Financial experts believe that the US economic slowdown is upon us. While they’re optimistic that the government will be able to dodge a possible recession, businesses are now preparing for the worst-case scenario.
For the construction industry, the impact of the downturn could seriously hurt their business if not cushioned right. If you’re a contractor, it’s best to reinforce your company’s strengths now, to avoid a battered bottomline if a slump does happen in the next few months. The way to break a fall is to have something to hold on to while on a downward slope so you won’t have to hit the ground hard.
Here are some of the ways you can keep construction costs tight
This is the best time to find and stop money leaks in your operations. Check your cash flow and make sure you’re not in a tight financial spot even before an economic downturn happens. Rake in as much profit as possible, while cutting down on costs wherever you can.
Become more aware of your construction costs by improving your construction estimating process. Forecasting costs - while keeping inflation in mind - is a skill you have to master, and it’s especially important during uncertain times.
And for those costs you just can’t forecast right now (like raw materials), estimating with live, local cost data is key to providing a realistic bid to your client. So you can optimize your cash flow without sacrificing quality of work and business reputation.
Optimizing cash flow and improving profit margins also involve maximizing one of your most important resources - time. And you know that creating a bid from scratch for each new project is a time sucker. By saving time on your estimates using construction estimating service, you gain more time to actually build and create a project backlog.
Keeping material inventory low also helps you stay within your budget. As you well know, building materials costs can fluctuate, so the return on any inventory investment is anyone’s guess.
Sticking to an easy, fast, repeatable construction estimating process, as well as closely monitoring a project’s progress, can help you become financially efficient.
Keep Cash on Hand
Having enough cash available will help cover your overhead costs during a period of business stagnation. Think of this as your “slush fund,” or money that serves as your emergency reserve, during a recession. This will help keep your business afloat, even if projects are scarce and costs are surging. And, if your business is liquid, financial institutions are more likely to grant you secured loans if needed.
Try curbing or deferring your spending habits until the economy gets better. Keep that money for rainy days - you’ll be needing it to set off any future cash deficit.
Nurture Your Relationships
Building strong relationships with your clients, partners, crew, and suppliers is key for success at any time, but is especially crucial when recession is looming. If your typical builds or renovations are expected to be few and far between, you can strike up niche projects by keeping your existing clients in close contact.
For example: If you have a subspecialty, like master plumbing, zen landscaping, or pool maintenance, be sure to add these to your services list during low economic times. With this strategy, you can win small but numerous projects that will help keep you afloat through a tough time and give you enough financial elbow room during the slump period.
Keep Your Key People Happy
While it may seem odd to keep your employees on board and not go the layoff route, it can actually help keep stability as business slows down. Having a lack of manpower when a project does come along would mean having to backfill crew members whose skills may not be up to your standards. Also, looking for skilled workers during the great resignation period is hard enough and can cause you to lose projects due to lack of manpower when needed.
Team spirit is also vital to the success of each project, big or small, and employing the right crew to complete the job on-time, on-budget, and at a high quality can sustain your business down the road. If you really are unable to keep everyone on the payroll, know who your key people are - those who are highly skilled and committed to their jobs - and keep them. If you do need to let folks go, they need to be properly compensated and reassured you’ll call on them as more jobs become available.
And when the economy recovers, you can invest in your people through workforce development, which can help improve project quality and increase repeat clients. A full pipeline of projects will help you sustain your operations despite future economic threats.
Construction Estimating Done Right
It’s quite tricky to estimate costs during economic instability. Inflation looms, the price of lumber and cost of drywall are unstable, making construction estimating a challenge even for seasoned contractors. You can minimize errors by using an estimate service that allows you to create a detailed, professional estimate in no time.
1build construction estimating service is powered by real-time construction cost data wherever you build. Just a few of the many competitive advantages you get from using 1build include:
- Work with professional estimators with experience in your region and scope of work who can help you win more bids
- Flexible, per-project pricing so you only pay when you need us
- Get accurate cost estimates without spending your valuable time
Reinforce Your Fortress
The future of the construction industry and other sectors may seem uncertain today, but a proactive response can help you weather the storm. Exercise care, secure your assets, and smartly tap into resources that will help keep your company afloat…and possibly even grow. This economic challenge is just a phase you can overcome with the right mindset, strategy, and tools.