We’re in the midst of unprecedented uncertainty in
the financial markets, and consumer confidence is the lowest
it’s been in a long time. It seems that no one really
knows what’s going to happen. We may be facing a
serious recession, or worse; we may just be undergoing a
bizarre blip, to be followed by a quick return to business as
usual. Either way, here are some ideas about how to handle the
Do a Reality Check
Many economists actually like the occasional recession (up to
a point) because it purges the marketplace of marginal players.
Some of us spent the last 15 or so boom years coasting on the
good times instead of building a durable business. If
there’s a chance you’re one of those marginal
players, it may be time to do some soul-searching: Do you
really have what the bankruptcy lawyers call “an
ongoing concern” — or are you putting your
future clients at risk by taking on new business when
you’re living on borrowed time?
If there’s any doubt in your mind, ask an objective
third party — like an accountant or a business coach
— how your business looks from the outside and take
that opinion to heart. It may be time for a career
Make a Plan and Communicate It To
Assuming you decide you have the resources to get through a
potential major recession, you need to have a compelling plan
for how you’re going to manage that survival, and you
need to communicate that plan to your key stakeholders
— primarily your crew, but possibly your clients and
A clear, quantifiable plan will inspire confidence from your
team. It should be specific and candid about what your needs
and goals are and how you’ll meet them.
“Maintain volume at $1 million” is not
enough; you need something more like “Expand marketing
to generate $1 million in leads per quarter; cultivate sales
skills to achieve close rate of 25 percent based on dollar
volume.” Even that — though closer —
still needs a lot of detail regarding just what you’ll
do to generate those leads and cultivate those skills.
Be the Rainmaker
Your primary role as business owner is to ensure a steady flow
of quality jobs. When things get slow, anything that detracts
you from that role becomes a problem. A down economy is great
time to learn to delegate effectively — motivation and
the stakes are at their highest.
Think of it as a team-building opportunity. See what you can
do internally to get your staff to take some responsibilities
off your plate so that you can focus on sales, marketing, and
Evaluate Overhead Expenses
Take a close look at all your overhead expenses, as if they
were part of an investment portfolio: What sorts of returns are
you getting on your budget line items? For instance,
what’s your rate of return on those company trucks?
How does your gross profit per office employee compare with
that at other, similar companies?
If you have multiple profit centers (design, construction, and
small jobs, for example), do you track each as a profit center
and know that each covers its own share of the overhead?
Provide Superior Client
If your crew members are the pleasantest, politest, most
reliable, highest-quality people your clients ever deal with,
you will do fine in almost any sort of economy. So return calls
promptly, keep people informed, keep everything neat and clean,
and finish jobs ahead of schedule.
Like all of these recommendations, this has always been good
practice — but it’s even more important
Identify your crew’s skills and think about all the
kinds of problems they can be applied to. An ability to fix
— with real expertise — a range of major
household issues will help you get through any potential slow
times, because even when people are not inclined to do major
improvements they’ll still want to maintain their
primary asset — their home.
A lot of homes built in the last 25 years are having real
performance problems: premature rot, chronic paint failure,
inadequate insulation, and so on. Knowing what causes these
problems and being able to fix them so that they
don’t recur is a market niche with a future.
People will pay more if they’re confident
you’re able to do it once and do it right.
Keep Your Crew Size Steady
Many advisors recommend that you resist the tendency to hang
on to your crew as the work dries up. That’s good
advice — if you have marginal performers. But if your
crew is solid top to bottom, there may be some untapped
Have a company meeting and let everybody know that your first
priority is to keep them all on board. Ask for their ideas
about how to do that — ways they can help ensure a
steady flow of profitable jobs. We sometimes pigeonhole people
and neglect to ask them for help because we assume they
can’t provide it — when in fact they may be
our best resource. If you make keeping everybody employed a
team commitment, you’ll bring a lot more talent to
bear on the problem and stand a better chance of meeting the
Cross-Train Your Workers
One of the key ways you’ll get through a downtime is
by having a staff that can do pretty much anything you ask them
to. Let them know you need them to be flexible and adaptable.
Consider taking on tasks you might normally subcontract
— painting, roofing, hanging drywall — if you
can do them cost-effectively and to a high level of
If you’re shifting from a few large jobs to several
small ones, some of your crew might have to start developing
management skills they’d never needed before. This is
a good opportunity to develop some systems and training
procedures for bringing people along. When they have to choose
between learning to manage time and communicate effectively or
losing their job, most workers are going to be quite willing to
learn new skills.
Provide Financial Training
This is the time for each member of your crew to learn how to
read a job budget sheet, a job-cost accounting form, and a
company-wide profit-and-loss sheet. If your entire staff knows
the bottom line for every one of the company’s
activities, everyone will help you watch out for it. If
you’re the only one worrying about the bottom line in
a clear, informed fashion, you’ll be setting an
unnecessarily low ceiling for the effort.
So get the whole team involved. You may find savings and
profits where you never dreamed they existed before.
Don’t Forget Past
In 1990, the Boston area was hit by a deep recession. During
that time we found we could get a lot of new projects by
returning to past jobs to do unsolicited warranty work on past
projects. That’s when I learned that warranty work is
the best marketing investment available.
So if things slow down for you some, consider setting up one
of your carpenters to do unsolicited warranty calls for a
couple of weeks. You may find that it’s like a giant
gate valve for new projects — they start flowing as
soon as your worker starts providing this free service.
Cultivate Your Connectors
In his book The Tipping Point, Malcolm Gladwell
writes about “connectors” as the hubs of
social networks. One way to identify who your most important
connectors are is by plotting a “family tree”
of your referral sources over the past several years. Make a
list of all your projects and who referred them to you, write
each job (and source) on a sticky note, and post the notes on a
flip chart. Organize the chart like the branches of a tree
— the Smith job was a referral from the Joneses, who
were a referral from the Wilsons. The White job was a referral
from the Blacks, who were also a referral from the
That’s two branches that start at the Wilsons. In
this way you can identify your most potent lead sources
— they’re at the root of the biggest branches
on your “lead tree,” they’re your
connectors, and they’re probably some of your most
loyal fans. Take a group of these people out to dinner and ask
for their help and their ideas. It’s virtually certain
that they’ll come through for you.
Leave No Stone Unturned
There’s a range of other efforts that have worked for
us, such as public speaking on construction topics for local
organizations and consumer groups; community-service projects;
display tables at environmental fairs; frequent updates and
informative content on the company Web site; a useful and
entertaining newsletter with a personal touch. Don’t
forget these things — but don’t limit
yourself to them. And be sure to delegate some of the
activities to members of your crew so you can focus on other,
broader strategies and options.
In short, think like an economist: View a possible recession
as a way to clear out not only some of the marginal businesses
in your industry, but also many of your own marginal business
practices. Handled properly, an economic slump can help you
take your whole team to the next level.Paul Eldrenkamp owns Byggmeister, a custom remodeling firm
in Newton, Mass.