435: Construction Company Recovery After A Financial Setback

This Podcast Is Episode Number 435, And It's About Construction Company Recovery After A Financial Setback You started your construction business with plans of earning a living and being successful, but an unfortunate fact of business life is that companies suffer financial hardships. Whether those hardships are pandemic-related or linked to other urgent situations, the effect is still the same. Your finances are negatively affected, and it's up to you to lead the recovery.   Almost all business sectors have experienced declining profits, liquidity that is drying out, and even bankruptcy. Although the short-term outlook varies depending on your industry sector, all business leaders need to set up a strategy to guide their way towards recovery.   

Here are five steps you can take to help your business recover after a financial setback.

1. Find areas to cut back.

As a business owner, you'll always have expenses, but there are ways to reduce your spending and save money. Negotiate rates with your suppliers or find out if you can make arrangements for a discount. If not, see if you can switch providers. Look for ways to cut back on office expenses. Can your office staff work remotely? Can some of your office space be rented out? Can you change utility providers?

You likely don't want to cut back on your staff if possible, but you may have to. If you don't want to lay staff off, try reducing hours or cutting back on perks until things turn around.

2. Follow up with clients that owe you money.

During busy times it's tempting to be more laid back with clients who owe you money. When you've had a financial setback, it's essential to take stock of who owes you money and start collecting. Go through your invoicing system and follow up with anyone who owes you money. You might be surprised at how much could be coming your way.

If cash flow is a concern, consider charging clients a deposit to work with you. Doing so speeds up how quickly you have money coming in. Remember - OPM (Other People's Money). Construction companies need short-term liquid working capital such as cash, lines of credit, loans, owner financing, credit cards, supplier accounts, and other forms of money to conduct daily operations. Ensure all change orders are documented with a scope of work and paid in advance before the work begins.

3. Diversify your income

Governments around the world are offering assistance to small businesses affected by the pandemic. Look into business grants and income support schemes in your area designed to help your business recover.

Consider other ways of diversifying your income. If you're an expert in a particular construction field, offer virtual courses or workshops to teach others what you know. If you provide services in one niche, consider whether another area might be closely related to yours to allow for expansion.

4. Review your budget

If your budget was created before the financial emergency, go over it again and revise it as necessary. See if anything in it can be removed or delayed. If you plan on offering training seminars for employees, consider postponing for a few months. If you budgeted to expand your business, hold off until you're more financially stable.

5. Increase your marketing

You need to bring in customers. To do this, you need to market your business. Traditional advertising can help, but there are more cost-effective ways to go about it. Explore content marketing or social media. Consider email newsletters or search engine optimization.

Marketing reminds people about your business, and although it may seem like a bad idea to spend money at the moment, some spending is worth it in the long run. Not all marketing is expensive—and some can be just as effective as traditional advertising. 

Final thoughts

Financial setbacks are upsetting and frustrating, but they don't mean your business is finished. Follow these strategies to give your company the best chances of recovery.       Your construction company might have changed drastically in recent months. There is good news in that, too. It means your business is adaptable and that you can find ways to survive.   While you prepare to get your construction business back to full speed, it also helps to have a business expert guide you in rethinking your business strategy and rebuilding it into a more resilient one. If you need personalized advice about your specific situation, get in touch with us to work out a plan.

About The Author:

Sharie DeHart, QPA is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on how to manage the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or sharie@fasteasyaccounting.com