"Recession - Proof" Your Contracting Business
By planning to succeed (Part 1)
By Paul Montelongo
There is quite a bit of talk these days in the news about the possibility of a recession in our economy. It has been a great run for contractors over the last ten years.
Historically, one of the first industries to experience challenges in an economic “slow down” is the construction industry. So, does this mean that your enterprise has to suffer during an economic “soft landing”? Here are some practical, realistic strategies that you should be examining right now to “recession-proof” your contracting business.
Be Realistic
If you have been in this business any length of time, you understand that a “slow down” is inevitable. Sticking your head in the sand and denying that it will happen will only prolong your misery when you wake up. In your reality check, you must evaluate the level of your productivity. Are there areas in your business that need to be streamlined? Are pricing schedules from your materials suppliers’ and trade contractors’ being closely monitored? During times of economic abundance, dollars slip through the cracks in the interest of expediting projects quickly. Make your suppliers and your trade contractors cognizant of the possibilities of a recession. Talk to them about better pricing and better service.
Your awareness of the prospects of a recession does not mean you are a negative person or have a pessimistic outlook. Rather, it demonstrates a keen sense of planning and a commitment to stay the course for the long haul. You must avoid being in a “holding pattern”. Become proactive and plan for the success of your future.
Strengthen Your Relationships Now
Creating strong customer relationships is essential to your business success. It is an ongoing process. Are there a few clients that you could visit and thank them for their business? Can you ask for more business while at your visit? Acknowledge to them that times may be a little slow in the future and you really appreciate their business. Make a commitment to them that you will do what it takes to remain in business and that you are there to serve them. Staying in close contact with your customers is imperative to growing your business. What about your relationship with your trade contractors? In an economic slow down, loyalty in these working relationships can mean the difference in getting new projects or not.
It is also important to develop new relationships and alliances. You must constantly be on the watch for new sources of business. Can you make new contacts with realtors, bankers, insurance adjusters, venture capitalists, angel capitalists and developers? Creating relationships with these types of business people will broaden your business base and generate new leads.
Diversify
Though I have preached niche focus and serving a specific targeted market, the fact is, that in order to succeed, you must have several areas of focus. Diversification into other markets can allow you to thrive in soft economic times. Builders can branch into customized remodeling projects. Remodelers can broaden their business with insurance restoration projects. Trade contractors can offer additional consulting services or target a different category of builder. The key is to look for areas that compliment what you already do and that will require very little start up capital. Ask yourself, “what is the natural market for me to get into?” These transitions to other markets can take time to develop and the same principles apply to building business relationships. You must begin to think now in terms of extending your professional services to other markets.
Beef Up Your Marketing
The first reaction to a recession for many businesspeople is to pull in the reins with their marketing dollars. Get past this mentality and understand that investing marketing dollars and actively promoting your business will only generate more sales. Now is the time to reassess your marketing strategy. The easiest and quickest way to get new business is to ask your “warm list” of existing clients. Virtually every marketing survey on this planet indicates that it takes less time and money to obtain business from your existing clients. You know this. Make it a priority to call at least three clients from your “warm list” each day of the week. Call them, thank them, verify their satisfaction with you and then ask them for more business. Have a specific product or service in mind when you call them. And then do the thing that so many contractors forget to do…ASK FOR A REFERRAL. Better yet, ask for three referrals. When your “warm list” clients are happy with you, they will gladly give you contact info rmation for at least three of their friends or associates that may need your services.
Another immediate source for new leads is your vendors and trade contractors. These people always know people who need your services. However, they get busy and forget to tell you about these folks. Continually ask them for referrals. Offer an incentive commission to them for referrals that turn into a deal. Make it a part of your regular conversation with them to ask for new business leads.
Then get on the phone and call those referrals. Send them a brochure. Mail them your newsletter. Visit them in person. Begin the sales process immediately in some fashion by getting your name in front of them.
Your marketing and promotion plan should change only slightly in times of economic uncertainty. The change should be one of intensity. You must be more persistent and creative in order to “recession-proof” your contracting business.
Store Your Acorns
It may be a silly metaphor, but we can learn a lesson from Mother Nature. Burrowing animals know to put their surplus food in storage for the winter. Save your money and invest your profits. The best strategy for survival during the “economic winter” is to have working capital in reserve. Hopefully, you have been growing your savings account from the profits of the last ten years. It is still not too late. Pay yourself first and put at least ten percent of everything you earn into some sort of savings plan or money market plan. Obtain and implement sound professional financial advice.
Historically speaking, recessions have been relatively short lived. It is the contractor who plans to succeed over the long haul that will “recession-proof” their business. There is truth in the old adage…”Failing to plan means planning to fail.” Don’t be a negative statistic, expect success and solidify your position as the Contractor of Choice.
Until we have the honor to meet in person, remember, “Success is YOUR choice, choose well.”
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