If 2020 has brought any clarity to contractors, it’s that there’s no time to panic. Instead, they and surety bond providers, must manage by accepting, adjusting and accelerating into a future of inevitable change, at a more rapid pace.
Those who’ve endured crisis before understand this will remain a trying economic environment for some time. But this is different than 2008. Faced with challenging circumstances, forcibly altered customer behaviors and mandated to redesign the way we conduct business, it’s critical to think differently.
As it relates to construction, an industry relatively slow to embrace change, things will look different on the other end. So now, let’s focus on how to power through to the other side.
  1. Cash is more king than ever. In fact it’s Capi di tutti Capi!
    Toss your financial plan, it’s still about survival – prepare for the worst but hope for the best. Adjust forecasting to absorb market shifts for 2020-21 and the new reality that ensues. While temporarily shuttered projects again cautiously reopen, the upcoming project pipeline is being reassessed by lenders, surety firms and public treasuries alike. It’s likely 2021 will see continued tightening credit markets, including surety credit, accelerating business failures of your peers and vendor/subcontractor ranks. How you manage cash flow and overall project liquidity will determine success or failure in navigating out of this scenario relatively unscathed, allowing you to pivot towards growth, well-capitalized, in a less crowded market.
    Example: Sell excess equipment or retire lease arrangements for pieces that are nice to have, but not needed.
  2. Keep skilled talent.
    Unemployment figures have reached unprecedented numbers to then recover some, however will likely increase again through Spring.  You must be able retain your talent. Don’t forget the skilled labor shortage that existed before the pandemic. It won’t be any better when we come out. In fact it’s likely to be worse. In high demand, talented workers critical to your output should be retained or risk of loss to a competitor. Repurpose these employees because you will need them again. If full time retainment isn’t possible have the furlough conversation early and incentivize their return.
    Example: Shift project management staff over to full time estimating. Increasing the # of projects you can bid and, thus, win. To the extent you must lay off some of your people, don’t forget each one is a human with a family, receiving unwelcome news in an already challenging time. How you handle this aspect will be seen by all of the others who may remain on the payroll, and have a direct affect on their motivation and loyalty. After all, these employees will save your company.
  3. Add to your talent bench.
    Talent is hard to find. With so much uncertainty in the air, many will be testing the market or will be furloughed, looking for another opportunity. Good employees are what will save your company and help it thrive in recovery. If you have the resources and haven’t conducted layoffs yourself (remaining staff will question loyalty if you have) stack your bench. Offer fair compensation with stronger economics, perhaps a vesting stock plan at the onset of the recovery.
  1. Renegotiate.
    With suppliers, landlords or any other vendor contract where flexible. With construction supply chains squeezed and work stoppages there is no doubt room for discounts or in improving payment terms. With the entire supply chain affected however, these firms will also be experiencing similar pains concerned about conserving cash and converting accounts receivable. So if you’ve been practicing cash management well, use that strength to swap discounts for prompt(er) pay. Construction will pick up and fully rebound. To your suppliers, be a great partner and keep existing inventory contracts while locking in discounts while you can. Don’t squeeze, be fair. Right now you want them showing preferential treatment to your projects, not the competitors.
  1. Accelerate accounts receivables conversion.
    On the flipside, incentivize customers to pay faster through discounts. Sure, gross profit margins will deteriorate but remember #1 on this list? Get it if you need it to live another day.
  1. Customer behavior will shift.
    To cost and health, not cost alone. The buying decision will be more complex and scrutinize your firm holistically. How do you address the challenges to their P&L? How do you help improve it? How can you implement? Your team should always be leading with a mindset in fulfilling customer goals while reducing anxiety.
  1. Technology is here to stay.
    The pandemic has forced business to adapt to remote workforces. Many once reluctant are now realizing the efficiency it provides. With a reduced workforce, take the opportunity to integrate tech where people driven processes are no longer necessary. It’s an incredible opportunity to reduce expenses and increase efficiency particularly around customer service, the reduction of operational redundancies, communication flows and seamless sales processes. Have your team understand why technology is being introduced to encourage its embrace, not as an employee replacement.
  1. Build connections with employees.
    In times of fear and uncertainty, business owners aren’t the only ones enduring panic. Employees will be concerned about their fate within the organization. It helps the psyche to be acknowledged and heard. Consider setting up open office hours once per week. Be as transparent in communicating how the company will overcome the crisis and each employee can do their part to help. Celebrate small wins, weekly. They can have a significant impact on morale and make progress more ‘tangible’ especially when a completed project is months away and difficult to navigate through.
  1. Team building.
    At the end of the day, no matter how challenging the world might seem outside, we all want to be a part of something. Take time out of each day or week to celebrate small wins, birthdays, sponsored lunches or anything worthy of mention. Let your people, be people. Keeping teams connected and engaged makes the work more fulfilling and meaningful, leading to better performance. Keep them wanting to work for you.
A crisis is temporary and cyclical, as are recessions. It will end and we’ll come out of this more resilient than ever.

Recent Posts

CONTACT
RAFFUEL
SURETY
GROUP

OUR ADDRESS

15 Chambers Street
Princeton, NJ 08542

Email: info@raffuelsurety.com
Tel: +1(609) 924-2426

Click Here To Find Us

To speak with our specialists, please fill in the following contact form:

[contact-form-7 404 "Not Found"]

CONTACT
RAFFUEL
SURETY
GROUP

OUR ADDRESS

15 Chambers Street
Princeton, NJ 08542

Email: info@raffuelsurety.com
Tel: +1(609) 924-2426

Click Here To Find Us

To speak with our specialists, please fill in the following contact form:

[contact-form-7 404 "Not Found"]

We can help.

It all starts with our Mission Statement. Understanding your business and your needs. But it goes deeper. We bring balance and insight to the situation. Our experience puts us in a unique consultative role. That alone is valuable, but without the right markets it’s a tree falling in the forest kind of thing. We represent the broadest possible array of surety companies in the business with worldwide capabilities, both traditional and innovative. There isn’t an answer for everything, but if it exists, we’ll find it.

We can help.

It all starts with our Mission Statement. Understanding your business and your needs. But it goes deeper. We bring balance and insight to the situation. Our experience puts us in a unique consultative role. That alone is valuable, but without the right markets it’s a tree falling in the forest kind of thing. We represent the broadest possible array of surety companies in the business with worldwide capabilities, both traditional and innovative. There isn’t an answer for everything, but if it exists, we’ll find it.