by Jim White, PhD, CEO of Tractor Equipment Sales
1. Choose projects carefully. Now is not the time to take on projects that involve high risk and low return. Bid the job, not the competition. Companies should look for opportunities where they execute on their strengths and build quality work, with an acceptable margin and return for the risk involved. Risk mitigation---including contract review, effective prequalification and bonding of subcontractors and vendors risk-will help prevent problems down the road that otherwise may reflect poorly on the firm and reduce profits over the long term.
2. Invest in your team. With jobs continuing to be scarce, construction companies can afford to be picky about applicants and existing staff. Find and keep the best people, and then invest in them to build their skills and their loyalty. Make sure certifications are renewed when necessary, upgrade skills with training as appropriate, and stay focused on safety to provide the kind of environment in which workers enjoy and excel. You have an obligation to send home every employee in the same condition in which they arrive.
3. Review equipment needs and invest in maintenance. Inventory of unused or unneeded equipment may be causing a drain on your business. Carefully and realistically review your equipment needs and consider trimming inventory.
Additionally, cutbacks in the past few years have caused some firms to reduce costs by deferring maintenance of heavy equipment. But when the pace of work picks up, companies need to know they can rely on their equipment functioning at full capability. An unexpected breakdown can cause costly delays and impact the reputation for dependability upon which a company strives. Lastly, the risk to workers safety increases when equipment does not function, as it should. Creating a schedule of regular maintenance-and then sticking to it-is an important preventive measure.
4. Avoid debt overload. The boom times created a mind-set in which taking on debt seemed the best way to grow a business. The many bankruptcies in a number of industries were often companies that could not meet payments once their cash flow was disrupted. These bankruptcies have brought a new sensitivity to the business world when it comes to debt. The lessons learned are that construction firms should maximize liquidity when possible. When borrowing is necessary, debt should be paid down as quickly as feasible to preserve flexibility for future projects. Having an available line of credit is important in today’s economy, but planning cash flow without reliance on the banks is a much safer bet.
5. Strengthen partnerships. Construction firms rely on a number of relationships to make their business successful: suppliers, subcontractors, agents, and brokers for insurance carriers and bond providers, accountants, bankers and attorneys.
Seek relationships that provided value to your business. When a company handles such relationships on a case-by-case basis, it is less likely to build trust and long-term relationships that can see you through during bad times. For example, a surety-bond underwriter that understands a construction firm’s strategy for the future and sees the value of working through difficult times together is more likely to be flexible when a company is facing a challenging project or change in the work program. Smart construction firms strengthen their partnerships by sharing information, involving the surety and others experts in their business planning, and working together closely for mutual success.
Construction company leaders who have made it this far can pat themselves on the back for surviving one of the toughest periods they will probably ever face. However, to move out of the economic crisis beyond survival to success, it is important to take steps now to prepare for better times ahead. Working closely with partners, can help contractors stay ahead of the competition and be well positioned for the future.
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About Jim White, CEO of Tractor Equipment Sales:
Tractor Equipment Sales has served the construction industry in the San Francisco Bay Area and Silicon Valley for over 60 years. CEO, Jim White, PhD, brings to his position several decades of international business experience, including 20 years as Founder and CEO of JL
White International, a full-service management consulting firm in Monterey, CA.
White also achieved international recognition as CEO of Blount World Trade Corporation, Vice-President and Division Manager with Ingersoll Rand Equipment Corporation, and Owner and Managing Director of ACEC Centrifugal Pumps NV, Belgium.
White is creator of the Twelve O’Clock High leadership event (http://www.12high.com/tes), attended by more than 100,000 business owners and individuals worldwide, and The Circle of Success®, a customized, yearlong, leadership and management transformation process, White is also a popular speaker at corporate leadership events for more than 21 industries worldwide.