The construction industry is a fickle beast. There are boom times, and there are busy times. Right now, the industry is heading toward a bust, and when it comes, small construction firms will be hit the hardest.
That’s why it’s so important for small construction firms to prepare now for a financial downturn. By taking some proactive steps, construction firms can strengthen their businesses and come out on the other side in good shape. In this blog post, Digital Marketing Material takes a look at some of the preparations small construction firms can take to make it through a recession.
The first item on your list should be to cut unnecessary expenses. This will free up cash flow that can be used to weather lean times. Small construction firms should also focus on reducing debt. This will reduce interest payments and free up more cash flow. Consider reaching out to creditors to renegotiate loan terms.
Small construction firms that lay off workers in anticipation of a recession may find themselves in a worse position when the downturn finally hits. Not only will they have to contend with the added expense of hiring and training new workers, but they will also lose the knowledge and experience of their existing workforce. In addition, layoffs can damage morale and create a feeling of insecurity among remaining employees.
Small construction firms should also focus on making better job cost estimations. This will help you win bids and increase profitability. In order to make better job cost estimations, take a close look at your overhead costs and make sure you’re not including any unnecessary costs in your bids.
Construction takeoff and estimate software simplifies the process. You may consider this option no matter the size of your project. This software can help you turn measurements into quotes for clients. Look for software that lets you add your logo to your estimate.
Make it a priority to also build up your cash reserves. This means having more cash on hand that you can quickly access. One way to boost your reserves is to invoice sooner. This will help you get paid faster and have more cash on hand. Another way to boost liquidity is through collections. This will enable you to quickly collect money owed. Finally, apply for a line of credit, which can provide you with access to extra cash when you need it most.
In these uncertain economic times, it’s more important than ever for small businesses to protect themselves from financial ruin. One way to do this is to convert your business entity to a limited liability company (LLC). Registering as an LLC will safeguard your personal assets in case there’s ever litigation against your company. You’ll also gain tax advantages which can help you save during a downturn.
By taking steps like cost-cutting, investing in estimating software, and reconsidering your business structure, small construction businesses can prepare for a recession. But don’t wait until the recession finally arrives, or it might be too late.