Running Your Business in a Recession
Don't Relax Just Yet!
If you’re running a construction business in a post-recession economy, nothing in the belly may actually serve your goals better than fire! A recession can hit a construction business hard—and this past recession has been no exception. The numbers tell the story. According to the U.S. Census Bureau, the value of construction was $939.1 billion in 2009, 12.4 percent below the $1,072.1 billion spent in 2008. Today’s numbers are beginning to trend upwards—the Bureau estimated a seasonally adjusted annual rate of $961 billion in August 2014, which is 5 percent above the August 2013 estimate of $915.3 billion. Things are looking better, but this is no time to relax, which begs the question: what happens when you come out of a recession? What should you do when the phone starts to ring again? To thrive in a robust economy means leaving the sloppy habits of past good economies where they belong: in the archives.
Recessions create an opportunity to learn. As a business owner who has survived, you’ve learned how to adapt. Those in the field know what the past five years have been like: many contractors had to work with smaller staffs due to budget cuts and had to bid twice as many jobs to stay competitive in the market. New competition was created by out-of-state companies bidding on jobs which they would not have considered during pre-recession periods. This intense level of competition caused many construction firms to turn to new best practices and technologies to stay lean—in particular automating takeoff and estimating. However, as the market improves, some construction companies have begun to lose the strict business practices they developed and have started bleeding profits again.
Increased profits may mean that tracking becomes more lax, including closely monitoring things like labor costs. In short, as the economy improves we tend to let our guard down. We may still have a fire in the belly to succeed, but we’re not hungry enough to maintain a steady vigil. Creating value from a recessionary experience means learning from our survival instincts and applying those techniques in a post recessionary environment. It means staying hungry.
Applying Technologies of the Future
In an effort to become more efficient during the recession, construction companies, both large and small, discovered that they needed to redefine their core values. Turning “back to the basics” becomes even more crucial for many businesses. When every dollar counts, estimators and project managers often become more diligent with takeoffs and estimates, in particular. Many look for cost savings wherever they can find it; projects and jobs are bid “at cost” in order to keep the staff working and maintain the company’s reputation.
One area many construction firms review during a recession is the process of value engineering across different projects. The exercise is conducted to find innovative ways to review a project’s requirements to achieve the end result at a lower total cost throughout the lifecycle. This process helps save money on materials, labor, and overall equipment. During the rough times, many construction companies are able to thrive due to their meticulous attitude, which leads contractors to develop solid habits of thoroughly implementing checks and balances both in the field and at the office. This is an example of best practices, and automation can facilitate this.
Generally speaking, automation technology for design, takeoff and build offers up tools for construction companies to replace labor-intensive, error-prone manual processes. New developments in advanced technologies have also helped to usher in a today’s era of estimating technologies, which offer even greater opportunities for ROI (return-on-investment). The benefits of using automation technology boil down to three basic concepts: getting more work done without expanding a workforce, being more efficient and accurate on all projects, and keeping costs and profits where they need to be all the time. Automation ultimately helps make people more productive in the office and on the job site. Additionally, there are more checks and balances built into technology solutions.
With the implementation of both best practices and automation technology, a crew is directed more clearly and projects are tracked regularly. Additionally, it becomes easier for construction companies to control material and labor costs, ultimately generating more profits.
Applying what we have learned in running a lean business, tempered with best practices and technology solutions, will position any construction company to thrive as the market regains momentum. Many construction companies already have implemented best practices and technology for bidding, estimating, and digital takeoff, however, the key becomes identifying ways to continue to use it as efficiently as possible in the future. How can contractors do this?
When considering a solution to automate workflows, it is important to consider everything from takeoff to bid to build. Information needs to be accessible to everyone—whether that is the estimator, project manager, superintendent or the foreman in the field. The sharing of data is essential on today’s construction projects. Technology companies are working to address the challenges of a mobile workforce and help companies move data from one person to the next—whether in the office or at the job site. This addresses specific pain points that have been a bane of the industry for years: managing a mobile workforce and insuring access to current data.
With many construction companies redefining core values and turning back to the basics, now is the time for contractors to reinvest in best practices and the right technology solution in order to boost efficiency, increase accuracy, reduce waste, and increase profits.
Leaving the Past Behind
We are seeing the future now and as we look forward two big trends related to how we work are emerging: collaboration and the ability to work with personnel from anywhere, anytime. Increased collaboration through the construction project lifecycle and increased mobility are shaping the future of our industry.
Cloud technologies that allow for managing digital plans, preparing online bids, and collaborating between the office and the field are going to become even more prevalent in the future. Technology solutions that offer a single source of data residing in the cloud ensures that no matter where the data is being accessed from, everyone is working with the same set of data.
So as we look at the recession in our rear-view mirrors, we see exciting times ahead that can only be fully realized with good process, good practices and good technology.