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How to Recession-Proof Your Company
As surely as installation of a good weatherproofing system
in a new building keeps out harsh winds, recession-proofing techniques can
help protect your construction company from the worst effects of a severe
economic cycle.
Some of the methods recommended by builders who’ve survived previous bad
times are:
- Improve cash-flow controls. Negotiate the longest
possible payment terms with suppliers and work closely with customers to
keep accounts receivable rolling in.
- Monitor inventory. Reduce overstocks in
materials by trimming lead times.
- Step up scrutiny of subcontractors. As part of an
intensified prequalification process, consider bonding high-risk
subcontractors.
- Strengthen funding validation. Validate funding
both before beginning the project and also during production.
- Seek larger contracts. To offset the
effects of a shrinking market, focus on winning bigger jobs.
- Heighten lien awareness. Ensure that your staff is
familiar with lien laws and with procedures to protect lien rights.
- Intensify contract review. Establish a thorough process
of legal review of all contracts.
- IReinforce lending and surety
ties. Increase the amount of time spent developing and maintaining
strong relationships with banks and sureties.
- Review change-order procedures. Carefully evaluate the
effectiveness of your systems for identifying and processing change
orders.
- Trim waste. Eliminate unnecessary expenses and employees.
- Reclaim unused capital investments. Sell excess
equipment and put the proceeds to productive use.
- Prepare for the long haul. Plan for an
extended period of slow activity — double what experts project.
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