Stay Ahead Of The Pain25.04.2022
The last time I was in the hospital, I had an operation. Coming out of that operation, the nurses gave me Panadol and some other magic beans and said it was best for a few days to stay ahead of the pain, so before the pain starts, do something about it.
Unless you have been sitting in a small shack meditating in the blue mountains, you would have noticed that prices are rising – rapidly. I feel that what we are being fed as the inflation figures is way off.
- A 6.6 per cent surge in fruit and vegetable prices, leading to a 2.1 per cent quarterly jump in food prices overall, is the other most significant contributor.
- Fuel is also another primary source of surging inflation, with a forecast 10.9 per cent jump in March quarter prices preceding the government’s budget move to halve fuel excise for six months, which should see much of that increase reversed in the current June quarter.
- Westpac is expecting new house purchases to have seen a 5.4 per cent price increase just over the first few months of the year, largely driven by the federal government’s Homebuilder subsidy — grants that had previously kept inflation in this sector artificially low while stoking demand that, combined with materials and labour shortages, has sent construction costs soaring. Now the effect of the grant has worn off, the full extent of construction cost increases is showing up in the numbers.
You get the picture – and in your own life, you will be seeing costs go up. Sooner or later, the Reserve Bank will increase interest rates, and this will serve as a double whammy.
So, this is where staying ahead of the pain comes in.
- We have been talking to clients about changing the way they write quotes, including the inability to have a variation on material prices. If your job is delayed, your material prices have gone up; this is included in your quote. We have seen rapid price rises with building materials. We have seen increases in the capital cost of new equipment and food are material costs are going up for the hospitality industry. Make sure you have a plan for new material costs and covering off on your quotes so that you are not left holding massive bills from suppliers and unable to pass them on.
- Have time built into all your quotes and considerations. Waiting is costly. When you sit down and make your selection, think about the traits ahead of you, the supply line that will supply you and other such things that will cost you. You may have to carry the burden of buying materials because you need to stay ahead of the supply line. Consider this in your quotes.
- Your subcontractors and labour may cost you more if you are waiting for a job to jump over three months. What provision are you making if subcontractors become challenging to find and labour becomes more expensive? Are you scaling your business to be profitable at a lower turnover if things get hard in the marketplace?
- Are you watching your business costs? Are you managing your expenses? A few simple changes at home could make a cushion for when your rent rises or your mortgage goes up. Check all your business costs, use of assets and anything that may be taking money from your business because inflation certainly will chisel away at your profit line.
We want our clients to stay ahead of the pain, and planning your business forward now is one way to do it. If you want some help with your following quote and support, please shout out to your client coordinator. There are attractive opportunities still in the marketplace in Australia, but there are also incredible challenges, and you need a plan for all of them. Your business Angels is here to see our clients through the problematic coming period and help you take advantage of opportunities.
I had one client ask me what he said when the builder asked him to justify his price. I told him, “I’m also here to make money; anything less and I can stay home in bed and go broke”. Sometimes you have to stand your ground, and we certainly don’t want you to be running your business at a loss.