Business lessons from the brink: How construction company Interdemo successfully rebuilt after collapse
Friday, May 23, 2014/
The director of a Sydney construction business with a turnover of around $2 million has spoken about how he turned the business around after it collapsed into liquidation last year.
Interdemo, a business specialising in controlled demolitions and interior stripouts, was placed into liquidation in February 2013 after trading for 13 years.
Speaking to SmartCompany, managing director Simon Brown said after the business’s cash flow dried up he met with other staff members and decided to buy the assets off the liquidators for $140,000 and start over.
“We knew it was going to be difficult,” he says. “We had to renegotiate with a lot of our suppliers to work out a better deal. Every job had to be costed and we had to find out where the money was going and where it could be improved.”
Brown says the business originally fell into trouble because it was underquoting a lot of jobs in order to win work in a fiercely competitive market. As part of the business restructure, he said the company has vowed to no longer do that.
“It’s unsustainable,” he says. “We’ve been there, done that.”
When asked what advice he would give to business owners doing it tough in the construction sector, Brown said it comes down to the quality of your work and understanding your profit margins. The key is to determine what projects the business does best and, sometimes, it also helps to learn how to say no.
“It is tough, no doubt about that,” he says. “But you must do your job really well. You cannot be going into a project at a rate you’re not comfortable with because you’re going to be doing that project at a loss.”
Brown also says it is important business owners do not underestimate the costs of materials and other overheads, and are able to look after their teams.
“The work we do in the demolition industry, you’ve got to make sure our guys do get their entitlements and penalty rates,” he says. “You can’t cut corners with those costs.”
In some cases, when a client is seeking a discount on a job, Brown simply explains it is not possible because the quality of the work—and the safety of the construction workers—could be compromised. Brown says sometimes this honesty is rewarded.
“There were definitely projects where clients saw that and they accepted that,” he says.
Looking ahead, Brown is optimistic and says there is plenty of work available.
“Sometimes, we have our competitors coming in 30-40% cheaper than us and we look at that and shake our heads,” he says. “But at the end of the day, we sort of say this is the standard of service we’re going to provide and that comes at a cost.”
According to IBIS World, there are around 340,000 construction businesses in Australia. The sector is expected to grow at an annual rate of 0.5% in the years from 2014-19.