How to Recession-Proof Your Contracting BusinessAugust 20, 2020Although the economy (and the construction industry in particular) seems poised for steady growth over the next few years, it’s hard to tell when that might change. Even if the world isn’t swept away by a housing crisis like 2008, your business will have to face an economic downturn from time to time. What companies do to prepare determines which ones make it to the other side. Here’s a few tips to give your contracting business the resilience it needs when times get tough.
Maintain Cash Flow
Cash flow is probably the most important part of business success, but even more so during a recession. Having even a small sum of cash can make a big difference. You don’t have to operate like you are always in the middle of a recession, hoarding cash and refusing to take a chance on expansion. But you should remember that it can arrive at any time. Your ability to pay the bills keeps the lights on, literally. It also provides a cushion for you to weather a lower amount of paying customers. If you have the money to compensate yourself and your employees, you can focus on paying work when it comes in.
Protect Your Credit
Similarly, you should pay attention to your credit rating well in advance of needing to use it. Like most people who run a business, you have a personal credit rating and a business one. In the early years of your business, that rating might be much lower than your own. Tend to it with responsible use of credit cards and prompt payback of installment loans. This will help to ensure that if you need a loan to help you stay above water during a particularly lean period, lenders will be willing to give it to you.
If your business credit is not particularly great, be wary of using personal loans to fund your business when your workload is not enough to cover the bills. Personal loans may seem like a great way to use your good credit to help your business succeed. If you end up in a situation where you can’t pay it off, it could drag down your personal credit while you struggle to keep your business afloat.
Find Reliable Customers
Even during a recession, there are customers who need to spend money. Banks still lend money (although usually to a lesser degree), municipalities still create grants for building, and voters still approve bond measures. The way you find customers depends on your field. If you work in a field that is largely service based, like plumbing or home inspection, you’ll want to form partnerships with other professionals who can recommend you to their own clients.
If you work in fields where the client relationship ends with the project, you need a different tactic. Figure out who’s got money for construction and how they plan to spend it. Pay attention to development plans in your area and be ready with a bid as soon as they call for it.
Keep Marketing Effective
When the money stops rolling in, many businesses decide to slash their marketing budget. This is a problem, especially if your company needs fresh leads on a regular basis. Instead of cutting back too much on marketing, ensure that your marketing attempts are more effective. Target your money where it’s most likely to be effective instead of spreading it everywhere. That way, potential customers don’t forget that you exist.
Consider Recession-Friendly Services
During recessions, people tend to switch their spending from wants to needs. If you work primarily in new construction or installation of equipment, you might want to consider a few additional services related to repair or refurbishment. Think about ways you can cut costs without compromising on quality. For example, tightening up your processes may save you time and allow you to lower prices without losing your profit margin.
Recession will come, and you want your contracting business to be ready. Planning early could help you sail through with minimal damage. To start building your way to your own business, visit CSLS today!
Contact:Mary Birch, Business Development Managermaryb@cslscorp.com, (818) 458-7842
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