According to the talking heads on TV, the current economic situation is dire. Fuel prices, the stalled stock market and, of course, the mortgage and credit crises are swirling together to produce a perfect storm. Or so it sounds.
The economy is definitely experiencing a trough – one that many are describing as a recession. But conspicuously missing from the media message is the fact “economic downturn” and “recession” aren’t terms for end-of-the-world disaster. They occur every five to 10 years as part of the normal cycle of any capitalistic economy.
Weathering this phase requires a plan. The best companies will not merely survive the downturn, but also emerge from it a stronger, better positioned firm. Here are some tips that can help you do both:
- Stop listening to the media’s endless parade of analysts and do your own economic research. Take your top customers and major suppliers to lunch. Find out about your customers plans and challenges. And your suppliers can tip you off about potential cost increases or good deals on equipment.
- Treat existing customers with the utmost care. It’s easier to keep current customers than find new ones. Meet deadlines and do all you can to improve customer convenience. Since your employees are the face of your company much of the time, a refresher course in customer relations might be in order.
- Watch spending and accounts receivables. Don’t spend based on what you bought last year, and don’t let your customers stretch you.
- Reassure your employees. Tell employees times will be tough, but you will make it through if everyone commits to working harder. Create an incentive program to reward employees for effective cost-cutting ideas. Re-emphasize the importance of quality work and doing things right the first time.
- Take advantage of decreasing competition. You probably contend regularly with contractors who offer low-ball pricing. A former Contractor of the Year finalist told me he knows these companies’ days are numbered when owners show up at jobsites in new $40,000 pickups. A sour economy pushes these businesses into an early grave. Be waiting in the wings to rescue their customers.
- Add a division or pursue a niche. It might be counter-intuitive, but if adding a service makes projects more economical for you or more convenient for a majority of your customers, this could be the best time to do it. A site prep contractor who begins doing his own paving, for example, becomes more of a one-stop shop for his customers and avoids dependence on another contractor. If you are particularly good at a certain type of job, if you see an emerging field or if analysis reveals a relatively high profit margin for work you don’t often perform, go after this market segment. Become an expert during the downturn and your work volume could soar when the economy recovers.
- Keep an eye out for untethered talent. Some companies won’t be able to avoid layoffs. If you have a chance to make a strategic hire, take it.
Record attendance at ConExpo-Con/Agg last month is a positive indicator for our industry. Exhibitors told me they were encouraged by the number and quality of contractors at the show and by the amount of business conducted. Overall, orders for construction machinery were up 26 percent in January, the latest month for which data is available, compared to the same month last year.
With this in mind, look for opportunities in the current environment and act on them. Soon you might be looking back on this downturn as an upturn for your business.
