Getting Serious About Building
The Age
Friday August 19, 2005
Now to get the cash flow, and get around the difficulties with marketing, writes Janine Perrett.
THE mum-and-dad partnership is fairly typical in small business - until they decide they actually want to be more like a big business.Neil and Louise Riles believe that, if managed professionally, they can turn their small company, Riles Constructions, into a significant one. "We want to move away from the husband and wife business to a serious business. We have to stop thinking like a little partnership and think like a big business," says Louise. "There are many construction businesses out there like us. Most of them are great builders but in order to truly stand out we need to also be a great business." The Riles point out that, since starting their building business eight years ago, they have quadrupled annual turnover from $500,000 to $2 million last year. They believe doubling that is achievable, and say they are at a critical stage of their growth. Louise is not daunted by the challenge - she runs the business side of the company while bringing up the couple's five children. Neil, who has been a builder since the day after he left school in 1976, also likes a challenge. He specialises in the more ambitious residential jobs that other builders are wary of. "The harder the job the better, the more complex the better," says Neil. "We currently average about three jobs a year but they are big jobs and they're getting bigger and we want to grow that type of work."This means that, unlike many builders, he does most of his work through architects, which he believes has advantages; the main one being they avoid much of the direct hassles with clients. "There's always someone in between us and the client," says Neil. The downside is that it does make it harder to market his business and expand the client base - because he has to target architects specifically. "How do we target new architects? If we use the direct approach it cannot look like advertising or they will just throw it in the bin," says Louise. They recently won an award from the Master Builders Association, which Louise says "did us a lot of good and proved beneficial". Louise also accepts that a good website would probably be their best bet as the architects and their clients are all technically savvy and they could showcase their fine work through photos and drawings on the net. However, she is at a bit of a loss on where to start. "How do you select a contractor to design and implement the new technology?" she wonders. The other problem with making themselves known is their location - Riles Constructions is based on the outskirts of Nowra on the NSW south coast, 2 1/2 hours' drive from Sydney The business focuses on Sydney clients building prestigious south coast retreats, which helps in times of downturn as they are less susceptible to interest rate movements and other factors. But it creates other marketing issues. "A lot of clients think because you live in the country, they can get it much cheaper than in the city," says Neil. "They don't think that everything we use has to come down from Sydney and that we have exactly the same insurance and other costs as in the city."There are some 80 rival builders in the region, but Riles Constructions has managed to create its own niche at the prestige end of the market - not only winning awards for their building, but also kudos for their business professionalism. "It's a challenge to maintain the professionalism," says Louise. "We get feedback from clients who have built million-dollar houses with other firms and then get handwritten invoices."Louise's priority is to improve the systems management in the business. The first thing she wants to do is establish a paperless purchasing system. "I would really like to streamline purchasing as we can deal with 20 or 30 different suppliers and end up with 120 different accounts, all on paper," she says.This leads to another issue affecting most small business - in particular seasonal ones such as builders - cash flow. While their challenge is to grow the business into a substantial entity, they face the problem that it is a small operation. Riles Constructions has eight full-time staff, in addition to the usual array of subbies, contractors and other tradespeople. But in the end it is dependent on Neil's talent. When he broke his ankle a few years ago Louise was forced to find a job, and they are both conscious of the need to bring in other partners if they want to grow. Unlike other businesses, which can seek an equity partner, builders must rely on the age-old method of borrowing on the family home to fund their operations. Because they are personal loans, not business, they don't warrant the same attention from the bank. "We don't have a business that you can sell, so a self-made business is classified as the greatest risk," says Louise. "We don't have a business banker. Financing is crucial to any builder, as they have to put up a 5 per cent bank guarantee on each job as security, and sometimes that can take 18 months to come back."As for Louise's marketing efforts, her professional enthusiasm coupled with her husband's talent is their best hope. As she puts it: "Neil is a really good builder, as are all our tradesmen, employees and subcontractors alike. I just want to make sure that our business model supports them as best as possible, which will in turn ensure our clients 100 per cent satisfaction with all aspects of our business."CHALLENGES FOR RILES CONSTRUCTIONS? Growing the business from a small partnership to a medium-sized company? Marketing a south coast company to Sydney architects? Greater use of technology from online management systems to website
© 2005 The Age