Good builder or good business? Why householders need both

8 September 2025

By Ankit Sharma, Master Builders CEO 

Building or renovating a home is a big decision and it has the potential to be both financially and emotionally exhausting.

Naturally, most people focus on finding a builder with strong technical skills and a good reputation for quality. Workmanship matters, but the way a business operates behind the scenes is just as important as what happens on site. The unfortunate truth is that even the best builders can be part of businesses that are poorly run, under financial pressure, or lacking the systems to deal with complexity.

If you want your build to run smoothly from start to finish, you need more than a good builder. You need a builder who runs a good business.

The hidden cost of builder failures

Over the past year, more than 700 construction companies across New Zealand have gone into liquidation. That is a staggering 50% increase compared to the previous year. Behind the data is a human cost. Every failure is a story of disruption and hardship.

MBIE’s State of Building and Construction sector report for 2023 found that only 36% of companies across the wider construction sector felt that their businesses had been financially successful in the past 12 months. This is a critical issue for homeowners and should be an area of focus for the sector.

When a company fails, homeowners are left with unfinished homes and unexpected costs. Workers lose their jobs without warning. Suppliers and subcontractors are often left unpaid. And the mental toll on small business owners can be devastating. Construction already has one of the highest rates of business failure and one of the highest suicide rates of any sector. These two realities can be linked, and they point to a deeper issue.

This is not just a financial problem. It is a human one. Strong business foundations are essential not just for performance, but for wellbeing of our businesses and communities.

Why being a skilled tradie is no longer enough

In today’s construction environment, builders must also be able to run complex projects, manage cash flow, understand contracts, lead teams, and work well with clients and subcontractors. They are expected to be both craft experts and business leaders. Yet despite these demands, there are very few requirements in New Zealand for someone to prove they have the business skills to run a construction company.

In Australia, builders must meet higher standards before they can operate independently. For example, a Certificate IV in Building and Construction is often required, covering both technical and business knowledge. Some regions also require financial assessments to ensure builders have the capability to manage large projects responsibly. These checks help reduce business failures and protect everyone involved.

New Zealand’s relatively low barriers to entry leave too many people vulnerable. Raising expectations around business capability would lead to better outcomes for clients, staff, and the sector as a whole.

So, what should you look for in a builder

  • Financial due diligence: Request credit reports or financial summaries from bodies like CreditWorks to assess financial stability.
  • References and past projects: Speak directly to prior clients about budget control, timeliness, and how problems were handled.
  • Subcontractor management: Ask who the builder uses for key trades. A reliable builder should have a history of coordinating subcontractors effectively to avoid project delays and quality issues.
  • Communication style: Good builds rely on clear, timely dialogue. Ask references whether the builder was transparent, responsive, and easy to work with. Look for examples of communication when things didn’t go to plan.
  • Manage your deposit and advance payments: Typically, the deposit should be no more than 10% of the build cost for the residential sector, if your builder is asking for more, check why it is needed. They should also set up a comprehensive payment schedule which ensures you pay for work when it is completed and not in advance.
  • Watch for hidden costs: PC Sums: Provisional Cost (PC) Sums are estimates for items like kitchens or flooring that are not fully specified in the contract. If actual costs exceed the allowance, you pay the difference plus a margin. Check that the areas that provisionally costed actually need to be, and be wary of unrealistically low PC Sums, as they can lead to unexpected budget blowouts. Ask your builder to explain why these are provisional, what are the things that can change, and for clear breakdowns. Talk openly about the costs to ensure the allowances are realistic. Keep a contingency fund of 10 to 15 percent to cover variations.
  • Review contract: Review all terms around payments, timelines, warranties, dispute resolution, and ensure allowances like PC Sums are clearly detailed and realistically set. We strongly recommend all homeowners get independent legal advice when entering into a building project. Your lawyer should take you through your contract in detail and ensure you know your rights and obligations.

Cheaper is not always better, so lookout for warning signs

It is natural to look for competitive pricing, but a very low quote can be a red flag. It may signal hidden costs, unrealistic allowances, or a business under financial pressure. If something feels off, trust your instincts. Choose a builder who is open, professional, and realistic about pricing and timelines. Pick someone you can communicate with and who runs a stable, well-managed business. It will protect your investment and your peace of mind.