532: Adapting Your Construction Business To A Slower Economy

This Podcast Is Episode Number 532, And It's About Adapting Your Construction Business To A Slower Economy It's hard to go a day without reading something in the news about the state of the economy. Whether it's interest rates rising or the cost of living, there's no getting around the fact that in 2023 there are many doing it more demanding than a few years ago. But while there are some economic challenges for individuals and businesses, it's important not to go too far down the rabbit hole. Remember – economic conditions are forever changing, and history tells us things can change anytime.

If you're concerned about the economy's impact on your business or have already experienced its effects, read on. In this article, we'll explore ways to adapt and improve your construction company during slowdowns, so your business can emerge more substantial when the market bounces back.

Take the time to understand your market conditions   The news can often overwhelm us with negativity. While staying informed is crucial, consuming every opinion piece and social media commentary can lead to a negative mindset. Instead, focus on your own business and industry to identify the real challenges you're facing. Research might even uncover some opportunities too.  

As a construction business owner, adapting to a slower economy can be challenging. However, there are several steps you can take to keep your business afloat during tough times. One of the most important things you can do is to focus on efficiency. Look for ways to streamline your operations and reduce your expenses without sacrificing the quality of your work. This might mean cutting back on specific services or finding ways to complete projects quickly.

Consider the following:

Have there been changes in your industry or the way customers behave?
Can you identify any new, untapped opportunities?
Are there any emerging trends that you can take advantage of?

Understanding your business' position in the market and identifying opportunities to differentiate from competitors is crucial. It guides your marketing budget allocation and shapes your products/services.

A chance to improve efficiency

If your business is experiencing a slowdown and you have some extra time, it's an excellent opportunity to improve it. Many business owners find prioritizing improvement initiatives over customer or administrative tasks challenging, but now you can focus on executing those long-standing plans. These activities can make your operations more efficient and will be even more beneficial once things pick up again.

Documenting processes

Capturing your business processes is a valuable way to improve efficiency. Documenting procedures and creating visual aids can help onboard new team members faster and safeguard against knowledge loss. Protecting your business from the risk of key personnel leaving is essential.

Automation

Artificial Intelligence and automation are changing everything. Explore how these technologies are used in your trade to streamline tasks like data entry, reporting, and inventory management.

Update old systems

Migrating from one system to another can be complex and time-consuming. Businesses often stick with legacy systems for longer than necessary. But new tools can speed up daily tasks, benefitting long-term business growth. These new tools are good for business long term.

Exploring different revenue streams

Consider exploring additional offerings if there is a decline in demand for your core services or products. By diversifying, you'll better weather economic downturns and ensure a steady revenue stream.

Service-related

Consider your team's existing knowledge. Can you broaden your work to capture more clients? For example, if you're a builder who completes new builds, think about how you can communicate your skills for property maintenance, custom carpentry, outdoor living spaces, or project consulting. Your skills and industry knowledge can be used in various ways – take some time to think about it.

Nurture customer relationships

Focus on your existing loyal clients as a top priority, as their satisfaction is vital to maintaining a successful business. While acquiring new customers is essential, remember that the cost of acquiring them is often higher than retaining the ones you already have. In today's digital age, providing outstanding customer experiences is crucial, as online testimonials and recommendations greatly influence potential customers. Take advantage of quiet periods to add spontaneous value to your loyal customers, whether offering advice, checking in on their satisfaction, or surprising them with something free. Going the extra mile for your customers and thinking beyond transactions will earn you their trust and respect, resulting in positive word-of-mouth and referrals that can significantly impact your long-term success.

Expanding B2B opportunities

Consider if your business, focused on serving end users, could extend its offering to cater to other businesses (for example - Nursing home maintenance, etc). This can provide a consistent revenue stream with less time and management than direct consumer engagements. Assess whether pricing for businesses could be lower than for consumers. Estimate potential revenue against reduced margin. If the numbers align, explore this opportunity while maintaining your core business.

Keep track of your finances and budget

Regularly reviewing your finances is crucial to improving your business's health. During quieter periods, you can implement cost-saving practices that have a lasting impact. For example, consider reviewing your suppliers for cheaper options to save time and money. Conducting a comprehensive expense review can unlock savings without significant disruption.

Understand natural business cycles

Keep calm and avoid making hasty decisions based on short-term events. While ignoring the constant economic commentary can be difficult, it's in your business's best interest to rely on concrete facts and data when making decisions. A long-term business plan is a reference point for guiding your choices.

Finally, staying current on the latest industry trends and technologies is important. This can help you stay ahead of the competition and offer your clients the best possible service. Consider investing in new equipment or software to help you work more efficiently and effectively. And don't be afraid to seek advice from other industry professionals or attend conferences and workshops to stay informed.

Final thoughts

Overall, adapting to a slower economy requires a combination of creativity, flexibility, and hard work. But with the right approach, you can keep your construction business thriving even in challenging times. Let me know if you need help balancing short-term actions with long-term goals. I'm always ready to listen.

About The Author:

Sharie DeHart, QPA, co-founded Business Consulting And Accounting (Fast Easy 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 managing 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