There is a roller coaster in Ohio that takes you to the top of the hill, lets you start to crest, then stops. It just hangs there for a split second, but as you hang there looking straight down, you can not help but start getting a few butterflies. Even though you know where you are about to go, when that brake lets loose, you feel it. I love roller coasters. The bigger, faster, crazier, the better. But, like all business owners, the roller coaster of ownership is the one that gets my juices flowing the most.
I have seen a substantial uptick in contractors across the country, saying they are slow or have been slow for months. I understand that no matter what the economy is doing, there will be some slow, some just right, and some overbooked. This one feels different. It seems like every day, the internet forums are getting more and more “I am looking for work” or “how do I get more leads” posts. A few years ago, there may have been a few a week, but now it is hourly.
The question here is not about what the economy is doing; it is about how some make it through the slow times and why others do not.
- Reserves. Yes, the main reason some companies withstand slow times is reserves. They have charged enough, saved enough, and been disciplined enough to set money back for a rainy day. After 2008, I had an owner tell me he was thankful that he had $1 million in the bank to get him through. He kept his head above water by using it as needed to keep employees paid, business debt serviced, and basically keep the lights on. He said it hurt. He thought many times of just shutting the doors and riding off into the sunset, but he knew that if they survived, they would be in a position to dominate the market directly after and make the money back faster than ever. He stayed positive, and in fact, he did make that money back and then some.
- Lean and Mean. One way to survive a slow period is to be lean and mean. This isn’t something that you can do overnight. This is something that requires planning, discipline, and tons of foresight. When times are good, many companies go on buying sprees. Equipment, trucks, offices, etc. They use a good year to get financing and then max it to the roof. Debt is not a part of a lean and mean structure. Side note: debt is necessary at times, and a good thing if the money made from the financed items exceeds the amount required to service the debt. But back to lean and mean. If you are carrying massive debt obligations and there is a downturn, you do not have the flexibility to lower margins in order to stay afloat. A lean and mean strategy requires you to make decisions as if you are always in a downturn and charge like you are not.
- Collaboration. As much as some of you will hate this, competitors may need to collaborate to survive. Tackling a project with another company is a good way to expand your services or project size without the investment of growing your own company. Make sure you are networking constantly with your competitors and looking for opportunities to make mutually beneficial deals.
- Marketing. The time to market your company is not when you are out of jobs but when you still have them. Marketing takes some time and investment. If you wait until you are just scraping by, it is too late. You are already running on fumes, and a marketing budget is not in the cards. Keep pushing no matter what. When there is a slow period of work, let the other companies pull back. That is when your marketing dollars will go the furthest. Push forward and position yourself for market dominance.
- The Dreaded Pause. I do not like this, but it is a strategy. I have seen companies pause all activities until the market comes back. They go get jobs, live off of savings, and then open their doors as soon as they can. Again, not my favorite, but a strategy nonetheless.
I am not a preacher of oncoming economic collapse. I am just seeing a few signs of a roller coaster year ahead of us. If everything is great, we all win. If everything goes bonkers, those who have strapped themselves in for the ride will survive.