Latest / The Good Builder Podcast / The Daily Dose #327 | Xero Economist Louise Southall on Productivity, Cash Flow and Why Construction Is Holding Up
Transcript
- Aaron Ng (00:00) Now, before I get into it, a big shout out to the legends at my construct. If you're still managing your jobs, contracts, client comms across text messaging and spreadsheets, there is a better way. My construct is built by Australian builders for Australian builders. And it is the best platform out there as a construction software. Jake and the team are working on some really exciting stuff that we've got to have a sneak peek at. But go and check them out. is myconstruct.com. You can get a 30 day trial and the guys there are absolute legends and they're taking the Australian building industry by storm. So go and check out their platform. They are very, very cool. And thank you once again, MyConstruct for being the proud sponsors of this podcast. Az (00:59) Good morning and welcome to the Good Builder Podcast. Today we're gonna talk about something that is on everyone's lips in the construction industry, from the builders that are building the home straight through to the bigger businesses and governments and everyone all around Australia. And that word is productivity. It is the word that a lot of people are using, the media are using, governments are using, but they're using it a bit as a stick sometimes, and not the way we're gonna talk about it today with this lovely guest that I've got on. And my guest today is Louise Southall. Louise is Zero's economist, and she works across the Zero Small Business Insights program, which pulls real data. out of real small businesses, sales, jobs, wages, not surveys, not the vibe of it all. This is the actual numbers from the businesses that are doing the work out there in the industry. So I am completely chuffed to have Louise on today. She is going to shine the light on a few things that's going on out there, lift the bonnet on productivity, and she's going to tell us a few things that we're probably not going to get from anyone else in the industry. So today I am so pumped to have Louise virtually join us at The Good Builder because I don't think we've had a guest like her before. So welcome Louise. How are you? Louise Southall - Xero (02:20) I'm very well thank you. What a lovely introduction. It's it's fantastic to be with you today. Az (02:25) thank you, Louise. Well, first of all, I I wanna say thanks because we've written an article that you contributed greatly to. I think we had over eight and a half thousand builders read that particular article. So You know, like we I I said it just before we started the podcast, but like we couldn't do any of this stuff that we do at the Good Builder if it wasn't for experts like you. so we totally appreciate your time, your support and and you you know, being so open to sharing some of your information. And I'm sure you've got a lot of it looking across what you do. Louise Southall - Xero (02:55) Yes, it's it's a really interesting job getting to kind of unpack what is really happening in small businesses because there isn't a lot of good data around from governments about small business specifically and sometimes what's happening there is a little bit different from what's going on in the rest of the economy. So yeah, I certainly love my job. Az (03:12) Yeah, wow. Wow. Well, as I said to you, we're gonna get into some questions now, and I I I'm I'll be totally honest with everyone out there. I am not an economist. I'm going to do my best to maintain a good conversation with a very educated lady that knows a lot, but I'm sure this is going to be a very cool podcast for you all. So, first of all, the first thing I wanted to talk to you today about, Louise, was actually the headline: construction productivity is up. That's what everyone's saying. When you look under the bonnet, what do you what is actually driving it? Because, as you said, we're trying to do the same thing, and this is why we reached out to you look. We're trying to lift the bonnet, find out what's going on, but you you really you can't find that data as you said anyway. So what's kind of what's happening out there? What's the productivity looking like and what's the driver? Louise Southall - Xero (03:59) Yeah, so for the construction sector, it was a really good result for the last six months. So productivity is it's one of the strongest performing sectors when we look across the Australian economy. And it's not really one single thing that that's driving this. I think that there's a bit of a misconception about productivity that in order to boost it you have to do, you know, a really big thing in your business. But the thing about productivity is it's actually about moving and changing things at the margin. And sometimes those things involve technology, sometimes they involve reviewing your processes and and really understanding the mechanics of running your business and then also your staff and the people that you have working in your business and changes that you can make to those different areas are what can drive productivity growth in in construction businesses. And our data suggests that the small businesses out there in this industry are doing pretty well at the moment. Certainly better than many other sectors. Az (04:57) Yeah. Fascinating because we do cop a bit in the construction industry from sometimes broader media around productivity and things like that. So it's really cool to hear that, Louise, first of all, because you sort of see the real numbers, especially for those smaller businesses. But yeah, the other thing is like would you would you those particular factors, are there ones that you would concentrate more on as a builder, or is it A bespoke sort of thing that you look at on a case-by-case basis for a bit. I'm not trying to get to the answer exactly, Louise, but what I've seen in the industry is like we we see a lot, we see lots of software companies come into it, for example, and maybe hope I'm not going on too much of a tangent, but they're like, chuck this software program in, it'll change your entire business. And that's a big step change. And then what you said was it's more little stuff. And I it made me feel a sigh of relief, to be honest, Louise, because I was like, it's incremental, little incremental things that you can do that'll better your business. Don't try and do things too big. Am I being correct, Louise? Or Louise Southall - Xero (05:57) Yeah, I think it is it's also about really understanding your business. And the business owner, you are the person who understands your business the best. And and every business is going to be slightly different. But as the business owner, you can really understand the systems that you have and that's that's really the starting point for improving productivity. So, you know the the running of the business, making sure that all of the friction points. So for somewhere like construction, you know, a friction point is you you do the quote, then you you do the work, but then you've got to get the invoice out, then you've got to get the payment in. They're kind of like three friction points that that I would think for for this particular industry. And so understanding the systems that you have around that. Az (06:23) Yeah. Yeah. Please wrong. Louise Southall - Xero (06:42) And how can you improve those systems? And often technology is is a solution, but it's understanding what the problem is in the first place. So if when you're reviewing your business you see, okay, I I've got the quotes I'm doing okay on, but where I'm struggling is my payments aren't coming in quick enough. Then that's having a look at what technology tools can you use in your business to get payments coming through the door quicker. So you know it might be putting a pay now button on so that when your customers get their invoice they can pay it straight away. So understand the the friction points in your business first and then look to the technology to find, you know, how you can do that. Az (07:10) Yeah. Louise Southall - Xero (07:23) do that a bit better. Az (07:23) Well. Yeah, I love it. Cash flow is king. You you touched on the the cash side of things. Cash flow is king. And I think that's what I shouldn't say it to the zero economist, but I th I think that sorry about this. I I forgot who I'm talking to. I I talked to I have a few opinions on this podcast, Louise, but I I do feel like you know, that's what eventually will shut down a business and and things like that. So you can see the importance of those little things. And I remember, I don't know if you know Louise, I was involved in a building business. I was a partner in a a relatively big one. And that was always a problem. And I remember around Christmas time that my partner would say to me, We need four mil in the bank, mate. We need four mil in the bank to get through January. And we were sitting at like two and I'm just like, my God. Okay, how are we gonna do this? And I think we didn't know the business well enough. to be brutally honest. And this is why I'm now doing this and talking to people like you. A little ways to hand out the information. So that is really phenomenal, really cool. Yeah, good insight. Louise Southall - Xero (08:21) Yeah, it's really there's a few sort of features about construction that make cash flow management really important. One of them is that Christmas shutdown that a lot of businesses do have. so being able to use technology tools to forecast your cash flow. Yeah, sit down with your accountant not not in December, a few months before and work out working out what Az (08:39) Yeah. Thank thank you. Louise Southall - Xero (08:42) what you're gonna need to get you through that period. And then also the the other challenge for construction is unlike you know if you go into a a retail shop, you you buy the transaction happens straight away. But of course in construction you've got a long delay, particularly in like something like home building, between when the customer signs up as you do the work and when the work's finally paid and Az (08:53) Hmm. Yeah. Louise Southall - Xero (09:06) And so managing that process is just it's important for all businesses, but I feel like construction is a sector where really understanding your numbers is so important. Az (09:16) Yeah. you are completely correct. And this is why I am so happy to have you on the podcast, Louise, because I think this is all what everything you've already said is things that people haven't spoken about. We've done over three hundred and twenty-five episodes now, and you're already talking about things that we haven't talked about and pinpointing some of the stuff that I think we'll give builders, like you gave me, a bit of a sigh of relief in that it's not that big step change. We've got to have a look at it, know our business, and then those little maybe one percenters or so that can just move you in that right direction, which is pretty cool. the other thing you you just talked about a few challenges there and the challenges of the construction industry, Louise. Another challenge is red tape. And everyone talks about red tape. We see everyone from the associ big associations to us. I talk about it a lot. Do I really know what it means sometimes? but where you from where you sit, what has genuinely been cut in terms of the red tape that everyone sort of mentions? And what do you think is still sort of sitting there that that is affecting the industry and and builders that maybe could be a little bit better? Force waste. Louise Southall - Xero (10:21) Yeah, you're right. You're absolutely right. Red tape means different things to different people. And you know, I'm sure if you had a town planner on, they would have a de very different perspective to me about about what red tape is. So my perspective is really around the the running of the business. And so when I think about red tape, I'm thinking I I think we also need to recognise that Az (10:26) Mm. Yeah. Louise Southall - Xero (10:42) Some of those things are within the control of the business owner. and so it is thinking about okay, where are the friction bits in my business that I I could remove? I don't have to wait for for government to remove these bits of red tape. There are things that actually business owners have themselves. ⁓ and it might be Az (10:51) Yeah. wow. Louise Southall - Xero (11:01) You know, when I think about reviewing processes, it might even be that there's something that you've done in your business for a long time because that's just how it's always been done. You don't actually need to do that anymore. so that's a that's the perfect red tape reduction program, isn't it, within a business to actually stop doing something that you don't need to be doing anymore. So I think the the red tape that we focus on at zero is really about improving the running of the business because Az (11:12) Yeah. Yeah. Wow. Louise Southall - Xero (11:28) If you're spending less time, you know, chasing payments, you know, finding out who's paid, who hasn't, understanding what's what's happening with cash flow. If you're spending less time doing those things, you've got more time to take on more customers and and focus on actually the things people love doing. No no one starts a small business to do the the books. ⁓ Az (11:50) Yeah. Louise Southall - Xero (11:51) you you want to be doing and servicing clients and and that's also where you're making the money. So I think for me, red when I think about red tape, I'm thinking about really the red tape within the business. Az (11:56) Yeah. Mm. Louise Southall - Xero (12:02) And the good thing about that is construction work businesses do have a lot of a lot more control perhaps over that than maybe they do other sorts of red tape, like, you know, big big policies and big planning laws. You you you you can you can't really control that. But there's plenty of red tape within every business that a business owner can look at. Az (12:13) Yeah. Yeah, well I Again, you said something that no one has ever said, and I love it, Louise. I love it. I really do. I think there is a multitude of red tape. As you were speaking about that, I remember my old business, Avendale Holmes, and the way we used to get quotes out and go through several people for the process. And then it would be like, Well, why didn't we get that quote out two weeks ago? And by that two time, that two weeks has gone, Louise, we'd go back to the customer and they're gone, we're already talking to Coral Holmes. They've got a price at this. Could you match that price? we've already got this. Have you done that? And I it it only just the penny dropped when you just talked about that for me. I was like, why did we do that? But we were always worried about the external factors. Which is really interesting. You always focus on but the things you can control can change your business significantly, especially in terms of cash flow and getting that that those invoices out and money in. I think you're completely right. I think you've got to Louise Southall - Xero (13:03) Yeah. Az (13:17) Yeah, businesses have got to look toward that. That's really, really fascinating. So do you as part of Zero, if you don't if you don't mind me asking, and this one's off off on a bit of a tangent, Louise, but do you have specialists o there that that help businesses or builders look at this sort of stuff? But or do you have partners or people that you refer to? Louise Southall - Xero (13:36) So Xero has a really close relationship with the accounting and bookkeeping profession here in Australia. And so we really point people to them as trusted financial experts. ⁓ and they can be great partners to sit down and work with you on your business. obviously using different platforms, preferably Zero, but using using technology to Az (13:42) Yeah. Love it. Yeah. Consider right. Louise Southall - Xero (14:00) Yeah, to to make sure that you're understanding your business. Now ultimately the decisions in the business are down to the business owner, but an accountant or bookkeeper can guide you through and and help you ask the questions. You know, that they're like a coach for your business. they help you ask the right questions and they also understand your what you're trying to get out of your business because every business owner has a different. Az (14:07) Yeah. Love it. Louise Southall - Xero (14:24) reason for why they started the business, different objectives. You know, some people might be a sole trader, they're happy to be a sole trader. that that's what they're looking for. Other people want to build a a huge you know construction business and and really and so if you're working with someone like an accountant and bookkeeper who really understands you and really understands your business and what you're trying to achieve, then they're a fantastic partner and really a crucial partner. Az (14:49) Wow, another good piece of advice. And for any accountant out there, we actually haven't had one on. So if you would like to come on the Good Builder pods, I'm sorry to plug us, Louise, but I think you just gave a very good bit of advice. And I remember the early days of The Good Builder. I talked to a very good builder, a gentleman who's probably been in the industry for about 40 years or something like that. Peter Wood from Avid Property Group. who own Harmony and one of the biggest developers in Australia. And I said, What makes a good builder? He's like, A good accountant. And I was like, Okay. And the penny didn't quite drop once again until you just sort of talk through that. So and the reason I ask to Louise and and for our community out there is yep, listen to this podcast, go and get your zero stuff, have a look at what Louise posts and zero and all that stuff, but talk to your accountant. Don't bombard Louise with all these questions. you know, because this is what sort of happens. So go and get a good accountant if you haven't got one or find one. I think that's a very good piece of advice. Louise Southall - Xero (15:39) Yeah. Az (15:46) Us from Louise. Well, I thought we'd get into a bit of the nitty-gritty of it. The sort of June quarter, Louise, you've got the data. thank you so much for sharing it. First of all, you don't have to share everything. I think you're just going to talk to a few things, which is phenomenal because you're not going to get this anywhere else, everybody. But excuse me. how did construction businesses actually perform in the June quarter on sales, jobs and wages, Louise? Could you give us a bit of an insight? Louise Southall - Xero (16:13) Yeah, so construction was once again one of the better performing sectors in in the June quarter. So sales were up over 10% compared to a year ago. the sector's employing more than five percent more people than it was a year ago. wages are up, they're about three percent. ⁓ so that's not too low, not too high. It's sort of a a good middle ground around the long-term average for that. So Az (16:31) Yeah. Yeah. Louise Southall - Xero (16:38) ⁓ so those if I kind of combine all of those indicators together, some of the sales growth will be because prices have been going up. we've we've seen that in some of the ABS data. So it isn't all demand. But I'm more positive about the demand story because of the jobs results. So 5.6% is Az (16:46) Okay, yep. Louise Southall - Xero (16:57) Or it's it's more or not quite double what we saw in the the rest of the economy. So it's it's much stronger than the other other sectors. So that tells me that this is an industry that's it's making actual more sales as well as employing employing more people. and wages pressure's there, but it's not out of control and and so that's more manageable for for small businesses in the sector. Az (17:02) Wow. More people? Wow. Yeah, well. Louise Southall - Xero (17:21) So overall a a pretty reasonable picture. Az (17:23) Yeah. And w what are the s sort of size of the businesses in construction that you see, Louise? Because you must have a very broad view across all this data, which is pretty fascinating. How how big are they? Or or a range? Louise Southall - Xero (17:36) Yeah, we do. We so if you're looking at a lot of, you know, Australian Bureau of Statistics data, a lot of it is around it's it's largely captured from bigger businesses. And that's what I really love about this particular data set. It is solely focused on small businesses. And that might be a sole trader, or it might be you know, someone who's got fifteen to twenty, twenty staff. So I think that that makes it a really unique data set. One thing I would Az (17:41) Yeah. Yeah. Louise Southall - Xero (18:03) I do often get asked about is you know, well, you say things are going okay, but that's not my experience. So I would remind listeners that what this is aggregated data. So what we're measuring is sort of the average business. So there will be listeners out there who are doing better than the numbers that I'm sharing, and then there will be others who are saying, actually I'm I'm finding it more difficult than that. So Az (18:14) Yeah. Mm. Louise Southall - Xero (18:26) We try to do a measure of of the average construction business, you know, while acknowledging that there are people who are gonna be either side of that average. Az (18:34) Yeah. Well no, thank you for clarifying that. And yeah, very interesting. how many how many businesses do you sort of look at across this data set as well? Louise. Sorry I'm asking so many questions, but very fascinated. No, no, that's okay. Louise Southall - Xero (18:44) So for the whole of Australia, ⁓ I don't I don't have the exact numbers for construction, but for the whole of Australia the data set is over half a million small businesses. So it is a big data set. Yeah. Yeah. Az (18:53) ⁓ wow. Okay. What do they say? 5,000 is a reasonable sample or 500. So you got about 500,000 ⁓ in this data set. So once again, thank you so much for sharing those insights with us because as I said, Louise Southall - Xero (19:04) Yes. Az (19:10) who gets to see half a million businesses and and kind of is able to share a bit of that aggregated result I think is phenomenal for our community and the industry. So thank you once again. The the other interesting thing Louise is that you you're saying and and the data is showing that construction is sort of outperforming a lot of the other industries in including you know some of the more consumer facing industries, maybe retail, maybe I'm making a few assumptions here, so please correct me be because you got the data. Louise Southall - Xero (19:39) No, you're absolutely right. Az (19:40) But that's a good okay a little bit nervous in this podcast with you and my numbers always but how when when people are saying the cost of living is going up and as you said some people in the industry are saying it's pretty hard wh why is the sector holding up better? What what do you what do you see? Louise Southall - Xero (19:58) So I think there's a few factors here. Firstly, the sector's benefiting from you know, a widespread view across all governments that we need to improve housing supply. So you've kind of got some policy levers that are moving in that direction, which which is helping. The other thing that's helping is also and which sometimes gets forgotten is of course construction isn't just about building new homes, it's also about building for businesses. So new factories, warehouses, those sorts of things. And we're seeing that particularly around data centers, this is a you know, there's a lot of activity around there. So I think that's also helping Az (20:29) yes. Louise Southall - Xero (20:34) the sector at the moment. The other thing that I I do think benefits the sector, it you're absolutely right, cost of living is a top of mind issue for everybody at the moment. But one of the things about the decision to buy a house is, you know, this is a a a long-term decision. It's not a short-term decision. So if you're a cafe or a restaurant at the moment, you're finding it difficult because Az (20:43) Mm. Louise Southall - Xero (20:56) People are saying, well, look, I I'm just not going to go get the takeaway this week, or we won't go out, or you know, we're not going to give you the the movies or something. That's an easy decision to to delay or not make. But for construction, often you've made the decision, you know, six, twelve months ago, actually, that you're going to build a new home. and then Az (21:01) Yeah. Yeah. Louise Southall - Xero (21:15) And even if you're making the decision now, you're making that decision based on how you think your finances and your situation are going to be for the next, you know, at least ten or twenty years, not not sort of how things are going to be even in the next six to twelve months. So I think that is helping cushion construction a little bit. It and I definitely think it's still impacting it. We've you know, we've had three interest rate rises so far this year. Az (21:35) Yeah. Louise Southall - Xero (21:41) But I think it is just sort of cushioning it a little bit. but the other good thing about construction, which I think gets gets missed a bit, is it's a really important sector for the economy broadly. So if as a country we are building more houses, Az (21:46) Yeah. Louise Southall - Xero (21:56) then when you've built that home, what what do you put in that home? You need new floor coverings, you need new winter window coverings, you need often new furniture, new white goods. It economists call it kind of a multiplier effect, but it it has really good linkages through the rest of the economy. So a healthy construction sector is really good. Az (22:05) Yeah. Louise Southall - Xero (22:17) For the whole economy. And you only have to look across the Tasman at New Zealand. Their construction sector has been having a much harder time. It's been a little bit better in the last three to six months, but before that, construction was really struggling in New Zealand. And you could see that showing up in other parts of the economy as well. So we should be celebrating, even businesses that are not in construction should be celebrating that this sector's doing pretty well right now. Az (22:18) Yeah. Mm. Yeah. wow. Absolutely. And this is again why I wanted you on to you know, I think it's a really great podcast to go, hey guys, you know, guys and girls out there, we're doing a pretty good job. We seem to be pretty productive and things like that, despite what, you know, we sometimes see. But the the other question which popped into my mind, and maybe it's a random one, and I'm sorry for this one, Louise, but I've heard that when people buy new houses, they buy new cars. Like you said about the multiplier effect. So it is really important that we we keep it strong as well, like to your point. Which I think yeah, fascinating. And and the way you talked about customers and the cushion effect of them making a decision, you know, six, twelve, twenty four months before that they're going to do this, makes a lot of sense. We're hearing we we we talk to a few mid, you know, top tier builders down to the smaller builders. And they're all saying, you know, well, a lot of the ones in our community anyway are saying, feels weird because things are we're still getting inquiry, you know, there's doom and gloom everywhere. And I couldn't explain that. They were asking me, you know, what's going on? And and you know, because we've got a bit of a view, but I think you just explained it beautifully. I think that's exactly what's going on. And when you see the customer sentiment and and chatter around social media, you can see people still going in and building. They're a little bit worried about the risk and things and the economy, but they're going, We're we're forging ahead. So, A a a very, very cool insight, Louise, and I love the way you explain it. This the data can add so much knowledge to, you know, what we do and and a lot more understanding and and we don't get enough of it. So I think I've said thanks about fifty times, but I'm gonna say it again. Thank you for jumping on and and providing it to us because we can't get it. Louise Southall - Xero (24:15) Ha ha. Az (24:20) Now you we're based in Queensland and and there's a lot of activity happening up here and a lot of builders. There's been a few builders that have even come over the ditch actually from New Zealand and now they're they're over here. and Queensland is one of the top performing regions for sales and jobs and wages and growth. What do you sort of see going on up here, Louise, and why is that sort of happening? Louise Southall - Xero (24:41) Yeah, often the the regional data that we we produce, so we we have like Australia level data, but we also like to split the data by state. And it does it does generate a bit of rivalry, particularly the productivity data. People I think we're making claims that you know people in certain states work harder than people in other states. but actually it the actual reason is is way more boring than that. it's actually Az (24:53) Yeah. okay. Damn. Louise Southall - Xero (25:06) It's i it's really about the industry. The industry mix drives Az (25:09) Okay. Louise Southall - Xero (25:09) a lot of of what is happening in different states. So for Queensland, we've got decent population growth. so yes, some a a sector like construction's doing well. Also mining. Mining is such an important industry for, you know, it really determines Az (25:23) Yeah. Louise Southall - Xero (25:26) how well Australia's doing overall. And so we see Western Australia and Queensland often benefit from, you know, if mining's doing well. And and alongside construction, mining was one of the better performing sectors that we had in the June quarter. So I think I think that industry mix is really what what describes you know, what what what explains why we've seen Queensland yeah, doing pretty well, not just the odd month here or there, but pretty consistently over the last six to twelve months. Az (25:53) Yeah. Yeah, wow. This is a pointed question. Queensland the most productive? I know what you said, Louise, and that we we can't have state rivalry. But for a bit of fun for the podcast, who is the most productive state? Or or is it Louise Southall - Xero (26:06) Yeah, Queensland was certainly was certainly up there. Yeah, yeah, definitely. Yeah, yeah. And and probably most importantly for Queenslanders better than New South Wales. I think that's probably all that really matters, isn't it? Az (26:10) Okay. Awesome. Where are you based, Louise? Thank you. It does. That's all we wanted to know, Louise. Thank you. That's that that that that was my question. Where are you based, Louise? Louise Southall - Xero (26:24) I am based in New South Wales, so yes. Az (26:27) ⁓ okay. Sorry, Louis. No, but I you know, I know what it's yeah, you you but you're completely right. Back to being sorry that I took it off on a bit of a tangent, but back to being serious. There's a lot of stuff going up here. We've got the Olympics coming up and all that sort of thing and a lot of things that are gonna drive a bit more of that work up here. ⁓ Louise Southall - Xero (26:35) No, that's fine. Yeah, of course. Yeah, yeah. Az (26:46) In talking about that sort of stuff, the pipeline sort of thing, with you know, there's a lot of government announcements and there's we call them you would know them PDAs up here, priority development areas, the governments, the the Christopher government have said they're gonna do this and that in certain areas. is that affecting some of the productivity up here? Is that showing up in the numbers, Louise? Do you think for Queensland? Louise Southall - Xero (27:09) Yeah, I think more broadly across Australia it's certainly in the activity numbers, the you know, I t I talked about the residential and the non-residential construction, but I I didn't mention public sector. That is also driving driving a lot of activity. As you mentioned, Queensland's gonna have the Olympics. but also Az (27:23) wow. Louise Southall - Xero (27:27) I mean, there's that many tunnelling machines underneath Sydney at the moment, building new metros and and those sorts of things. So it's it's happening in other states as as well. ⁓ so that's why I think you know, that that point about having lots of tailwinds for this sector, it it's been performing well, but I think the signs are also you know, looking forward are also pretty positive for the sector. Probably the main challenge will be Az (27:37) Yeah. Louise Southall - Xero (27:52) the skills issue. So, you know, that that is the if I think about all the tailwinds that are for the sector, the main headwind I would see is is skills and whether or not we have enough skilled people to be able to yeah deliver all of these projects. Az (28:07) Yeah. this is another off the tangent question. Do you get involved in a lot of discussion in the construction industry with industry bodies and things like that. I I know you're a really busy lady and you might not have the time, but I think you're pretty phenomenal. And I think you've got a great lens of looking at this industry. And I I don't know if you do and I'm making assumptions here, but I think a lot of people need to hear what you have to say. I think there's some really good points that you've been putting out in this podcast so far, Louise. Do you talk to any of the or advise or anything? Louise Southall - Xero (28:37) So one of the things that I really love about the Xero Small Business Insights program is that the data is free and it's we we make it available on our website. So we do other people within Xero do work with industry associations from lots of different industries to make sure that this data is getting in in the right hands. so yes, we we really encourage Az (28:52) Yeah, wow. Fantastic. Louise Southall - Xero (29:01) you know, people who are involved in in industry leadership type roles, yeah, to take a look at at our data and and use it in whatever way is useful to them. you know, whether that's lobbying for for various different construction related policies. whether that's that's one of the things that I really like about it. I think Xero could have and and sometimes you do see there's people businesses put these sorts of things behind a paywall and and and charge for it. But I love the fact that this is free and Az (29:27) I do too. Louise Southall - Xero (29:28) And we we update it regularly and and encourage people to use it. Az (29:32) That is so cool, Louise. We do a we're like we're not like Zero, but we do exactly the same. We try and provide all our information for free to educate the industry. And that's wonderful that you put that there. And and we know about it, of course, but we've actually never shared it. So we'll put all the links below for everyone out there and and you can be damn sure that in our articles and things there'll be all those links and we've put them in the emails for all the big builders and small builders to go and have a look at. I think it's it you know, I know we haven't finished yet, Louise, but this has been pretty phenomenal in terms of the information that you're sharing and the perspective and the conversations that I think you're going to drive as a result of you analysing this data and providing it. It's very, very cool. We we I I sit here most days thinking about how do we how do we hit this housing accord? How do we do this? How do we better build this? And I think you've nailed nearly every single one of those things in my head that we haven't been able to figure out. And it does take the data to have a look at and an understanding of what it's driving. So very, very cool. I I talked a little bit earlier around the the AI and digital tools and you know that it you know sometimes it's it's not the magic wand and sometimes it's talked about the magic wand. But on on the tools that small business can use, what does adoption actually look like? Like I said, change is always hard, but what is what does it look like when a a smaller business maybe integrates zero or how do they go about it? Or you know, what are some of the tools that they should look at? Louise Southall - Xero (30:55) Yeah, I think the the thing with technology is is it isn't a one size fits all. it's definitely not magic. It's it's just maths. it's just lots of ones and zeros. ⁓ but it's it's yeah, it's it's about finding w the tools that fit the particular Az (31:00) Mm. I love it. Yeah. Louise Southall - Xero (31:11) business that you're in and the size of the business. So that that it you know definitely business size is is a big determining factor. So if you're just starting out, you might be a sole trader or or just a couple of people in the business. Then looking at things that can you know when you're particularly for construction, you're often not it, you're not in an office, you're trying to do quotes, invoices, chasing payments on the run. So looking for tools that allow you to to be able to have that mobile element. ⁓ are really useful. But then as the business grows and you start employing people, then you need to start looking at tools that can help you manage that. So tools that can help you know manage project management, making sure you've got the right people on the right site at the right time. Az (31:38) Mm. Yeah. Louise Southall - Xero (31:56) and and integrating all of that with your your books and your accounting software is really helpful. Even managing leave and those sorts of things, that becomes much more complicated the more people that you you add to the business. I always feel I've I've been kind of working with small businesses for about the last 20 years through my career, and I always feel like that that small business size from about five to about Az (32:09) Yeah. wow. Louise Southall - Xero (32:20) 10, 12 is really hard because you things have got a lot more complicated, but you don't necessarily have the the ability to employ employ like a business manager or or someone like that. And so for those that size business, technology can really help fill those gaps while you're trying to make that leap from being a small business, you know, a micro business, up to a bigger business where you can get a bit more help. Az (32:25) Mm. Yeah. Louise Southall - Xero (32:45) and a bit more expertise. So what you need in your in your tech stack will change as your business grows. And so that's why it's important to think about okay, what do I need right now? What are the things I'm trying to solve right now? And then as your business gets more complicated, have something that you can add to. And that's, you know, Zero has the core accounting software, but then we also have over. Over a thousand apps that can be added to the account to help you integrate everything and and run the business. Az (33:10) Yeah. Yeah. Well, I I know you're being pretty humble about Zero and I'm gonna give it a plug. we use Zero here at The Good Builder. Sorry, Louise. We do use Zero here at The Good Builder and we've been using it for about ten or twelve years in our personal businesses and we couldn't do it without it. Louise Southall - Xero (33:22) Okay. Az (33:29) You know, I'm always on the go and you're able to get into the app and send an invoice or have a look about where things are at and things like that. And for a small business, I must say, because I've been in plenty of them now, it has been a game changer. Like if I was looking at, you know, you think back about everything that we've implemented, even AI things and tools and stuff like that, I really believe that cash flow management, the leave management, sick leave management, all those sorts of things, which Zero provides and and all that sort of thing is critically needed for a lot of businesses out there. So I know you're not plugging them. I am and I'm happy to. I think that Zero is a great platform. And I totally agree with what you said and I love the way you explained it again. And then I think if you're a small business, the first thing you should do is look at your accounting software. Do it. Cash will keep, I shouldn't say it, but I was going to say cash will keep you in business. No cash won't. So ⁓ and that's where it is for me. Louise Southall - Xero (34:03) Yeah. Well it is it's it Yeah, yeah. Well it's always happy to talk to a happy customer. It's it's always good to hear. Az (34:26) Yeah, there's plenty of the other side of everything now, Louise, I don't want to go to doom and gloom, but there's a a few things to be nervous about. you'd have a pretty good you'd probably look at everything, but you know, there's there's I heard on the news, I think last night too, brace for another interest rate rise, that's that's gonna come. There's probably one more they're saying, but you never know, there's always one more. global uncertainty with particular people in power, we've got to be careful of and all that sort of thing, Louise. What what should a builder do to right now to stay in front of that stuff? Or should they, as you had said earlier in the podcast, and I actually loved, and again, I know you're talking about economics, but you talked about something quite practical about things that are in your control and things out of your control and the red tape. But anyway, what do you think a builder should be doing right now to stay ahead and and kind of keep that business solid? Louise Southall - Xero (35:18) Yeah, it's it's it can be really overwhelming. I mean, you can imagine in my job I I'm as part of this program, I I don't just cover Australia, I look at four other different countries as well. So it can be it can be quite overwhelming. but I think you're absolutely right in terms of focusing on the things that you can can control. And this is where, this is where AI I think can be really useful. So AI powered tools that allow you to Az (35:29) ⁓ wow. Food. Louise Southall - Xero (35:43) Forecast ahead what might be happening in your business. So, you know, try not to worry about what might be happening to, I don't know, the US stock market or something like that. Focus on the things that can matter to your business. But you can do that by using AI-powered tools to have a look at, you know, expected what what's expected to come in, what bills have you got to go out. and where might the humps be over the next three to six months that you need to plan for now to make sure that you're gonna you're gonna get over that. And working with your accountant or bookkeeper to really understand the levers that you've got. And yes, try and block try and block out all the noise. Because it does change every day. It changes constantly. So focus on those things that you you can actually have a meaningful difference in your business. And and if you if you do focus on the you know the basics of business, like your cash flow, absolutely. I I 100% agree with your emphasis on cash flow, then what that does is it means that actually no matter what is coming, Az (36:38) Mm-hmm. Mm. Louise Southall - Xero (36:46) you're going to be in a better position than your competitors are. If you've got a plan for, okay, I know in three months time I'm going to have a bit of a pinch on my cash flow. So for the next three months, the thing I've really got to focus on is making sure I get paid as quickly as possible. So I'm going to dedicate more time to get those payments through the door because I've got, I know I've got a bit of a a bit of a blip coming up. If you can do things like that, then you're going to be much better set up. Than a competitor who's, you know, doom stroke scrolling and not actually focused on what's happening in their business. Az (37:17) Mm. Again, Louise, that is such a great piece of advice. A great piece of advice. So logical, so practical. As a matter of fact, Louise, and I'm probably gonna give Zero a plug again. Monday, me and my wife, Renee, we sat down for the Good Builder. We went through our Zero, we used AI tools and everything like that within it. And we sat down with our accountant and looked at the next 12 months. And it has refocused me like nobody's business. It's been really good. and we know that. Manage that, manage the cash, make sure you've got the cash and you are fine. You are totally correct. I absolutely love that. And I think every builder out there should go and do that. And I don't think many of us do. We we keep every day we go out there and we we we're very reactive, we're not very proactive, but that is an exercise that will s I think save your business in a way, or set it on that trajectory that you want to go on. I think that was an amazing piece of advice. But you do need good visibility, clarity. over your numbers as well. And that is which I think sorry. Louise Southall - Xero (38:18) Yeah, yeah, very much so. just yeah, that clarity over over what is actually underlying in your business is is just critical. Az (38:22) Mm. Yeah, and it's hard to do on a spreadsheet. It's easy to do on a platform like Zero. Yeah, you know, like it's very easy to do when you've got a platform that's that where all the information is getting fed into as well. before we had zero, and sorry but I'm talking about our own businesses, everybody, but before we had zero, we were doing things on spreadsheets or I had things in email and nothing was kind of connecting and we were like, where did that go? And where did that go and where did that go? Louise Southall - Xero (38:29) ⁓ it's impossible to do. Az (38:52) It was scary. so very interesting. you know, and and again, Luis, this has been a really I I I love the numbers and everything that you've given us, but I think on top of the numbers that Louise has given us all, you've given us really, really practical advice. Like it's been quite wonderful, Louise, in terms of like being able to you've gone from you know, all the numbers that show this the landscape of how we're going in construction and what's going on out there. So people have got a bit of a baseline out there. There, so everyone can go and have a bit of a listen and then a check on their own business. But beyond that, you've given some really cool practical advice how to become a good builder. And I love that. Like that's what we're also about. So thank you very much. And that kind of leads me to my last question, which is a little bit sad to be honest with you, because I've absolutely loved this podcast and I feel like I could talk to you forever because you've got I can tell you've got a lot of great small business experience and and the a majority of our audience. So we've got about 30,000 builders, Louise, and I And if you think about that, probably about 1% of them are, you know, you're builders building over 100 homes. All of them are, you know, that tail end. So really appreciative of everything you've done. But and it leads me to my last question. you know we're called the good builder here, Louise. What do you think makes a good builder? Louise Southall - Xero (40:07) that's a really good question, a tough question. I think I guess from my perspective, I'm thinking about a good builder as in a a good small business operator who who happens to be in construction. And I've I've as I mentioned before, I've I've sort of been working in and around small businesses for about the last 20, 30 years. And one observation I'd make is that there's a lot of people running a business who are really good at the the trade. Az (40:09) Yeah. Louise Southall - Xero (40:32) So they're fantastic plumbers, they're fantastic bricklayers, they're you know carpenters, really, really good at that trade. But to be a good small business owner in the industry, you almost need to do approach it like you're doing a second apprenticeship. So you are thinking learning all the skills that are needed to run a business, which is very different to being really good at your trade. And so Certainly when you're starting out, that's where trusted advisors come in. And you know, we've talked a lot today about accountants and bookkeepers, but it also might be a a colleague who's running a business and or you know joining your local networking group for for people in your industry. These are people who are going to be able to help you make the transition from being really good at your trade to being really good. At also running a business in that trade. And yeah, I I think I mean the the industry is a lifelong learning industry. That's what I love about construction. You you invest in skills from apprenticeships, you're constantly hiring apprenticeships, you're constantly improving those skills in your business in your industry. And I think that sets construction in good stead because as lifelong learners you can also be you know, improving those business skills all the time. Az (41:34) Yeah. man, you are good. Like that was so cool. I I loved it. I was gonna actually ask everybody. Louise said something prior to this podcast, but she just went into it. Talked about doing almost a dual apprenticeship. You know, you talk to the the trade apprenticeship and then the building apprenticeship. You've nailed it on the head, Louise. And I love the way that you said you said, you know. Builders are, you know, you're looking at it like you're a small business owner that happens to be in construction. I don't think that's a bad way to look at it for everyone out there. I think you've got to think of yourself as a business owner first and a builder second, because the business side of things is the thing that we're seeing that people are failing. when they fail, it's generally in that in that sort of realm, Louise. So all that bit of advice that was Louise Southall - Xero (42:36) Yeah, not many not many s businesses are going to fail because of, you know, the the trade itself is is not good. It it's more that the cash flow isn't coming in quick enough or or being maintained. So yeah. Az (42:42) No. You're you're completely right. ⁓ Well, Louise, I actually reckon after talking to you, you could fix this housing industry. I know that's a big weight on your shoulders, but well, yeah I know, I know you know I'll but but like your opinions, Louise. I you know, thank again. I I'm actually pretty certain you could. But but like that was Louise Southall - Xero (42:54) I'm very sure that's not the case. Az (43:07) That was wonderful. Like those the the The conversation, the insight into running a good small business, the numbers, that was actually phenomenal. I did not expect that we were going to go into that, to be honest with you. I thought we were gonna go into numbers only, and I was gonna try and have to come back to you with data, but you spoke about things beyond the numbers that make a good builder and a good business, and we are so appreciative of that. You know, you are beyond an economist. You're a great business mentor, I think. So thank you so much for your time on this. Podcast. We don't get to talk to many people that are sitting kind of outside of the construction industry, to be honest. And it's been really refreshing to hear your point of view because you're looking at it from a different perspective than us all stuck in it. And I think you've got about five of six of the golden answers right in this podcast. That was wonderful. Thank you. Louise Southall - Xero (43:59) No, thanks so much. I've really, really enjoyed having a conversation with you. And yeah, hopefully your listeners have something that they can take away and apply in their own business. Az (44:03) Yeah. I think there's gonna be a fair bit. we'll we'll put all the details below of of Zero and how to get involved with Zero and where their data is and sign up for your app. sign up for your platform, really. I really do. We really do use it here at The Good Builder. I've used it in previous businesses and it's been a game changer for me. As I said, I went through that exercise Monday with my wife and I it was super cool. And all that information from Louise, as I I said thank you fifty times in this podcast, and I generally don't. It was wonderful, Louise. So I would love to have you back on maybe once a quarter, if you don't mind, just to do a quarterly update on what's going on in this ball business. That might be good to keep the pulse on what's happening more broadly for for our community and yeah I can't thank you enough Louise this was a really refreshing podcast to be honest. the the time yeah all Louise Southall - Xero (44:53) Yeah, no problem at all. The place is all mine.