Construction Industry’s Changing Landscape Professional advice can guide you in succession planning and adapting your business to changing conditions

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By Patrick Jackson
Barrie Construction Report guest columnist

Across the province, and indeed, across the country, the landscape for construction companies is changing, with respect to changing customer demands and tastes, and ownership and operational considerations. And, despite the pessimism among economists and analysts about the state of Canada’s economy, construction companies are, in general, optimistic about the future. Anticipating continued growth then, and the new challenges construction companies face, business owners must make time to re-evaluate their business, to understand the changes and challenges, in order to ensure their companies are prepared.

The first change construction companies need to prepare for is the changing role of the CEO within the company. While many owners of small business will stay on in some capacity beyond a traditional retirement age, others are hoping to step back, if not at age 65, at some time around then. In fact, a recent survey suggested that five years from now, 64 per cent of CEOs of construction companies expect to take on a more strategic and less hands on role.

The problem though is that only 36 per cent of construction companies nationally have actually taken time to put succession plans in place. Understanding the role of the CEO and who will take on those responsibilities in the case of a full or partial retirement is key. Once that is fully understood it is a much more defined process to understand who will take on those vacated roles and the skill development or experience that needs to be gained by whoever will succeed them. While many CEOs have come to take over multiple roles and to wear many hats within their companies over time, it is not likely that someone stepping into the role will have the experience, or expertise to follow suit. Identifying strengths among potential successors and ensuring key competencies is crucial to the business continuing after the CEO has stepped away.

While this internal reorganization is sorted out, construction companies must also deal with a myriad of other challenges, including:

• Understanding accounting policy choices and how they impact key financial ratios that banks and financiers look to in assessing loan applications.

• Structuring investment vehicles and syndications to help raise capital at the lowest possible cost by taking advantage of numerous favourable tax structures.

• Taking advantage of the latest technology solutions to stay on top of costs, investments and reporting obligations, while keeping accounting costs to a minimum.

• Benefiting from industry specific rules and regulations that provide tax relief and deferrals, both nationally and internationally.

• Avoiding the pitfalls and potential of double taxation.

• Connecting with investors, lenders, sellers, real estate and construction professionals.

• Understanding internal controls and implementing efficient and strong processes and procedures to safeguard assets and ensure reliable financial reporting.

• Navigating the complex governance and regulatory requirements of the public markets.

• Understanding the benefits of good governance and financial reporting policies.

Construction companies must find ways to determine what their particular market share really values and then find ways to factor those specific elements into cost-effective projects that customers will see have value, but are also affordable. This may take a thorough evaluation of costing and business financials to determine what is reasonable, what is affordable, and what will be sustainable.

If you have never considered professional advice before, this may be the time. Whether it is succession planning, or simply adapting to today’s changing markets, construction companies must pay more attention to the business of construction, so that they, and future generations, will be able to continue the work of construction.

Patrick Jackson CPA, CA is regional leader, real estate and construction practice for BDO Canada’s Ontario Atlantic Region, based out of Barrie. He has more than 10 years’ experience providing business advice to construction companies to help them navigate the above mentioned challenges. To reach him, call (705) 726-6331, or email pjackson@bdo.ca.