Beat a Recession: 7 Steps Construction Companies Can Take

ABC Chief Economist Anirban Basu predicts next year to be fraught with risk in the construction industry. What does that mean for your construction company? More importantly, what can you do about it?

According to the S&P Global North American Corporate Credit Mid-year Outlook report for homebuilders and developers, the construction industry's positive outlook has dimmed somewhat in the residential market. They believe that if the economy heads into a recession, “construction should fare the storm well because there is an overall need for additional housing throughout the country.” What does that mean for the commercial industry?

If you haven’t been thinking about it, now’s the time to shore up your business. Here are several recession-ready tips to help you weather the storm.

Recession-Ready Tips for Contractors

  1. Aim for a 12-Month backlog. Focus on the basics rather than bringing on new services. Review those contracts where you’ve done well and focus on shoring up more like those. Diversification into new services and markets could backfire during recessions. Do what you do well and stick to your profit streams.
  2. Monitor your company’s financial health. Take an active role in reviewing your monthly statements, projects, and profitability so you know what to expect in the coming months. Consider communicating more with customers, subs, and employees about your goals. Also, look for profitable project opportunities to increase leverage during slow times.
  3. Preserve cash and shore up financials. Avoid waiting to speak with your financial advisors and lenders. Now’s the time to know where you stand, determine if you need to cut costs, or if you need to negotiate a larger line of credit.
  4. Defer large expenses. If your jobs are currently profitable, you may want to put that money aside for a rainy day. Unless a large expenses in warranted for profitability, you may want to defer it.
  5. Avoid layoffs. Shedding workers today could mean you lose them for good. With existing labor shortages, you may be shooting yourself in the foot by laying off good workers today.
  6. Land federally-funded infrastructure projects. The $1.2 trillion Infrastructure Bill signed into law in 2021, including $550 billion in new investments for the nation's bridges, airports, waterways, public transit and more is a contract to get involved with.
  7. Consider an M&A deal. Prepare now for the post-recession increase in M&A opportunities. Ensuring your financials are up to date, projects are profitable, employees are tenured, and more can put your firm in a good position, especially if you plan to retire.

“We know your unique circumstances,” commented Nick Finkenauer, CPA and shareholder at MHCS. “Our extensive practical knowledge and experience provides you with you a wide array of solutions to fit your specific needs.”

Let’s talk about your challenges and how we can help you to reach your goals.