Target group: Financier. Why their needs and requirements in the construction industry matter
- Jörg Appl
- Dec 24, 2024
- 11 min read
In the construction industry, nothing works without building owners – but even less without the financiers. Whether banks, public authorities or private investors: they expect added value in terms of your offer (product, software or service) – and no empty promises. Reliable costs, adherence to deadlines and no risk blah are their priorities. How do you manage to convince precisely these target groups with your marketing strategy without slipping into bullshit marketing?
📚 Challenge accepted? Exciting case studies await you at the end, showing you how to make your way to the marketing Olympus of the construction industry! 🚀💡🏗️
The construction industry differs fundamentally from other sectors of the economy in the complex, often multi-year processes associated with the planning and realisation of a construction project. In no other area do aspects such as long-term cost transparency, adherence to schedules and minimisation of project risks play such a central role. The multitude of players involved in a construction project – from the client and architect to the various tradespeople and engineers – requires special coordination and constant adjustment. 🏗️
For financiers, each construction project represents a financial investment in which the risk of cost overruns or delays in the construction schedule is significant. Therefore, their needs and requirements must be given special consideration in the planning and execution of a project in order to maximise the probability of capital repayment and minimise risks.
The specific needs and requirements of the investor or financier
Creditworthiness of project participants and risk management (Figure 16)
The creditworthiness of project participants and effective risk management play a central role in construction projects. Financiers must ensure that all parties involved in the project – be it the construction company, contractors or subcontractors – have sufficient financial resources to reliably fulfil their contractual obligations This is not only about creditworthiness in terms of loan repayment, but also about a comprehensive assessment of the risks that may affect the entire project. In order to overcome possible challenges such as unforeseen problems or delays, detailed risk management plans and a clear assessment of financial risks are often indispensable.
💡 From the perspective of a technical marketing manager in the construction industry, working for a construction company or engineering firm, these topics also provide a basis for convincing communication with investors. The company's financial stability and reliability can be specifically marketed to gain the trust of investors This could be done by showcasing reference projects where financial risks were successfully managed, or by emphasising a solid equity base and stable financial metrics.
Additionally, implementing and demonstrating a robust risk management system that proactively addresses unforeseen challenges can be a strong argument One example would be to produce a detailed report showing how the company has successfully minimised project delays or mitigated risks through innovative solutions in the past.
Marketing these strengths, supported by concrete figures, facts and demonstrable successes, creates a decisive competitive advantage, strengthens the trust of investors and promotes long-term partnerships.
Professional competence of the parties involved and quality assurance (Figure 16)
It is very important to investors that all parties involved in a construction project have the necessary technical expertise and the required resources to successfully implement the project. Verifying the qualifications of engineers, architects and contracting companies plays a central role here. Quality assurance is equally essential and includes both the monitoring of technical standards and the use of certified materials. Particular attention is paid to identifying potential quality defects at an early stage in order to avoid costly rework.
🎯 A technical marketing manager working for a construction company, engineering firm or supplier can effectively market these requirements by credibly communicating their own expertise and reliability. This can be done by presenting reference projects, certificates and audit results that demonstrate technical expertise and adherence to the highest standards.
Equally important is the transparent presentation of available resources, such as specialised teams, modern technologies or optimised processes that ensure the smooth implementation of construction projects.
With clearly structured communication strategies and the targeted use of technical arguments, the marketing manager can strengthen the trust of investors and position the comp
Contractual safeguards and the arm's length principle (Figure 16)
Financiers attach great importance to transparent contractual conditions between the project partners, as these create a clear basis for cooperation. Transparent contractual conditions mean that all agreements are clearly formulated and comprehensible for all parties involved. This includes a clear definition of responsibilities, deadlines, costs and quality requirements. This ensures that all parties understand and can meet their obligations, which reduces the risk of misunderstandings or disputes.
Another important aspect is the so-called ‘arm's length principle’, which plays a central role in contractual relationships. This principle means that the relationships between the contractual partners are independent and without personal connections. It ensures that decisions and agreements are made solely on the basis of objective criteria such as professional competence and market conditions, and are not influenced by personal or family relationships.
The combination of transparent contractual conditions and the application of the arm's length principle protects against conflicts of interest that could jeopardise the implementation of the project. Such conflicts could arise, for example, if one of the project partners is given preferential treatment or if private connections influence the distribution of resources or responsibilities. For funders, it is crucial that the collaboration is based on a solid, fair and objective foundation in order to minimise the risk of delays, additional costs or project failure. By observing these principles, project partners create trust and increase the likelihood of successful project completion.
A technical marketing manager working for a construction company, engineering firm or supplier can market these aspects in a targeted way by clearly and convincingly communicating the transparency of the contract and compliance with the ‘arm's length’ principle.
This can be done by presenting examples from their own practice, such as reference projects in which transparent and fair contract conditions have led to successful cooperation. Describing internal measures to ensure objectivity, such as certified processes or compliance guidelines, can also strengthen the trust of the investors.
The marketing manager can also emphasise that the company has structured contract templates and a proven contract management system that ensures transparency and fairness. Such arguments give lenders the feeling that they are working with a reliable partner that proactively avoids conflicts and is ideally positioned to successfully implement the project.
Adherence to deadlines and budget control (Figure 16)
The adherence to deadlines and consistent budget control are of central importance for investors. Construction projects are often characterised by their high complexity and long implementation phases, which entails numerous uncertainties. Delays or cost overruns can not only endanger the financing model, but also have a lasting negative impact on the trust of investors in the project.
To counter these risks, financiers expect detailed time and cost schedules to be prepared early in the project. Regular monitoring of project progress is equally important to allow for early response to deviations. Precise planning and continuous control ensures that the project remains within the set deadlines and financial constraints, which is crucial for long-term project stability and the confidence of the financiers.
🕒 A technical marketing manager working for a construction company, engineering firm or supplier can market these aspects in a targeted way by emphasising the company's efficiency and reliability. This could be done, for example, by showcasing successful reference projects in which deadlines and budgets were met despite challenges.
A specific example:
An engineering firm could highlight the use of innovative project management software that not only enables precise scheduling but also monitors all costs in real time and identifies potential problems early on. A supplier, on the other hand, could emphasise the added value of just-in-time deliveries, which not only prevent delays on the construction site but also support budget control through optimised material supply.
By clearly communicating these strengths, supported by data, success stories and technical details, the marketing manager can boost the trust of the sponsors and cement the company's position as a reliable partner.
Turnkey solutions and lump-sum contracts (Figure 16)
Turnkey solutions and lump-sum contracts are among the preferred models of many funders in the construction industry because they ensure high planning security and minimised liability. Turnkey construction allows clients to take over a fully completed project without having to worry about additional obligations or follow-up work. This reduces the risk of legal disputes and misunderstandings, which can often arise from confusion over responsibilities or unfinished work.
Lump-sum contracts, in which a fixed price is agreed for the entire construction project, offer financiers additional security. They protect against unforeseen cost overruns that could otherwise jeopardise the project's financing model. For financiers, this means that both the time frame and the financial framework remain more controllable, which is particularly important for complex construction projects.
These models are favoured because they create a clear and manageable structure. Turnkey solutions eliminate uncertainties regarding project completion, while lump-sum contracts shift the financial risk to the executing companies. For financiers, who often lack in-depth knowledge of construction, these approaches create trust and facilitate collaboration with project partners.
A technical marketing manager working for a construction company, engineering firm or supplier can market these advantages to financiers in a targeted way.
Examples:
For a construction company: The marketing manager could highlight the company's expertise and experience in realising turnkey projects. This could be done by presenting a project in which all the trades were efficiently coordinated and the building was handed over to the client on schedule and fully completed. An example would be an office complex that was not only completed on time but also delivered within the agreed budget.
For an engineering firm: Here, the marketing manager could emphasise how the firm is able to reliably calculate and implement flat-rate contracts through the use of BIM (Building Information Modelling) and advanced project management software. One example would be the planning of an industrial building in which both costs and time frames were precisely adhered to thanks to precise advance planning. Such technological tools minimise risk and give the financier confidence in the implementation.
For a supplier: The marketing manager could show how the company contributes significantly to meeting time and cost schedules by providing a reliable supply chain and certified materials. An example would be a construction project in which just-in-time delivery of high-quality building materials avoided delays on the construction site and ensured the smooth running of the project.
Through clear communication, the use of measurable results and the highlighting of reliable services, the technical marketing manager can position the company as a competent and trustworthy partner to funders, one that understands and meets their specific requirements..
How your technical expertise can help the financier
If you offer a technical product or service in the construction industry that addresses the needs and requirements of the financier, you can position yourself as a valuable partner. In the end, the way you as a provider of technical products or services in the construction industry address the needs of financiers in such a way that your solution is perceived as indispensable is crucial.
It's not just the quality and price of your products that count, but also your ability to promote the success of the project and minimise risks. With a clear understanding of the funders' requirements, you can not only attract their attention, but also build trust and ensure the profitability of a project in the long term.
🔑 Your added value: A reliable partner who minimises risks and makes projects successful – an offer that is invaluable in the construction industry.
Questions that will take your marketing expertise in the construction industry to the next level!
🏗️ Case Study 1: The Importance of Credit Rating and Risk Management
A construction project is about to begin, and several construction companies and subcontractors are involved. The financier wants to ensure that all project participants are financially stable and able to meet their obligations. To do this, he requires comprehensive risk management plans and credit checks.
Question: Why are credit ratings and risk management so important to the financier in this context?
A) They ensure that the client meets all technical requirements.
B) They provide the financier with security that the project has financial stability and that unforeseen risks are minimised.
C) They ensure that construction companies regularly pay their employees.
D) They are less important to the financier because the primary concern is the aesthetic design of the project.
Solution: B
🛠️ Explanation:
For the financier, the financial stability of the project participants is crucial to minimise the risk of defaults and delays. Credit checks and risk management plans can ensure that all project partners are financially secure and that the project can be successfully completed.
⏳ Case Study 2: Adherence to deadlines and budget control
A public investor has invested in a large construction project that will take several years to complete. To ensure that the project is completed without delays or cost overruns, the fund provider requires detailed time and cost planning as well as regular reports on the project's progress.
Question: What role do the following play for the fund provider in this case in terms of adhering to deadlines and controlling budgets
A) They are only important for the client and have no influence on the expectations of the financier.
B) They are less relevant because the financier provides additional funds in the event of delays.
C) They are crucial because delays or cost overruns can jeopardise the entire financing model and the trust of the financier.
D) They only influence the relationship between architects and contractors.
Solution: C)
📊 Explanation:
Adherence to deadlines and budgets is crucial for the financier, as unexpected delays or costs can jeopardise the financing model and affect trust in the project. Regular reports enable the financier to identify potential problems at an early stage and take action.
🔑 Case study 3: turnkey solutions and lump-sum contracts
A construction company offers a funding agency a turnkey solution with a lump-sum contract. This means that the completed structure is handed over without the builder having to take on any additional obligations. The funding agency is particularly taken with this model.
Question: Why is the turnkey solution with a lump-sum contract so attractive for funding agencies?
A) It allows the financier to fully delegate responsibility for the quality of construction.
B) It reduces financial risk by fixing the price and avoiding unforeseen cost overruns.
C) It increases the flexibility of the project, as the client can make changes later.
D) It is less relevant to the financier because it focuses more on aesthetic aspects
Solution: B
💡 Explanation:
Turnkey solutions and lump-sum contracts offer financiers financial security because the price is fixed, thus minimising the risk of unforeseen cost overruns. This makes it easier to control costs and reduces potential conflicts regarding further obligations after the project has been completed.
Further reading
Boll, P. (2007): Investitionen in Public Private Partnership-Projekte im öffentlichen Hochbau unter besonderer Berücksichtigung der Risikoverteilung: eine theoretische und empirische Untersuchung der Anforderung private Investoren. Schriften zur Immobilienökonomie Band 43, IRE/BS International Real Estate Business School, Universität Regensburg, Rudolf Müller Verlag
This book offers a comprehensive analysis of investments in PPP projects in public-sector building construction, with a particular focus on the distribution of risk between public and private partners. It combines theoretical approaches with empirical studies and is aimed at scientists, students and practitioners in the field of real estate economics.
Dentons (2013): A Guide to Project Finance.
This guide provides an overview of project finance techniques, particularly in the context of infrastructure projects. It discusses developments in the financial markets following the global financial crisis of 2007–2008 and their impact on project finance.
Konior, J. (2018): Feasibility Study of Construction Project in Compliance with Bank Investment Supervision Requirements MATEC Web Conf. Volume 174, 3rd Scientific Conference Environmental Challenges in Civil Engineering (ECCE 2018).
In this study, the author, based on 12 years of practice in the field of bank investment supervision, identifies and assesses significant risks in construction projects. The methodology aims to identify and measure risks with the highest impact and probability to ensure successful project implementation
PlanRadar (2023): PPP projects: advantages and disadvantages of the model at a glance.
This article provides an up-to-date overview of the advantages and disadvantages of PPP projects. It examines the background of the model, discusses points of criticism and provides examples of successful PPP projects.
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