How can construction business leaders “recession-proof” their business?
To help you best position your construction business to weather out recessions, we asked construction and other business leaders this question for their best insights. From using contract labor to paying attention to your customers and stakeholders, there are several strategies that you may adopt to help shore up your business operations against any economic recession.
Here are 11 strategies these leaders recommend for recession-proofing a construction business:
- Use Contract Labor
- Focus on Strategic Marketing
- Take Care of Existing Debts Now
- Save Cash
- Focus on Controlling Cost
- Implement Inventory Control and Production Methods
- Double Down Investments in Teams to Drive Retention
- Analyze All the Specifics of Your Budget
- Be Strategic About Benchmarking
- Do What You Know is Right for You
- Pay Attention to Your Customers and Stakeholders
Use Contract Labor
One of the most important strategies for business leaders to recession-proof their business is to only hire contract labor that they can scale up or down depending on the market. This way, they won’t have to lay off staff during recessions. Instead, they can give their contract labor fewer hours or discontinue with them temporarily until monetary conditions become more favorable. This strategy will save your business money and maintain your labor force at the levels you need it to be.
Matthew Ramirez, Paraphrase Tool
Focus on Strategic Marketing
Construction business leaders should focus on strategic marketing to help their businesses stay afloat during a recession. Excellent copywriting, strategic SEO campaigns, consistent social media posting, and paid advertising will enhance online engagement and customer acquisition. They can even try to relate to people’s pain points during a recession in their marketing initiatives.
Nick Shackelford, Structured Agency
Take Care of Existing Debts Now
Take care of existing debts before a recession hits. This strategy guarantees that businesses will not dig themselves deeper into a hole with creditors or employees when hit with unexpected costs. Paying off debts makes companies more mobile when dealing with inflationary costs. If businesses come under threat, business owners won’t go bankrupt trying to pay creditors and employee wages if their debts have already been handled. Recessions can heavily impact any business’s livelihood and chances of success. To survive, business owners must be careful with their financial management to pay their bills on time without worrying about closing down.
Zach Goldstein, Public Rec
The strategy I offer is simple but construction leaders need to squirrel away cash. Having cash available to cover operating expenses is important for any business going through a recession but can be important to a construction business because it is typically one of the first businesses affected. You should have enough cash to handle basic overhead for about four to five months at least or to fund a shortfall, which sometimes happens in construction. Creating a cash account will also make you feel more secure so you can take on more jobs with confidence, knowing money is there in case you need to buy a piece of equipment or a product before the customer pays you for your work.
Steve Mascarin, Taunton Village Dental
Focus on Controlling Cost
One important strategy is to focus on cost control. During a recession, consumers tend to tighten their belts and spending overall declines. This means that businesses have to work hard to control their costs in order to remain profitable. One way to do this is to carefully track your spending and look for areas where you can cut costs without sacrificing quality or service levels.
Admir Salcinovic, Pricelisto
Implement Inventory Control and Production Methods
Implement state-of-the-art inventory control and production methods. These methods can build and strengthen inventory controls and processes to prevent recurring production errors and ensure quality. These methods include automated production systems, quality control requirements, and anti-retardation procedures. Make sure you train and teach your employees these methods to ensure employee productivity simultaneously.
Johannes Larsson, JohannesLarsson.com
Double Down Investments in Teams to Drive Retention
One solid investment for businesses to protect themselves before a recession is to tighten up internal development and retention. Companies can help protect themselves from the inflationary costs of churn, onboarding, and hiring by bunkering down on employee development, satisfaction efforts, and feedback improvements.
Prioritize employee wellness initiatives and tracking sentiment to ensure teams are satisfied in their roles. Businesses can’t run without teams on the ground, so invest in strengthening those relationships and teams before investing elsewhere. A proactive, if a conservative, approach to fighting the recession helps businesses from going under when unforeseen costs increase. Whereas most companies might raise prices to fight these costs, this strategy avoids forcing the onus back onto customers who still support your business.
Jason Panzer, Hexclad
Analyze All the Specifics of Your Budget
Always do your best to preserve efficient and lean books so you may avoid having to make tough decisions when the recession inevitably hits. Spend sufficient time reviewing your building budget item by item. Oversized building systems, inefficient machinery, and excessive labor costs are just some of the potential wastes that might be uncovered in this way. The bottom line will be affected in the long run due to these issues. Reducing wasteful spending on materials or hours of work can also help smooth out budget rough spots. Running a tight financial ship throughout the year can also help ensure that the construction company is ready for peak season. Using a task scheduler software to back up your financial records is a smart move. This software is the most effective means of modifying, saving, and updating data. Because it’s stored on the cloud, it’s also easy to access from any device, at any time.
Daniel Foley, Daniel Foley Consultancy
Be Strategic About Benchmarking
The best business owners are those who are constantly striving to improve everything they do for the sake of the company. They gather a large amount of data in order to begin comparing other companies from different states, regions, and countries. This is known as benchmarking, and benchmarking against peers is critical but difficult. The comparison among peers aids in portraying whether the construction firm is competing/relative within their market and provides the owner with the ability to recognise the need for continuous improvement — without benchmarking, construction companies tend to operate erroneously, making them believe in their infallibility.
Guy Sharp, Andorra Guides
Do What You Know is Right for You
When it comes to weathering a downturn, the best advice is to stick to what you know. There may be unanticipated costs associated with trying out novel approaches, procedures, or cutting-edge materials; expanding service to areas beyond your normal geographic footprint; or taking on any project that falls beyond your area of competence. As time goes on, it could become a major risk to your business. For this reason, it’s crucial to zero in on providing specialized building services that cater to your target market exclusively.
Nely Mihaylova, UNAGI Scooters
Pay Attention to Your Customers and Stakeholders
One of the finest practical techniques to preserve stability is to strengthen relationships with customers and subcontractors. It helps maintain the construction project profitably. If you want to keep your best clients, you need to keep in constant contact with them, respond quickly to their needs, and maybe even offer them some sort of payment plan or discount. Construction crew management is ideally suited for use in improving team supervision. There is solid evidence that adopting this strategy raises team output and morale. By doing so, you’re demonstrating your worth to the company and developing a strong rapport. Once the immediate danger has passed, you must take steps to secure the company’s successful continuation.
Frederic Linfjärd, Planday