Builder cashflows are suffering

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Following several conversations with builders GPS has commenced a program to strengthen our relationship with builders on GPS funded projects.

It turns out that our businesses have many similarities once you cut through all the jargon. We also share many operating risks.

Determining and achieving an optimal size of operations is core. Like GPS, many builders don’t want to become the biggest. It is all about efficiencies and consistency. We all prefer to run with a team that is a manageable size and to keep them working. Timing of construction programs can often have the biggest impact on the bottom line.

Too often my conversations with builders arise from a project stalling due to lack of funding. The developer is a rusted-on bank borrower, who now needs to achieve a level of debt coverage from presales, in a market which is struggling with preconstruction presales.

This delays the commencement of construction which can be detrimental to the builder’s consistency of work. They don’t want two or more projects at the same stage of construction. This means having to bring in additional teams, which increases management and may lower the quality of works.

GPS often receives funding applications which still need a suitable builder. There is an opportunity for cross referral of work.

This may seem to be a dry conversation, but to those involved it is very interesting.

Please give me a call if you would like to discuss further.

Richard Woodhead – Managing Director

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