5 key strategies for businesses supplying to the construction sector

If your business works with clients in the construction industry, there can often be some complexities, ranging from financial management and managing credit to navigating the timelines of projects.

In this article, we will explore 5 key strategies for effectively managing or supplying to the construction sector.

Managing credit & reviewing your customers:Managing credit is a crucial consideration when managing or supplying to the construction industry. When supplying to clients in the construction industry it’s essential to conduct thorough regular reviews of the customers, including credit checks to evaluate their financial health and history. Proactive reviews help to mitigate risks like non-payment or project delays, which could in turn affect your financial plan for the year, as well as cashflow forecasts. Additionally, ensure that contracts clearly outline payment terms and specify penalties for payment delays. You may want to consider and evaluate credit insurance options to help mitigate and manage credit risks.

Stress testing your financial plan and cashflow forecasts:Consider potential setbacks - What if there were delays with projects, or some projects didn’t happen, how would this impact your plan for the year? It is important that you have contingency plans in place should this happen. Cashflow forecasting is paramount in a business that is affected by the construction sector, and more information about cashflow forecasting is here. Fluctuating cashflow can be impacted by different elements such as extended project timelines, unpredictability, creditworthiness of customers, snagging/issues on projects, as well as the dependencies on sub-contractors and suppliers.

Pricing ahead:We also recommend factoring increases in labour and wage costs into your pricing, to cover any changes that may happen during a potential delay from the original quote, to fulfilling the project and getting paid, as delays between the original quote and payment could impact your bottom line. For example, if you are not going to fulfil the job until next year, factoring in potential increases in your costings is key. Additionally, although inflation has dropped, the volatility of costs of raw materials is still there due to shipping challenges due to global events.

Driving your pipeline:The key thing when operating within the construction sector is to be looking and thinking well ahead. Here’s a few steps to start creating a sales strategy to drive your pipeline:

1. Know your average timelines in each stage of the pipeline
2. Establish conversion rates at each stage of the pipeline
3. Set a 3-5 year sales growth strategy and targets
4. Use this information to work backwards to calculate the opportunities you need to hit your goals, as well as the lead measures and sales/BD activity KPIs required to deliver pipeline growth.

Don’t slow down when things are going well. A common mistake sales teams make is to embrace the all-too-welcome slowdown that comes after a month-end push or when sales numbers are looking ahead of forecasts. While it’s understandable for some downtime to exist, these slower periods are also an opportunity to double down and create a cushion in your sales pipeline.

Mitigate your risks:

• Insurance policies are a vital aspect of risk management in the construction industry. Having appropriate policies can help mitigate risks related to subcontractor work, or project delays. Regularly reviewing and updating insurance policies to match the scale and scope of current projects helps ensure that your business is fully protected.
• To further mitigate risk we also recommended diversifying suppliers and contractors, this will reduce the dependency on single suppliers, mitigating potential risks.
   

Managing and supplying to the construction industry requires a proactive, strategic approach to mitigate the potential risks involved. By adopting the above strategies, you can better navigate the complexities of the construction sector and position your business for sustained growth and success. If you do work closely with the construction industry and would like further tailored advice on how to adapt your business plan, please get in touch with our team by filling out the form below, and a member of the team will be in touch with you:

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For more information on how we can help you and your business, please contact us via email or phone and we will be happy to advise on the best solutions for your business.

Please note: This article is provided for information only and was correct as at the time of writing (30/01/25). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance.  No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.