What’s your business strategy for the next recession? I’m not talking about the current economic downturn, but the next inevitable runaway King Kong size, bubble-bursting economic screw up…say in 2015 or 2016.
The reason I ask is because most of the contractors I hear about whose businesses are surviving today are doing so only because of decisions they made five and ten years ago. These sorts of strategic decisions don’t require a Harvard MBA. They are really quite simple. Run a conservative business model. Don’t grow too fast. Keep your debt low and cash reserves high. Know your numbers. (The complete opposite, by the way, of how the federal government is running things these days.) And above all invest in your people. Treat those who work for you like your own family.
One of the best examples of this I’ve seen in the nearly 10 years I’ve been interviewing our Contractor of the Year finalists was Jim Schier, a Houston, Texas, construction company owner back in 2004. He told me he had enough cash on hand to meet payroll for a year, even without any work, if he had to. And he also told me about an employee who’d been hoodwinked by a used car dealer into signing for a loan on truck at a ridiculous interest rate. Jim marched into the car dealer’s office and demanded – and got – a reduction in the rate for his employee’s truck. The same as any of us might do for a family member who’d been conned by some slimeball.
That’s the kind of thing that helps contractors retain good employees, and we hear that same sort of thing from nearly every Contractor of the Year finalist we interview. Loyalty is a two-way street, and not surprisingly the contractors who are loyal to their people are the ones who are surviving right now. If your employees’ productivity starts to diminish the moment you turn your back, you’ll have a hard time making it, recession or not.
Another great way to build loyalty and prepare your company for the end of the recession is to keep investing in training. At some point this recession will end as they always do and some underdeveloped sectors of the construction economy are going to come roaring back with a vengeance. If you’re not ready for the rebound with well trained and loyal people then you’re going to be missing out on business, scrambling to complete the jobs you do get, backtracking to fix the mistakes of those under-trained employees and you’ll probably continue to play catch-up in this half-hobbled mode until the next recession.
There really isn’t much you can do at this point about the current recession other than to manage costs and work harder at getting what business there is out there. But it’s a great time to take stock of where you are, figure out ways to get better and start planning for not only the boom to come, but the next recession too.