The party is over for many of you, especially if your business is tied to the housing market. Commercial work is still strong in most of the country, but there are signals that sector may peter out a bit before long. Many of you have only a dim memory of what it’s like to scramble for work. If you started your business during the last 10 years or so, you probably have no experience with hard times. Your biggest problems likely have been finding enough people to handle all the work available.
A business slump is never fun, but if you approach things the right way you not only can survive, you may end up stronger in the end. Here are some basics to keep in mind.
Some contractors don’t see P&Ls more than quarterly or less. If your books are set up properly, you should be able to spot activities that consume more of your budget than they should. Don’t look only at the hard dollars, but also the percentage line. When you see an expense line item creeping up as a percentage of revenues, it’s time to take action.
Marginal performers can be let go, but before making the hard decision on someone you rely on heavily, examine whether you can negotiate some compromises in the form of part-time employment or switching to commission/bonus compensation. Invite them to help drum up more work, and let them share in the proceeds.
I recall a conversation with a mechanical contractor from Southern California during that region’s deep slump in the early 1990s who took on a lot of work installing drainage systems in parking garages. These weren’t glamorous or high-volume projects, but few competitors took much interest in the work and this firm capitalized on the opportunity. The contractor told me it was about the only thing keeping them afloat.
The obvious reason businesses cut back on advertising when times are bad is because they have less money to spend. This argues for setting aside a “rainy day” fund when business is booming. If work is still holding up for you, think about this.
Nobody wants a recession, but they are nature’s way of getting rid of bad economic habits. It’s a time to turn lemons into lemonade by implementing sound business practices that tend to fall by the wayside when everyone is too busy chasing their tails.