While COVID-19 continues to shutter the economy, many companies are having to decide how best to face the oncoming downturn by either cutting back on employees or reducing work hours and remuneration.
As the recession deepens, there will be an increase in part-time employees as full-time positions become scarce and an increase in unemployment. Unlike the 2009 recession, companies will be at the mercy of a pandemic that will run its course for an undetermined period of time. This won’t be easy for businesses but if the right measures are put in place now, the overall effects and losses of the recession can be reduced.
The simple truth is this: by failing to prepare, you are preparing to fail. As a business owner, investigating every possible solution available should be your primary concern; allowing you to take the necessary steps to protect both your employees and the longevity of your organisation.
Here are some guidelines to follow:
There is a time to act and a time to react. In the face of an unprecedented recession, the former is preferable and laying a solid foundation will serve you in good stead.
Upskill your people
Improving your employees’ knowledge pool and expertise is never a bad investment. Luckily, such resources are only an internet search away. Here are just a few examples of courses and webinars that cover subjects across the built environment. Existing service providers will be looking to support you in these times with online training and consulting at competitive prices.
Save money to make money
Ensure you have enough cash on hand to cover overheads and keep the business running smoothly. Ideally, you should strike a balance between saving and overspending so that—when the downturn ends—you can get back to business as usual in the shortest time possible.
Deal with debt
Bad debt and unwise investments can prove dire to a business even during a boom period. Limiting rash expenditure while consolidating—or even eliminating—your company’s debt will help you stay solvent while building your war chest. Researching alternative revenue streams, such as an untapped source of clients, can help your company stay fighting fit.
Know your costs
Understanding the difference between projected and actual project costs is paramount when deciding how to proceed during a downturn. Accurate tracking of labour, material and plant costs at quantity, rate and overall budget in a dynamic link to the project requirements and constant change, will greatly improve your profit margins and lead to better project outcomes. Investing in solid estimating, planning, project control and enterprise accounting software, that deals with the nuances of the construction industry like sub-contractor management, will ensure your books balance and that you’re fully informed on every aspect of your company’s finances.
Don’t rely on order book
In the last recession, many construction firms saw their order books vanish as projects were cancelled or indefinitely postponed by clients unable to secure proper finance. Considering this may happen again, it’s prudent to stay attractive to existing clients while mining new markets at the same time. Is there a niche you’ve never delved into? Can you offer more value to your existing clientele? Answering these questions will help you strategise a firm plan of action, leaving you better prepared than your competitors.
Keep your best people
“You’re just too qualified” is a trap to be avoided at all costs. The construction industry has always suffered from a skilled-labour deficit, with new workers lacking the experience to fill the void left by veterans lost in previous recessions. Keep your best people and their skills close by offering competitive wages and incentives while providing enough work to keep them busy.
Play to your strengths
What sets your company apart? Do you deliver on time and within budget? Do you fill a gap in the market? Are your workers particularly skilled at a certain aspect of construction? Identifying your company’s greatest strengths and playing to them will help you weather any storm.
Are furloughs a viable option
Nobody wants to retrench staff who are loyal, skilled and add value to a business. Furloughs enable companies to reduce staff costs while avoiding retrenchments, and the loss of critical skills. Furlough measures could include working reduced hours or being put on leave for as long as is necessary to weather the financial downturn. The major benefit of furloughs to companies is that they do not have to go through the disruptive and expensive processes of retrenching staff and then hiring and training new employees. Employees also benefit as it creates some certainty, they retain some income or benefits and they have a job to return to. Implementing furloughs needs to be carefully considered, with some key questions being, does it apply to all employees, how will we communicate with employees during furloughs to keep them engaged, what processes do we need to follow to ensure proper employee consultation and what benefits will we continue to provide?