Recession Survival: 5 Steps Construction Businesses Should Take Now

Even before the coronavirus upended construction, and effectively threw a wrench into the engine of the US economy, experts were predicting that a recession was just around the corner. If that was true, COVID-19 certainly sped things up. While the construction industry hasn’t been in the economic storm’s direct path, it is definitely feeling the effects. While in some states and cities, construction has been deemed “essential business,” in others, projects are being delayed or cancelled. To ensure that your company will survive a recession, no matter the cause, you need to start preparing now. These 5 steps will help prepare your construction business, whether a recession hits or not.

The contractors and suppliers that take the right actions now will have the best chance of surviving.

Economic & construction experts agree: A recession is here

With the construction industry booming over the last few years, many contractors have been enjoying a surplus of work, and near-record backlogs of future work. The steady flow of available projects has allowed many contractors, and material suppliers alike, to increase in size and profitability.

However, with greater potential profit comes a greater potential for loss. This is especially true when there is a recession looming on the horizon. Recent world events have shown how quickly everything can change, without any notice whatsoever.

“Whereas 10 days ago there was some legitimate uncertainty about whether the global economy was in the process of going into recession — 10 days later, there’s no question that it is,” David Wilcox, former head of research and statistics at the Federal Reserve Board, told CNN Business.

“The odds of a global recession are close to 100% right now,” Kevin Hassett, the former top economist in the Trump administration, told CNN’s Poppy Harlow.

According to Anirban Basu, chief economist of the Associated Builders and Contractors, “Businesses should be raising cash, determining if their lines of credit are large enough, considering staffing models and ensuring the good graces of bankers and insurers.”

In a recession, money seems to get extremely scarce, and that’s when contractors get in trouble. It’s difficult to pay for your materials and labor, when you’re not getting paid by the owner or general contractor of the project(s). There are steps you can take today, to minimize the negative effect of a recession on your business.