Words of Wisdom

It occurred to me the other morning that my contractor buddies who had once been considered young bucks, had, seemingly overnight, become the old guard. It also occurred to me that in their capacity as the old guard, they probably had some valuable insights on how to survive an economic downturn.

So, I decided chat with two groups: A group of trade contractors who’d been part of an advisory group to a local builder, and a group of remodelers who’ve been meeting for breakfast since 1991.

The trades I talked to included HVAC, plumbing, fencing, painting, tile and concrete construction contractors. Four of the remodelers had been in business since the 1970s and three since 2003. Here’s what they had to say.

Finding Work:

  • Look at different niches: second homes, homes built in the 1970s, or move from residential work to commercial.
  • Focus on a few builders/customers and create a great relationship; become one of only a few contractors on a select list.
  • Expand your geographic base.
  • Be quick, ready to diversify.
  • Get active in your community, be visible to potential clients.
  • Take small jobs, like repair work, termite work, or tankless water heaters. Get in the door with small projects.
  • Have a regular call back program to check past jobs. Then check for needed repair work and ask for referrals.
  • Walk neighborhoods where you work with flyers, not to hustle work but to address neighbors’ concerns about noise, workers on site, etc.
  • Beware of and be ready to fend off the production carpenter trying to sell himself as a remodeler. Educate your customer on the difference between “carpenter for hire” and a professional remodeler.
  • Be even more customer service focused. Walk projects more frequently. Communicate costs to customers relentlessly.
  • Look for beginning-to-end projects. Get in prior to the architects.
    Personnel issues:
  • Try to keep the hard-to-replace employees: foremen, leads, and project managers. If you have to part ways, do so on good terms.
  • Go to your crews and say: This is what I had to bid to get the job. Who wants to work for this money? Give people the option to either be laid off or downgrade their position and wage.
  • Make lay off decisions not based on seniority but on who you need to get the job done.
  • Reduce hours and investigate EDD programs such as Workshare where your employees may be able to get unemployment for the reduced hours.
  • Cut personnel early and cut deep. Cutting a bit at a time can be stressful for people still working.
  • Hang on to your good people even if it means going into debt.
  • Keep in mind that this is a great time to hire quality employees and to do so inexpensively.

Management Issues:

  • Be flexible enough to expand and contract your overhead. Have people in management go back into the field.
  • You may have to invest in an estimator, because you will be bidding more work to get fewer jobs.

Financial Issues

  • Be lean and mean, cut overhead as quickly as possible, as soon as you see the downturn or before.
  • Hopefully you saw it coming and saved your money and didn’t buy equipment.
  • Stay up on collections.
  • Preserve your cash so you can weather months with negative cash flow.
  • Don’t try to survive solely by being the low bidder. It just delays the inevitable.
  • Reduce inventory.
  • Sell extra equipment and vehicles.
  • Planning, understanding, and using your financial information becomes even more important. If you don’t plan, start. If you don’t know what your financial information is telling you, learn.
  • Find out where the project money is coming from. Don’t get started and then get stiffed.
  • This can be a good time to buy used equipment.
  • Keep work in-house rather than subcontracting out to keep the profits in-house.

Other thoughts:

Be ready to put on the nail belt again (and don’t be surprised if it “shrunk”!)

Live below your means. Look at the good times as frosting on the cake, not the way things are.

Be active in a peer group, for moral support and cross referrals.

I hope these random thoughts and insights from the “old guard” will be useful. These guys have been through tough economic times in the past and are still here to tell the tale. So can you.