9 min read
How to Scale Up a Construction Business
Published 22 Mar 2024
Scaling up is more important than ever for construction businesses, specifically those operating in Dubai and the broader UAE. The UAE economy is now recovering from the dramatic decline in oil prices, one of the main drivers of the country’s economy, during the pandemic era. The tourism and hospitality industries are also seeing an increase in activities.
In 2022, UAE’s construction industry registered an annual growth of 2%. [?] The growth is expected to become steady over the next quarters, with the compound annual growth rate (CAGR) reaching 5.7% by 2027. [?]
This steady growth in the UAE’s construction industry can also mean tougher competition. Smaller players in the industry have to constantly find ways to grow and gain a competitive advantage. So, how can you do that? By implementing growth or scale-up strategies.
Contents
Growing VS Scaling Up
Growing and scaling a business both aim to generate more revenue. However, they differ in terms of the amount of resources necessary to accomplish the goal. If you search for how to grow a construction business, the result will include hiring more skilled employees, adding more equipment, or increasing your capital. The strategy involves adding and using more resources to make more profit.
On the other hand, if you search for how to scale a construction business, the result may include automating tedious processes, monitoring your cash flow, etc. These methods will enable you to increase revenue without incurring significant costs or making extra efforts. In this article, we will focus on how to scale up instead of how to grow a small construction business.
On the other hand, if you search for how to scale a construction business, the result may include automating tedious processes, monitoring your cash flow, etc. These methods will enable you to increase revenue without incurring significant costs or making extra efforts. In this article, we will focus on how to scale up instead of how to grow a small construction business.
Scaling a construction business means making changes to your processes and operations to generate more revenue, meet increasing demands, and serve your clients better.
Understanding the Challenges
Growing and succeeding in the construction industry can be an uphill battle. Construction is a demand-oriented industry, which means any change in demand directly affects the profits of construction businesses. There are also many hurdles to overcome. Here are some of them.
1. Surge in Building Material Costs
The construction industry in the UAE has experienced hardships during the pandemic, with raw materials significantly increasing by 25 to 30%. [?]
In mid-2022, building materials costs dropped significantly. Everything was starting to look good for property developers in the UAE at that time and in Q1 2023. But beginning June 2023, the prices followed an upward trajectory again. The prices of raw materials, including cement, steel, and concrete, have all increased in the Emirati market.
The surge in prices mainly hurt smaller construction players in the UAE. If they choose to continue their projects on time, they may be forced to reduce their profit margins.
In mid-2022, building materials costs dropped significantly. Everything was starting to look good for property developers in the UAE at that time and in Q1 2023. But beginning June 2023, the prices followed an upward trajectory again. The prices of raw materials, including cement, steel, and concrete, have all increased in the Emirati market.
The surge in prices mainly hurt smaller construction players in the UAE. If they choose to continue their projects on time, they may be forced to reduce their profit margins.
2. Construction Delays
Delays are considered one of the most common and significant challenges in the construction industry, regardless of location. This issue can considerably impact the project's success in terms of cost, time, safety, and quality. In Dubai and the rest of UAE, where construction is one of the leading contributors to the GDP and has a major role in development, construction delays impact the nation’s overall economy.
Construction delays can happen for many reasons, one of which is supply chain disruption. Construction businesses rely heavily on prompt delivery of equipment and materials from their suppliers. However, certain instances, including changes in regulations and natural disasters, can cause the delay.
Delays also occur because of inefficient project management. Without the right solutions, construction companies can have difficulty streamlining their workflow and tracking their projects in real time. Other factors affecting project completion include approval of drawings, the owner’s delays in decision-making, and inadequate early planning.
Construction delays can happen for many reasons, one of which is supply chain disruption. Construction businesses rely heavily on prompt delivery of equipment and materials from their suppliers. However, certain instances, including changes in regulations and natural disasters, can cause the delay.
Delays also occur because of inefficient project management. Without the right solutions, construction companies can have difficulty streamlining their workflow and tracking their projects in real time. Other factors affecting project completion include approval of drawings, the owner’s delays in decision-making, and inadequate early planning.
3. Labor Shortage
Shortage of skilled workers is another challenge construction businesses face. The challenge is made more complicated by the fact that the construction industry needs a broad range of professionals.
Many factors contribute to the shortage. It includes pandemic-related employee turnover and economic conditions.The construction workforce is also aging with nearly 1 in 5 construction workers being older than 55. [?]
Many factors contribute to the shortage. It includes pandemic-related employee turnover and economic conditions.The construction workforce is also aging with nearly 1 in 5 construction workers being older than 55. [?]
What can small construction businesses do to overcome the industry challenges?
Develop close working relationships with suppliers of construction materials
Automate processes to keep employees from spending valuable time on repetitive tasks
Practice effective communication and ensure everyone is on the same page
Increase employee retention rates by offering more benefits or incentives
Key Strategies for Scaling Up Your Construction Business
Despite all the challenges, a construction business can still scale and grow. Here are five key growth strategies for construction businesses that will help owners and managers of construction businesses in Dubai, the UAE, and other parts of the globe.
Diversifying Services
Diversifying services is one effective strategy for scaling in construction. Essentially, this means branching out with the type of work a company does and expanding its client base. You will be taking on various types of construction projects. The more a construction business in Dubai or the UAE can diversify its services, the better position it will be in to weather any storm.
The UAE construction industry is divided into several sectors, offering more opportunities for diversification. Key sectors include the following:
The UAE construction industry is divided into several sectors, offering more opportunities for diversification. Key sectors include the following:
Commercial Construction
Energy and Utilities Construction
Industrial Construction
Infrastructure Construction
Institutional Construction
Residential Construction
Diversifying services is a strategy implemented by many top players in the UAE construction market.
Case of BIC Contracting LLC
BIC Contracting LLC offers many services alongside construction, including design, development, operations, and maintenance. The company also extends its services to various sectors, including but not limited to residential and commercial development.
Improving Operational Efficiency
Scaling a construction business means finding ways to make more money with little or no investment and less effort. Therefore, improving operational efficiency is one of the keys to increasing revenue without increasing expenses.
Operational efficiency measures the relationship between the input necessary to keep a construction company going versus the company’s output. It covers all aspects of construction, from planning and construction to project management. Typical input includes money, people, time, and effort. On the other hand, output refers to money, new clients, quality, speed, and opportunities.
There are many strategies a starting or growing construction business in the UAE can adopt in terms of increasing the efficiency, such as:
Operational efficiency measures the relationship between the input necessary to keep a construction company going versus the company’s output. It covers all aspects of construction, from planning and construction to project management. Typical input includes money, people, time, and effort. On the other hand, output refers to money, new clients, quality, speed, and opportunities.
There are many strategies a starting or growing construction business in the UAE can adopt in terms of increasing the efficiency, such as:
Improving the planning process. Thorough planning for required personnel, resources, materials, equipment, and procedures before construction helps prevent cost overruns and delays.
Centralizing data. Storing data in one location enables all departments to work with the same information at all times. It speeds up workflows while reducing errors, enabling construction companies to complete projects more efficiently.
Building strong communication. Improve communication by establishing clear communication protocols, using a centralized communication platform, and investing in real-time communication tools, like instant messaging.
Optimizing resources. Allocate and manage resources in the most efficient way possible. Assign the right people to the right projects.
Case of Emaar Properties
Emaar Properties is a leading developer in the UAE with iconic projects like the Burj Khalifa and Dubai Mall under its belt. The company provides an intriguing example of how scaling drives operational efficiency in the construction sector. Emaar partners with other companies that specialize in procurement, waste management, and logistics.
These strategic collaborations allow Emaar to focus on its unique competencies like design and project management. This saves on costs and enhances efficiency. Moreover, Emaar adopted most forms of technology, including BIM (building information modeling), which allows them to create 3D project models. The company also uses digital platforms to purchase materials and services, relying on mobile apps to track project progress. This brings about accountability and heightened transparency.
These strategic collaborations allow Emaar to focus on its unique competencies like design and project management. This saves on costs and enhances efficiency. Moreover, Emaar adopted most forms of technology, including BIM (building information modeling), which allows them to create 3D project models. The company also uses digital platforms to purchase materials and services, relying on mobile apps to track project progress. This brings about accountability and heightened transparency.
Building Strong Relationships
Partnerships and relationships drive construction projects and make final products a reality. Firm owners and managers who want to know how to scale their construction business should cultivate relationships with clients, subcontractors, suppliers, and industry peers as part of their strategies.
Building strong relationships takes time and effort. Here are some ways to foster relationships in the construction industry:
Building strong relationships takes time and effort. Here are some ways to foster relationships in the construction industry:
Keep open and effective communication. Be accessible and open to communication so subcontractors can report snags, give updates, and share issues. Also, take the initiative to provide necessary project information and updates to subcontractors and other stakeholders.
Ensure transparency. Be transparent with everything, including issues with the project. Transparency can significantly increase a company’s reputation, as it shows their ability to communicate honestly.
Case of Dutco Balfour Beatty
Dutco Balfour Beatty is known for having a strong client focus throughout a project’s lifecycle. They emphasize communication, transparency, and a fast response to client needs. Dutco also actively works on growing long-term partnerships with subcontractors and suppliers to improve customer service. This ensures consistent quality and reliable delivery on every project.
Investing In Technology
Technology is crucial in achieving growth and a competitive advantage in today’s modern business landscape. If you have been planning for how to grow your construction business, consider adopting innovative technologies specifically designed for the construction industry.
Technologies like artificial intelligence (AI) and building information modeling (BIM) are becoming increasingly popular. Construction businesses can leverage these technologies to streamline and automate processes. Automation enables teams to work on more important tasks rather than spending valuable time doing similar tedious tasks that a software program could finish in seconds.
Technologies like artificial intelligence (AI) and building information modeling (BIM) are becoming increasingly popular. Construction businesses can leverage these technologies to streamline and automate processes. Automation enables teams to work on more important tasks rather than spending valuable time doing similar tedious tasks that a software program could finish in seconds.
Case of Arabtec Construction
Arabtec Construction uses technology in the form of digital twins for its projects to improve real-time monitoring and data analysis. This technology also allows the company to observe and predict maintenance issues before they become problematic.
Grow a Construction Business With the Help of an ERP System
Construction companies nowadays are likely to find software or solutions to aid each aspect of their operations. From project management, time tracking, and team communication to bidding, blueprint creation, and marketing, countless technologies are available for each process. The use of these innovative technologies offers many advantages, automating tedious daily tasks, improving internal communication, and reducing data silos.
ERP, or Enterprise Resource Planning System, is one key solution for scaling a construction business. It is made up of integrated business applications or modules that communicate and share a single database. Each module concentrates on one business area. For example, the module for human resources will differ from procurement and logistics, but they all work together using the same data to meet a company’s needs.
In an industry that involves a lot of processes and teams, ERP can effectively coordinate disparate elements together in a single system. At the most basic level, ERP helps construction businesses efficiently manage their core processes, including finance, HR, supply chain, and others.
However, the benefit often goes beyond streamlining operations. Here are other ways ERP helps businesses scale and grow:
ERP, or Enterprise Resource Planning System, is one key solution for scaling a construction business. It is made up of integrated business applications or modules that communicate and share a single database. Each module concentrates on one business area. For example, the module for human resources will differ from procurement and logistics, but they all work together using the same data to meet a company’s needs.
In an industry that involves a lot of processes and teams, ERP can effectively coordinate disparate elements together in a single system. At the most basic level, ERP helps construction businesses efficiently manage their core processes, including finance, HR, supply chain, and others.
However, the benefit often goes beyond streamlining operations. Here are other ways ERP helps businesses scale and grow:
Informed decision-making. ERP systems for construction offer better visibility over a business’ processes. Decision-makers can have access to accurate data and powerful insights they can use to make smart decisions.
Improved planning and project management. A construction project involves a series of activities, from ordering materials to allocating equipment. Any mistake in the process can lead to delays and unexpected costs, which can be detrimental to a construction firm. With ERP, it is easy to see errors and changes that can affect the project.
Money savings. An integrated, purpose-built ERP system will cost less than several different systems in the long run. In addition to cost savings, adopting an integrated ERP solution saves employees time and effort by eliminating the need to switch from one application to another.
Modern ERP systems offer many ways of deployment. Some software is hosted in the cloud. This is the most popular deployment method because of lower upfront cost, easier integration, and greater scalability. Others are installed on-premise, wherein the company is responsible for the software and hardware installation and maintenance. A hybrid cloud ERP model is available. It offers companies the best of both cloud and on-premise deployment.
FirstBit ERP Software as a Growth Enabler
There’s no shortage of options for ERP software in the market. For those who want to build a profitable construction business in Dubai and UAE, consider FirstBit ERP software. It is specifically designed with UAE construction businesses of all sizes in mind. It is packed with functionalities that can help contractors grow and thrive in a competitive industry.
HR, Payroll, Accounting, and Finance
FirstBit ERP offers end-to-end payroll and HR automation. Construction companies can use it for flexible payroll calculations, timesheets, and leave management, among others. It is also fully integrated with the Finance and Accounting module, which features financial reporting which adheres to IFRS standards.
Supply Chain and Procurement Module
Companies can now streamline all the processes involved in procurement and avoid delays with the help of this functionality. The platform’s Supply Chain Module can help a construction business in the UAE to manage the whole supply chain process. Key features include inventory management, procurement management, and shipping. It also ensures compliance with local laws and regulations.
Image of FirstBit Consolidated Analysis of Purchase Orders
Approvals and Collaboration
Approvals and collaboration tools will be useful in preventing delays due to slow approval and lack of operational efficiency. Construction companies will have a built-in messenger for inter-company communication. It also features custom alerts and notifications so you don’t miss important messages.
Sales Module
FirstBit ERP also comes with a Sales module that allows companies to streamline the sales process and automate some tasks. It features invoice creation based on the percentage of the project completion, construction estimation and quotation creations, and progressive invoicing.
Whether a construction company aims for a horizontal or vertical scale-up, FirstBit ERP can help create a solid foundation for building business growth. So, when strategizing for how to make your construction business grow, include FirstBit ERP implementation in your list. To learn more about finding the best ERP practices, check out our guide on how to choose a construction ERP system.
Whether a construction company aims for a horizontal or vertical scale-up, FirstBit ERP can help create a solid foundation for building business growth. So, when strategizing for how to make your construction business grow, include FirstBit ERP implementation in your list. To learn more about finding the best ERP practices, check out our guide on how to choose a construction ERP system.
Key Takeaways
Scaling up is one of the keys to creating a profitable construction business, but it can be a difficult endeavor. Construction businesses in Dubai and the UAE face unique challenges that make it difficult to increase revenue exponentially and expand the client base without increasing necessary resources. Nevertheless, the right strategy and technology make it possible to overcome the hurdles and take the business to the next level.
FirstBit ERP can be your business partner for scaling up and growing in an ever-competitive construction industry in Dubai and the UAE.
FirstBit ERP can be your business partner for scaling up and growing in an ever-competitive construction industry in Dubai and the UAE.
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