With so much uncertainty around COVID-19, as well as the current political canvass, jobs, taxes, and the world in general, it’s difficult to predict what the economy will look like in the coming days. Of course, this has a direct effect on you and your business. Construction is fairly closely tied to the economy, and as with most economic matters, a lot of it is out of your direct control.
I’m not saying we’re heading for a recession or something worse; what I am saying is that smart business owners look at the writing on the wall and get prepared for whatever the economy brings, even when it takes a turn for the worse. Speaking from experience, here are 4 ways to help make your roofing business recession-ready:
Rely on your experience
As anyone who reads this and survived 2008 and 2009 will tell you, that period was the absolute rock bottom for our industry. The first thing you need to do is use your experience and perspective to understand that what we’re going through now is not that. Right now, the construction industry is still doing pretty well. Most contractors were deemed essential and business went on.
The negative effects of the economy were largely based on geographical area, and in this case, the government acted quickly to supplement lost income so that many people wouldn’t feel the true impact of the downturn. Regardless, it’s easy to panic and react inappropriately for your business if you don’t have a sense of perspective. Economic cycles come and go: there are ups and downs that we all have lived through. If you rely on your experience, you’ll learn to recognize how far up those ups go and how far down you can expect the downs to go.
Streamline your operations and reduce overhead
Roofing and construction doesn’t have to be an administrative nightmare or a burden on your operating capital anymore. With programs like JobNimbus and Zapier, you can automate most of the simple functions of your business, which increases efficiency without adding on salary dollars. Increased efficiency means more cash flow, less overhead, and more savings for a rainy day. A business that is optimized for a recession is generally lean and efficient and operates on a baseline that survives longer if things start getting worse.
Start saving money
When the economy is on an upward swing, the cash really starts to flow into the construction business. Unfortunately, most of us have no idea what to do with it, usually because we never had it to begin with. So, what do we do? We buy lifted trucks, add pools to our homes, hire people to do the stuff we don’t want to do, get offices (because we’re growing right?) and spend frivolously. The one thing we forget to do is save some of it.
You need to have cash on hand when things turn south. But how do you know how much? That depends on how much money it costs you to run your business. Figure out what your average monthly spend is on labor, material, and overhead: basically, how much money you need to keep the doors open for one month with no income. Then save enough to have 6 months of reserves available at all times. That will give you 6 months to either pivot, to let people go, or to do whatever you need to do to keep the boat afloat.
Be ready to pivot
Do you ever wonder why there are so many handymen in your market? I’m not saying most of them are any good, but there is certainly no shortage of them. Well, you can thank the Great Recession of 2008 for that. Those people found a means to survive during a complete collapse of what they knew, and you can do the same.
I’m a roofer and my business does primarily storm restoration replacements. Now, mother nature doesn’t know (or care) that the economy is down, so roofs will still get damaged and need to be replaced. But if my customers lost their jobs and are barely getting by, the $1,000 required for the deductible is going to be hard to come by. Or more often, the money for the roof repair that they just got from the insurance company could be spent on the next two or three mortgage payments. So I need to pivot, too, and offer repairs instead of a full replacement. You need to be able (and willing) to pivot if need be.
Planning for our business’ survival during an economic collapse is enough to turn your stomach in knots. And because it’s not the fun part of our business, it’s very easy to ignore. But 2021 is full of uncertainty. As morbid as it sounds, I know I need to prepare to survive whatever comes. I’ve gone through the downturns in the economy, and it’s a terrible experience: I lose staff, I lose my office, I default on some bills, and things get rough for a while. But I live to fight another day.