How to survive the economic crisis
Published on 03/12/2009
The present economic crisis initiated the demise of some of the world?s biggest companies and is forcing other businesses to tighten their belts. The construction market has especially felt the pinch, as the home building market has eroded and states? budget crunches limit expenditures on infrastructure improvements. In an effort to help contractors and vendors survive in these trying times, DBE Goodfaith has compiled a list of useful tips to help your business survive.
- Follow the money. The construction industry forecast looks bleak in the coming year, especially for home builders. One sector that is looking up, however, is public works. With the assistance of the stimulus fund, spending on public works projects will be up 15 percent nationwide from 2008. The stimulus may also be a saving grace for home builders because of its sizable allocations for government building renovations. In order to survive, businesses must be willing to diversity their portfolio and consider bidding on public works projects.
- Establish an Emergency Fund. If revenue exceeds expenses, set aside the surplus funds in a high interest, FDIC-insured Emergency Fund account. The money will retain its full value during economic downturns and the money is extremely accessible if it is needed.
- Deliver a quality bid. Procurement officers are not only looking for the lowest bid. Rather, they are interested in price relative to expected quality of work. This is important to keep in mind when putting together a bid. Do not let financial pressures push you to submitting a low but ultimately unwinnable bid. Also, meet the contracts? good faith effort requirement in full ? do not squander a quality bid by failing to complete this necessary step.
- Pare down unessential business expenses. This one is self-explanatory. When tools and equipment sustain the expected wear-and-tear, repair it rather than purchasing a replacement. Another option is minimize the use of credit and pay down debts if possible. The money saved from can be deposited into the aforementioned Emergency Fund.
- If your firm is facing serious financial problems, communicate frequently and openly with your employees. If employees understand that their company is in dire financial straits, they will be more likely to accept cutbacks and/or pay freezes while maintaining ? or even enhancing ? their level of productivity. Also, instead of layoffs, consider implementing furloughs. Couple this approach with promises of monetarily rewards for their sacrifices (such as bonuses or pay raises) once business returns to normal. These two tactics convey the message that a company is a professional family and that the business?s success provides benefits for all of its members.
- Consider TALF loans to fund business expansion. Are you currently a concrete contractor interested in growing your business to include striping and marking services but unable to secure loans to purchase the necessary equipment? Consider the Term Asset-Backed Securities Loan Facility, which helps market participants meet the credit needs of households and small businesses by supporting the issuance of asset-backed securities collateralized by student loans, auto loans, credit card loans, and loans guaranteed by the Small Business Administration. To learn more about TALF loans, click here.
- Apply for a certified disadvantaged business status. This is not an option for all firms, but the stimulus money allocated for infrastructure projects will require certified disadvantaged business participation. Many minority and women-owned contractors and suppliers will be eligible for certification. With certification, the chances of getting a slice for the stimulus pie are increased. Learn about Disadvantaged Business Enterprise certification on the New York State Department of Transportation website.
- Pursue money due to your firm. Are you waiting for outstanding payments? Pursue the money in an aggressive, but level-headed, manner. However, be patient with cash-strapped public agencies. Your business needs the money to survive and begin work on other projects - so be sure to get what you are owed.
- Deal with today, prepare for tomorrow. No one knows when the economic crisis will be resolved, and it may get worse before it improves. Prepare a plan of action in the event that the economy slides into a depression. Consider issues such as potential sources of new revenue and the cost-benefit ratio of expanding into burgeoning construction sectors (i.e. green building). Also, build a plan for when the economy turns around that outlines and strategizes the long-term financial goals of your firm. Perhaps it is in your firm's best interests to hire some of the industry's recently laid-off young, bright minds. Just remember to be realistic regarding your assessments and capabilities.
