By Jack Miller
While 1975 is proving to be a good year for most farm builders, it has been a tough one for contractors in general construction. Economists have termed it the worst recession since the Depression of the ’30s.
If you’re not among the farm builders who are having a good year, and share the problems of the urban builder, keep in mind that the key to survival in tough times is working harder and working smarter.
In spite of the enormous problems they faced this past year, however, some builders “managed” to grow and increase their profits. The key to their success during this tough period is in the word “managed” … they managed their companies into a stronger profit position.
Now that we’re beginning to pull out of the slump, what can you as an individual farm builder do to increase the profitability of your business as things begin to get better?
Sound management tricks
Know what’s going on.
Don’t stick your head in the sand. Stay active in your various trade associations. Read the necessary magazines, newspapers, and economic letters so that you can keep current. Find a source of information that will keep you informed as to what’s going on in your marketing area.
Have a game plan
Better yet have alternate plans. It’s difficult to plan while the future is uncertain. But you’re better off having a plan and changing it than you are having no roadmap at all.
Know the break-even volume for your company
Be sure you understand your fixed costs and variable costs. What overhead will continue even if you sell nothing? Once you get a good handle on your break-even volume, you will know exactly how much work you have to have in order to stay in business.
Be sure you’re getting your financial and cost-control data on time
Timely information is extremely critical during slow times. Be sure you are getting timely information on your cash position; your cash needs; job cost data; materials costs, availability, and price stability; and a current reading on your backlog of work. A builder should get a profit-and-loss statement every month. That way you get a feel of how you’re actually doing and can develop enough guideline numbers to plan ahead.
Write good contract agreements
Now is not the time to get caught in a legal hassle. Warranties should be spelled out and not oversold. Be sure to protect yourself against future price escalation. Don’t get caught in the middle.
Develop a good relationship with your banker
Or with more than one banker. It’s always extremely difficult to borrow money when you really need to, so develop the relationship before you need the money! Watch your cash needs closely and also keep an eye on the interest rates and availability of money. Many banking people predicted that the summer of 1975 would be the best time to borrow money. Government demand for money will be high in late 1975 and early 1976, and it may be very difficult for a contract to arrange for necessary funds during that period.
Focus your attention on cash management
Be conservative and don’t take big risks. If you have enough cash, you can last through any economic storm. The problem is running out of cash and not being able to get it when you need it.
Watch your prospect backlog
Tune your advertising to “prospect getting,” rather than “image building.” Use a rifle instead of a shotgun. Zero in on specific markets that are expanding in your area. Some industries don’t know a recession is going on.
Work at getting more productivity from your employees
Hard times can be an opportunity to motivate your people. If they see friends and neighbors unemployed, they will have a stronger desire to do a better job for you. Make it easy for your people to improve themselves and they may surprise you.
Conserve your assets
A recession is not the time to be wasteful. Be sure your company is doing everything it can to conserve cash, time, machinery, and the materials that you use. People can get into the habit of being conservative. A simple thing like turning the lights off at night in an office building can be a constant reminder that a businessman can’t afford to waste energy and money today.
Get back to basics
Planning, controlling, prospecting, selling, and hard work are the remedies for a recession. During good times, we become order-takers; during hard times, we get back to basics and learn how to sell.
Look for opportunities
You will find some of your best business opportunities during a down-swing in the economy. Bargains come on the market when times are tough. Good people also become available. If the kind of work you have been doing has dried up, look for areas where you might take advantage of your experience and capability.
Don’t give up
Persistence is a virtue, particularly during hard times. Once you give up, you’re lost. Most problems and situations can be solved even during a tough recession — if you’re willing to stick with it.
Watch your attitude
Don’t talk about the recession negatively … and don’t use it as an excuse for a poor or weak sales effort. Time spent mourning troubles is time wasted. Like a bad cold a bad attitude is catching. Every organization needs confident leadership, especially during a recessionary period.
Remember, during even a tough recession, some businesses manage to grow. Somehow, they increase their capability and their profitability. Shouldn’t you be one of the winners? FBN