The recession we’ve been hearing so much about is very much here. While there is some speculation that at least some of the price increases are due to increased corporate profits rather than economic pressures, the result is the same. People have less money available to spend.
Lower discretionary spending means people are more likely to take time to consider spending on things like home renovations and alterations, and they might do more price negotiation before they sign a contract.
The good news is that there are several things construction businesses can do to recession-proof their businesses. Here are our top tips:
When everyone is flush with cash, interest rates are low, and things are going well, a few estimating mistakes probably won’t sink your construction business. However, when every customer is haggling on price, you need to make extra sure that all your I’s are dotted, and all your t’s are crossed.
If you haven’t already invested in a professional construction estimating software solution, now is the time! A great estimating system allows you to create quotes in a shorter amount of time, ensures that they are accurate, and makes it easy to update quotes and make changes as necessary.
Most people who are looking to do home renovations or additions don’t really have any idea about what construction materials cost or what their project quote might be. That’s why so many react with sticker shock when they see what their design choices will cost them.
That’s one of the most common problems construction companies face, which is why we built the solution into the Bolster program. With pre-defined material options that are automatically included with every quote you give your clients, they can adjust their material choices until they find the price that suits their budget. Best of all, once it’s set up, there’s no extra work required to provide all those options!
When things are going well in the economy, we tend to overspend, even on our businesses. Maybe that means having expensive cell phone plans or not shopping around for office supplies. During a recession, every dollar counts, so take some time to look for opportunities to save on everything you spend. Negotiate better deals on insurance. Switch all your office lighting to LEDs that use less power. Use route planning software to cut transport costs.
You’ll be surprised how much money you can save when you start looking for saving opportunities!
When things are going well in the economy and your business, it’s less risky to invest in tools, equipment, vehicles and properties that could help your business to grow. However, when things are leaner, you want to keep as much of your profits in the bank as you can.
There’s no telling when your business could experience a slump in sales and having a little cash buffer to get you through a rough patch is one of the best things you can do.
Making money in the construction world is only partly about estimating and sales. The other part is just as important, and it happens after the order is signed and you’re on-site getting the job done.
When you’re in the construction business, a big part of what you are selling is time. Every job will have a predetermined amount of time allocated to labor, and as soon as you start going over that time allowance, you start losing money.
Companies that make it through rough economic times are obsessed with project management. They track productivity on a daily basis, and they address problems as quickly as possible. So if you want to make sure your company stays afloat, become a fantastic project manager, or hire one.
Sometimes, when things aren’t going great for business, companies make the mistake of overselling their services. The idea is that the more work they get, the better insulated they will be against problems.
However, your construction business only has so much capacity, and customers will only wait so long for you to get to their project. Make sure you only book jobs you can actually get to, and keep in contact with customers if there are scheduling problems. Cancelled orders and unhappy customers are very bad for your reputation!
Your construction business is only as good as the people who work there. Every time you have to hire a new employee to fill an empty role, you will spend a lot of money on training and the inevitable teething problems that come with any new hire.
Whether it’s training your new estimator to use your construction estimating software or teaching crews how to do the work on-site, it all takes time and money. So if you want to save money without doing a thing, focus on keeping the great, experienced people you already have.
Most construction companies have a yard where they store various materials. Many don’t keep track of what’s there, what’s being taken, and where it’s being used.
As much as you don’t want to think about it, if you’re not focused on inventory control, there’s a good chance at least some of your materials are making their way out of the back door – and not going to your job sites!
Use a computer-based inventory control system, and track what has been allocated to each project. Compare material usage to what you’ve allowed in your construction estimating software, and investigate any big discrepancies.
Many companies even find installing CCTV cameras, and access control measures help them to keep a handle on their inventory.
The most important thing you can do to improve your estimating and profits is to conduct post-project post-mortems on all your jobs.
Job costing compares your estimated costs with your actual expenses for the job. This helps to ensure that you’re allowing enough time and materials for each project and alerts you if changes need to be made.
It’s a good idea to separate the estimating and job costing function. So, for instance, have your bookkeeper or accountant compare data from your construction estimating software with the expenses captured in your accounting system.
When times are hard, many companies make the mistake of cutting their prices. Sometimes, they go so far as to do jobs at a loss just to keep their crews working. However, you can only do that for so long before it puts you out of business.
Instead of getting into a race to the bottom on prices, look for other ways to set your company apart. Specialize in something that’s in short supply in your area. Get exclusive material distribution deals with manufacturers in your industry. Expand your services into more lucrative types of projects.
It might not seem like it right now, but the good news is that recessions don’t last forever. It might take a while for things to correct themselves, but they always do, and they always will.
The best thing you can do to protect your business during a recession is to take action early and try to do as much as possible with as little as possible. The more you can cut costs and maximize profits, the better equipped you will be to ride out the storm.
If getting a better construction estimating software system is part of that process for your business, let’s talk. Bolster is the most advanced residential construction estimating system out there right now, and we’d love to show you how it works.