I received a quick summary of a recent round-table discussion (January I believe) Arizona Builders Alliance had regarding what contractors should and should not be doing during the tough economic times. Here are some of the things that the group suggested:
1. What should contractors be doing right now?
- Preserve cash, manage credit line
- Use credit lines or they may be cancelled
- Keep cash in places that are safe, federally guaranteed
- Watch cash flow and collect your money
- Know the margins in your projects; ease margins down but don’t work free
- Cut overhead fast: GC’s evaluate every 3-6 months; more frequently for subs
- Project worst case scenario and adjust overhead accordingly
- Lower overhead now for what you expect it to be in the two-three years
- Use a stair step approach in downsizing
- Eliminate helicopters, boats, condos and other non-essential overload
- Try and get securities in lieu of retention
- Create “what if” plans; it makes you less emotional
- Change plans quickly if necessary
- Be ready when market comes back strong
- Identify and keep your core staff
- Communicate with key employees
- Be mindful many employees have never been through this before
- Expect more from remaining staff
- Stay close to your customers; maintain marketing strength
- Make it easy as possible to do business with
- Look to emerging markets
- If expanding geographically, do so with familiar work
- Maintain and improve your key customer relationships
- Consider going “dormant” if sole proprietor
2. What should contractors NOT be doing right now?
- Don’t load up on cheap work; sacrifice volume for margin
- Don’t keep mediocre employees
- Don’t chase lots of directions at once (geographically or niches)
- Don’t bank on cash flow to keep company going
- Don’t take on work outside of your markets
- Don’t hide from your employees
- Don’t reduce training and education budgets
3. How can leaders foster positive attitudes within their employees?
- Communicate company current status (be open about financials) even closely held
- Be open and visible
- Inform your people what you are doing
- Encourage employees to ask questions
- Let the employees know their role and responsibility
- Emphasize employee actions will determine their security and that of the firm
- Demonstrate how the company values apply to the situation
- Remember external communication- banks, bonding companies, suppliers and owners
- Be engaged in the solution
- Be optimistic and realistic about the future
- Plan with your employees; strategic plan and targets (necessary)
- Upside: economic conditions are fostering positive attitudes among workers (sense of urgency, improved work ethic, and increased productivity)
4. What are the top skills necessary to survive and prosper?
- Communication
- Leadership, courage, positive attitude, encourager
- Decisive-willingness to make tough decisions early
- Focus on present and future; let go of the past
- Objectively consider all alternatives
- Calmness, stability, don’t be frantic
- Process skill improvement
- Plan ahead while it’s unemotional. Don’t simply react; make the tough decisions
- Being able to adapt/be flexible
- Strong financial skills and know how to manage finance
- Persistence/tenacity
- Don’t let them see you sweat!
5. What should contractors do now to prepare for the next upturn?
- Keep the cash
- Keep the cash
- Keep the cash!
- Stay lean and flexible
- Follow the money – look for new opportunities
- Pre-buy some commodities
- Improve your core people (education and training)
- Upgrade your team talent; replace C players with A players
- Cross train
- Create teams of existing customers, subs, etc, architect, and engineer
- Prepare for green culture
- Maintain your client relationships and create new client relationship
- Refine in house and construction processes
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