As an industry expert in construction, you’re probably aware that construction industries can only succeed if they establish a strong foundation based on proper research and planning, especially in the initial stages of the company’s development. Still, construction companies can risk a financial turndown if they aren’t careful enough.
An economic downturn brings hidden dangers that can be disastrous for construction companies if not managed. And even though it’s hard to predict an economic downturn, being well-equipped and prepared to manage your business in such a crisis helps you survive and thrive.
This guide from 1to1 Plans highlights some dangers associated with economic downturns and tips to safeguard your company from those risks.
1. Utilize Technology
One of the most crucial goals, if not the most essential goal, for all construction industries is efficiency. Generally, every company wants to make tons of money with minimal hassle. And what better means to enhance efficiency than with technology?
Plus, many software options nowadays help improve efficiency with features such as estimating tools and project management. It’s always good to work hard but also remember to work smart.
2. Accurately Estimate Job Costs
Being an experienced and skilled construction estimator is one of the best ways to protect your company during a recession. Also, you have to be accurate, knowledgeable, and systematic since poor estimates can lead to under and over-bidding. You can review past estimates and compare estimates to the actual amount to avoid estimating errors. Is there anything you could have done differently? Have you learned anything new that could help?
You can also improve the profit margins through estimating apps/software. The right software can help you:
- Calculate difficult measurements
- Estimate labor costs and material
- Account for taxes and custom pricing
You can also utilize walkthrough floor plans from 1to1 Plans to see your floor plan on a real-life scale. This allows you to finalize designs before beginning construction.
3. Assess Your Financial Status
When you experience a recession, you should instantly check and monitor your current financial status. Kick off by doing a thorough assessment of your company. Check your books and determine how much money you have in your account, your cash inflow and outflow status, and the timelines and deadlines for your projects.
4. Choose the Right Business Structure
Choosing the right business structure can impact your construction company in multiple ways, including guiding your employees by setting up official reporting relationships to control your business’ workflow. Among other things, it determines risk levels, your ability to collect capital from numerous sources, and even the amount of tax you’ll pay.
For instance, S corps and C corps are two options with different benefits. C corps tend to offer benefits to large companies, such as the option to hold multiple stocks, while S corps are usually better for small businesses, as they offer pass-through taxation. If you’re wondering how to start an S Corp in Texas, you can evade inflated lawyer fees for forming one if you file the paperwork yourself or use a formation service.
The Bottom Line
These recessions are inevitable and can occur without notice, but don’t panic. The construction industry has a good habit of performing well during tough times. Plus, by following the advice of this guide, you’ll be better equipped to safeguard your company during recessions. Utilize technology, fully understand your business’s financial health, and reconsider your business structure