By Brian Drucks

All indicators are pointing to a slowing economy. Business owners need to see these reports as a leading indicator of where their business may be heading.

The fact is that most construction is paid for with equity. In a slow Real Estate market, where property values continue to drop, that equity is diminished. Combined with the fact that loan money is not as readily available, contractors need to come up with creative solutions to meet the new demands of a changing economy.

Consider this. A business advisor of mine asked me if it was the slowing economy that was really hurting my business? He told me to figure out the dollar value of all job opportunities for my trade in my area. For arguments sake, let’s say my area generates 20 million dollars of work in my field of expertise. Then, estimate how much decline can actually be attributed to the slowing economy. Let’s say that could be 50%, which leaves me with 10 million dollars in business opportunities. I now deduct how much my business generates in a year. The balance represents the considerable amount of opportunity still I was leaving on the table. So now, ask yourself, is the problem a slowing economy or is it that you don’t know how to capture more of this opportunity?

Now that we see there are still great opportunities out there, how can we take advantage of them?

1. With less loan money available, can your company provide alternative financing options? Why not start taking credit cards. In the commercial environment, we are quite used to funding projects with our own money for an average of 60-90 days. Can you offer this option to a client base that doesn’t normally require it?

2. Dedicate yourself to knowing exactly what it costs your company to produce your service. As competition for work heats up, in all likelihood, your competitors will start dropping their prices. By knowing your costs, you will be able to accurately determine when and if you can lower your price.

3. Analyze where you can trim costs. When times are good, we tend to overlook seemingly small expenses. However, it is really amazing just how much these expenses add up. When was the last time you looked into your company’s phone plans? With the advent of VOIP phone systems, even the consumer can cut long distance charges in half. By combining our phones, Internet and cable services, I personally, am saving $ 80.00 per month. Look at your cell phone usage, can you switch carriers and buy pooled minutes? For me it was a savings of $ 300.00 per month.

4. By explaining to your employees the correlation between production and job pricing, they will understand how their efforts can help tighten prices, thereby making you more competitive. In my case, if I can get an employee to roll out an extra 24 linear feet of wall a day; I cut my labor costs by approximately 5%. One extra doorframe per day also cuts my labor costs by approximately 5%.

5. Between trimming your expenses and tightening production can your company find ways to reduce your costs by 10%?

6. Most of us do not have an unlimited labor pool. One overlooked consequence of taking work at lower margins is that you miss out on higher margin projects because your manpower is locked up on cut-rate projects.

Most businesses are run on trailing indicators such as Profit and Loss statements, and sales volume and customer satisfaction ratings. Although important, this information is really after the fact, the damage is already done. But what if you focused on the leading indicators, the things that are going to happen? Examine requests for proposals and closing rates. Instead of just looking at sales, you can now make gradual changes instead of major changes that are influenced by panic. Strong business leaders don’t sit around and wait for the world to happen around them. They plan for “what if’s” and have a plan of action. It is inevitable, economies change, can you?