Tough calls: Making decisions in construction amid an uncertain economy

*Article sponsored by MNP

Rising interest rates and sustained labour shortages have all had significant impacts on Canada’s real estate and construction industry. Trying to make decisions about the business when you’re not sure what the economy will look like next month let alone next year can be a very daunting task.

Consider these factors before you decide to slow operations or begin a new project:

• Staffing: It is essential to know your team’s capabilities, skills, and strengths to determine if you have what you need to make a profitable decision. Ask yourself whether you have the talent your business needs in various future scenarios before moving forward.

• Internal business processes: You need data outlining detailed revenue and expense information to make decisions for your business. Consider whether you are using the right systems and if you have the information to make the right choices.

• Benchmarking: A benchmark allows you to see how various decisions have panned out for businesses similar in size and scope to yours. This helps to paint a picture of which options are most viable for your business.

• Canvassing your internal environment: What does your cost structure look like and what will it cost you to hold off on or continue a project? Engage with your financial team to look at the market and assess the opportunities and hindrances present.

• Available financing: Understand how much financing is available to your construction business from your existing lender and review pro-forma financial statements to see how undertaking new projects will impact your available borrowing and financial covenants. Maintain communication with your lender to review borrowing needs and discuss any negative financial results early to avoid surprises.

For more information about making business decisions in today’s real estate and construction industry, contact MNP’s Alex Levin, CPA, CA at 647-943-4078 or [email protected].