As a female business owner in the construction industry, I have seen my fair share of ups and downs over the years (cue tiny violin, 2008 real-estate market crash, and COVID-19 flash-backs).
However, the current state of the construction market has presented a unique set of challenges never experienced before. The Northeast region, in particular, has been hit hard by supply chain issues with concrete and a labor shortage that has left many businesses struggling to keep up with demand.
Keep reading to gain insight into the effects of the down market on the construction industry and discover the ways that construction companies can flourish and succeed amidst these challenging times.
National Effects of the Down Market in the Northeast:
The construction industry has always been cyclical, with periods of growth and contraction. Several factors have been driving the down market recently, including:
- Supply Chain Issues: The pandemic has severely impacted the supply chain for construction materials. The cost of raw materials has skyrocketed, and shortages of critical materials such as lumber, steel, and concrete have left many businesses needing help to complete projects. This issue has caused a ripple effect, resulting in delays and increased costs for construction projects.
- Labor Shortage: The construction industry has faced a labor shortage for years, but the pandemic has worsened the problem. Many workers have left the industry due to health concerns, and others have found alternative sources of employment. With the pandemic causing a slowdown in the immigration process, there has been a significant reduction in the number of skilled workers available for construction projects. This labor shortage has led to a delay in project timelines and increased costs for hiring workers.
How Construction Companies Are Being Affected:
The down market has had several effects on the construction industry, including:
Reduced Profit Margins: With the cost of materials and labor rising, many businesses need help to maintain their profit margins. Attempts to reduce profit margins have increased competition and pressures to lower prices.
Project Delays: Supply chain issues and labor shortages have led to project delays, which can result in increased costs and lost revenue.
Increased Risk: The down market has increased the risk for businesses in the construction industry. Uncertainty surrounding the economy, supply chain, and labor market makes it challenging to plan for the future.
Tips for Growing Your Construction Business in the Face of Current Challenges:
While the down market has presented many challenges for the construction industry, here are steps businesses can take to grow and thrive in the face of these challenges.
1. Build Strong Relationships with Your Clients:
Tip 1: Assign a team member to client relationships and make it their 90% priority. If there is any hesitation in that client resigning a contract, that client relationship manager must inform the team ASAP. You then have the opportunity to intervene, provide better customer service, adapt your service/product, and negotiate a different contract, if applicable.
Tip 2: Manage client relations in a CRM - Customer Relationship System- that indicates close dates for clients. Set up email reminders six months, three months, and 60 days before the contract ends to ensure client engagement.
Tip 3: Help clients help their customers. Offer clients advice on how they can better serve their customers and employees. For example, celebrate wins when your client lands a big sale or adheres to safety standards during a specific time.
2. Invest in Technology: Technology can help you streamline operations, reduce costs, and improve efficiency.
Tip 1: Implementing project management software can help you track projects and identify areas where you can reduce costs.
Tip 2: Use tools that eliminate admin tasks, filing, storing paperwork, signing paperwork, keeping track of attendance, etc.
Tip 3: Track certifications, processes, checklists, and more using digital software. Explore our Construction Micro-learning blog to discover how the utilization of technology can enhance efficiency both on-site and off-site.
3. Emphasize Safety: With the pandemic still a concern, emphasizing safety can help you build trust with your clients and employees. After all, no one wants to work with a company with unsafe standards. Ensure you follow all recommended safety protocols and communicate these protocols to your clients and employees.
Tip 1: Use a construction training tool like aQuiRe™ that sends safety videos and quizzes to inform employees of active hazards on your job site. Read more about aQuiRe's library here.
Check out our blog about your ROI and the aQuiRe app here: Investing in Construction Safety: What to Expect in Terms of ROI
4. Offer Competitive Pricing: In a down market, businesses must actively reduce their prices to secure work. While it is essential to maintain your profit margins, help your customers understand what differentiates you as a company.
Tip 1: Are your employees diverse? Have you all worked in the industry together for a certain number of years? Do you have exceptional educational accreditation and achievement? Brag about yourself through email updates and social media.
Tip 2: Write monthly customer updates about how you are growing, improving, and enhancing your service/product.
5. Hire Diverse Talent:
Tip 1: Reach out to us at CaHill Resources if you're looking to hire skilled workers from underserved communities. We have tons of candidates looking for jobs in construction!
While the down market in the construction industry may seem daunting, it's important to remember that an opportunity for growth comes with every challenge. By diversifying your services, building solid relationships, investing in technology, emphasizing safety, and offering competitive pricing, you can position your construction company for success even in these challenging times. So keep applying for RFPs, seeking growth opportunities, and pushing forward - because the rewards of success are always worth the effort! Keep building, keep growing, and never give up!