Tough Times, Tough Questions

There is no reason for me to recap the national and world economic news, but we are living through an economic crisis of tsunami-like proportions! I will share with you what’s been going on in my custom home building business.

Have you been asked more often than ever by friends and acquaintances, “How is your business?” and found yourself answering with broad, nonspecific phrases like, ”We are doing OK.” I think perhaps if you see commonalities in the summary of new challenges I have been addressing, it may help you cope and understand that your new problems are the same ones we all are experiencing in these times. You may conclude that you have not lost your “magic touch.”

As the waves of negative financial news keep washing over everything, assume the daily problems you are dealing with are similar to those I have been experiencing.

Usual and customary activities have become difficult and trying. Most problems business owners are confronted with require money to resolve. I have found it increasingly difficult to stay motivated when there is a scarcity of good news to counterbalance all the bad news, but costly projects linger, which in turn make them more expensive to complete.

Ordinarily I encounter problems and I solve them relatively quickly. I have found myself hesitating, delaying and procrastinating where typically I do not. None of which helps solve the problem at hand. But with less new business coming in, I am putting off approving expenses to wrap up must-do projects. Have you become adept at hesitating?

Existing custom clients are requesting far more bidding than usual. Since we practice open-book construction management, our clients see all our costs. Typically they do not ask us to get multiple bids except on major phases. Lately we have been multiple-bidding minor cost phases due to our clients’ jitters.

Final delivery of custom homes has become far more challenging. Clients who started their projects two to three years ago arrive at the finish line and realize their new home is worth far less than what they put into it. We have seen a trend where even our best clients will make atypical preclosing demands coupled with a great reluctance to release the final payment. Other clients take a more direct approach and negotiate for builder discounts just because the economic times are negative. For the first time in my career, it was necessary to file a construction lien upon one of my clients in order to increase the likelihood that we would eventually be paid.

We have made many staff reductions and the remaining employees have accepted pay cuts as high as 30 percent of their prior salaries.

We have restructured our project managers’ pay by giving them a minimum salary and paying on a per-project performance basis, the total of which is also considerably less than prior income. One of our versatile managers has put his tool belt on and is doing carpentry work. Former punch-list carpenters are now working as subcontractors and saving us money.

Prospects are interviewing a ridiculous number of builders. Marketing efforts that typically would result in leads instead wind up producing very little or nothing at all. We are getting fewer calls to bid on new homes. Prospects are bidding out work and then electing to postpone the projects.

I spent time trimming expenses on relatively small line items I have until now ignored. Result: We had five companies to bid on our payroll management and saved money on this and other small cost items that we previously did not pay attention to.

Are these experiences unique to my custom business or are you dealing with similar issues? Feel free to send me an e-mail and let me know whether you have these same challenges or different ones.