How to Prepare Right Now for The Next Economic Downturn I Ep. 54

    

Today’s episode is a short, punchy look at how you can prepare during the boom times for the next economic downturn. I put this episode together from a short series of videos that I shot recently. I think you’ll find it very useful.

We’re going to begin by taking a look at the frustrations that buyers of construction services have and how you can address those frustrations so that you can stuff your treasure chest and prepare for that downturn. And in preparing for it you need to have the right perspective on the opportunities that may present themselves to you during that downturn to actually expand your business.

For a complete post drawn from this episode, visit my blog at https://ericanderton.com/blog/nextdownturn.

If you’d like to reach out to me on social media, I’m on LinkedIn and Twitter.

And on my Youtube channel, you’ll find a complete library of insights on life, business, and leadership that I’ve published over the years.

Episode highlights:

  • [01:05] The 3 opportunities in an economic downturn:
    • People – Talent will be much more available because other construction companies won’t have projects.
    • Projects – A good contractor today will be a good contractor in the downturn People who are doing projects in the downturn are looking for stable companies to work with.
    • Diversification – Cash is king in downturns and smart construction companies are stuffing their treasure chests now to take advantage of opportunities later
  • [02:33] 3 Tips to prepare for the coming downturn:
    • Look at your overhead and your processes so you are maximizing your profitability on every project.
    • Build a treasure chest. Cash gives you a timeline to continue your business and also a means to take advantage of opportunities that come up.
    • Make sure that you focus on relationships with your general contractors, your subcontractors, your bankers. Strengthen those relationships as much as you can. When the bad times come they’ll be there for you.
  • [04:31] The choices you make now, today, will help you or harm you in the future. Make sure the quality of your work is excellent, finish strong, get across that finish line with an excellent punch list execution.

 

Transcript:

ERIC:

[00:03] Hi, this is Eric Anderton. Welcome to Construction Genius. And today’s episode is a short, punchy look at how you can prepare during the boom times for the next economic downturn. We’re going to begin by taking a look at the frustrations that buyers of construction services have and how you can address those frustrations so that you can stuff your treasure chest and prepare for that downturn. And in preparing for it you need to have the right perspective on the opportunities that may present themselves to you during that downturn to actually expand your business. I put this episode together from a short series of videos that I shot recently. I think you’ll find it very useful. Feel free to give me feedback. Thank you for listening to construction genius and share this podcast episode with other folks that may find it useful.

ERIC:

[01:05] It’s interesting, I was recently listening to a panel of construction company owners talk about what’s going to happen and when the next downturn is going to happen. They had a variety of different things to say, but one of those guys was particularly excited for the next downturn because in the downturn he saw three specific opportunities. Opportunity number one is a people opportunity. When the downturn occurs talent will be much more available because other construction companies won’t have projects for those talented people to build. So it’s an opportunity for you to pick off some great talent from your competition. Number two, there’s a diversification opportunity. So if you’re smart now you’re stuffing your treasure chest with cash and cash is king in those downturns. It gives you flexibility and the opportunity to take advantage of things that come up in terms of diversification. And then number three, there is project opportunity. If you’re a good contractor today you will be a good contractor in the downturn and people who are doing projects in the downturn are looking for stable companies to work with. So be a stable company today so that you can be a stable company tomorrow and take advantage of those project opportunities. So those are three reasons to look forward to the next downturn. Number one, the people opportunities. Number two, the diversification opportunities as long as you have cash in the bank. And then number three, the project opportunities

ERIC:

[02:33] So let me give you three things you can do to prepare for the next downturn. Number one, tighten up. Look at your overhead and your processes and tighten those up so that you can be maximizing your profitability on every single project that you run. And the reason you want to maximize profitability is because number two, you want to build a treasure chest. Cash is king in a downturn. Cash gives you flexibility. It gives you a timeline to continue your business and also a means to take advantage of opportunities that come up in a downturn. So make sure you’re building your war chest right now today. And then the last thing is focus on relationships. Lots of guys are running and gunning at the moment and relationships can get frayed as you go from one project to the other. Make sure that you focus on relationships with your general contractors, your subcontractors, your bankers. Strengthen those relationships as much as you can, even in the crazy times. So that when the bad times come they’ll be there for you to help you with projects or to help you with resources that you may not necessarily be able to get hold of.

 

ERIC:

[03:39] Recently I was listening to a talk by a local developer in my area and he was sharing some of his frustrations working with contractors in the completion of projects. Number one, his concern was that the quality of work is not what it should be. Simply because a lot of contractors are running at a hundred miles an hour and they’re not really focusing on quality. Closely related to that, the projects don’t tend to finish as strongly as he’d like. So you start a project, you get stuck in with the various parties involved, you go through a lot of challenges and then sometimes you get right towards the end and things tend to drop off a little bit and you limp across the finish line. The punch list is not executed well, tasks hang around for months at a time and it’s just frustrating. So make sure you finish strong and execute that punch list excellently.

ERIC:

[04:31] And then the third thing that he was concerned with was the focus on short term as opposed to long term relationships. If you’re in construction you’re in a long game. Think about 20 year periods of time. And if you’re in a long game you’re going to want to cultivate those relationships even in the crazy times and not just focus on making a bunch of money now. But understand that your choices today in the boom times will have a impact in the future, in the bust times. So focus on those long term relationships so that you can maintain a healthy environment for you to do business in over a period of time. Okay? So there’s three things for you to consider. Make sure the quality of your work is excellent, finish strong, get across that finish line with an excellent punch list execution. And then the last thing, focus on long term relationships, not on short term gains only.

ERIC:

[05:25] Thanks again for listening to this episode of Construction Genius. The topic that we covered today reminds me of some great advice that I received a number of years ago, that I consistently repeat to myself and to my clients. And that is low overhead, stay humble, and it’s not what you make it’s what you keep. So let me encourage you, as you continue on with your construction business. Keep your overhead as low as you can. Make sure that you stay humble, don’t get too high when things are going great, don’t get too low when things are going terrible. And then it’s not what you make it’s what you keep. Make sure that you’re not focusing just on top line revenue, but bottom line profits and take those profits and stuff them away for a rainy day. Feel free to give me feedback on this episode. As I mentioned before, give us a rating on Google or Apple or wherever you get your podcasts and feel free to connect with me on LinkedIn or go to my website www.ericanderton.com. You can check out the work that I do there. You can read letters from my clients on the help that I provided them, and again, I appreciate you listening to Construction Genius.

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Pat, Glad you enjoyed it. I appreciate the feedback. I'll have some more episodes in the same vein, coming soon. Eric

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Eric, really enjoyed this podcast. Extreme Leadership is one of my favorite business books. Nice to see that you are incorporating some of their leadership strategies into your podcasts.

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