Construction has been in good health since the effects of 2008 calmed, but industry insiders are suggesting that a downturn could be on the horizon. Germany’s economy, influential in the Eurozone and internationally, is slowing largely due to construction, according to Bloomberg. All sectors of society feel the effects of recession, but the industry at the forefront will feel it most acutely. For construction-related businesses, there are a few key strategies to employ in order to weather a downturn.
Assessing your finances
The most important strategy for a business is, of course, to manage its finances properly. This is the same for construction firms and taking on household saving tips as a template for your own planning is a good idea. It’s good form to keep your credit balance low and to keep a close eye on your outgoings; however, if a recession may be around the corner, it’s a good opportunity to apply cost cuts to your financial strategy. It’s also prudent to plan for bankruptcy. Bankruptcy is a formal arrangement that many businesses experience; it is not a sign of failure, and can help you to re-establish yourself in the future.
Questioning the market
As a downturn or economic recession hits, the first victims will be sections of industry that are deemed non-essential. Consider this as it relates to your business. CNBC notes that house building continues to drop in the United States, with overall construction falling 4% each quarter. This is clearly a high-in-demand area, and should be focused on in any potential assessment of your construction portfolio. Conversely, and whether positively or not, construction in sectors such as recreation and the arts will suffer a downturn. Offices are likely to be affected too. Focus your portfolio on areas where demand should remain despite any negative factors; this will help you to get ahead of the pack.
Diversifying your portfolio
For construction-related logistics companies, there also remains the option to look for other industries to move into. Logistical companies enjoy considerable crossover with other physical job sectors, notably government and public services. Having the option, or contract, to enjoy work in other sectors will diversify your portfolio and give you much-needed protection against tumult within a single sector.
To diversify effectively, it helps to have some work going on as soon as you are able. Where possible, use parts of your business to help supply other areas and services. Having you foot in the door will give you a springboard to future success through having those connections and being able to demonstrate a track record in that chosen field.
Construction is usually a safe bet in terms of choosing where to work. However, downturns can happen unexpectedly, leading to an impact on business that can, over years, be detrimental and potentially fatal to your business. Finances are, as always, the key, and a strong financial plan and strategy will help you to navigate hard times. That aside, make your business a fluid one, always looking for new opportunities and areas to move into.
Source: Jennifer Dawson