Stay Successful by Being Prepared
During and after the Great Recession — between 2007 and 2011 — approximately 2 million workers left construction jobs. The industry has not yet gained back those employees and, with the average age of construction workers at 42, the aging construction industry faces a skilled labor shortage.
While the construction employment remains strong, a majority of economists predict another recession to hit sometime in 2020. Even if another recession doesn’t hit as hard as before, owners should examine ways to recession-proof their construction business; being prepared helps ensure company success. Here are 5 tips to consider.
Keep your best people
With a skilled labor shortage, new workers don’t have the same experience as those lost during the last recession. Keeping a good team of veterans means offering competitive wages and/or other incentives.
Consider cross training
The median age of construction workers in California is two years older than the median age of the total labor force. It’s no secret that the physical demands of construction work tends to take a toll on bodies. But older workers have experience and reliability that should not be discounted; men and women with years of on-the-job know-how should be viewed as a valuable asset. Have conversations with these workers and consider cross training them to provide broader skills they may utilize in different positions.
Play to your core competencies
What sets your company apart from your competition? Do some research to define your niche. Perhaps there are certain types of projects that are more profitable for your company than others? Or maybe it’s your ability to meet deadlines and come in under budget. Stick with whatever makes you unique. This way, if work does start to dry up, you’ll know what to promote so you can weather lean times.
Keep an eye on the cash
Know what your working capital needs are at all times. Look ahead at least six months and try to prepare for unfavorable economic conditions. Rising costs for material and labor costs often result in thin profit margins for companies that don’t grasp their actual project costs and necessary overhead. It’s also good practice to save as much as possible to get the company through tough times. Keep enough reserves to cover operating expenses for a few months.
Don’t rely on backlogs
The most vulnerable businesses during a recession are those who get complacent. It’s important to start strategizing about how to keep work coming in, even if you have 12 months’ worth of backlogs now. During the last recession, many construction firms saw those large backlogs disappear because projects were put on hold or dropped because financing was no longer possible.
An economic downturn — whether it comes in 2020 or years from now — doesn’t have to mean the end of business for construction companies. If contractors prepare now, focus on their strengths and get the company running most efficiently, they can be ready for what may lie ahead.