website at www.c2cpro.com.au for any queries that you may have. There'll be contact details on the site and we'd love to hear from you.
Peter: Cheers. Thanks Kate.
Kate: Thanks Peter.