If there’s one word that contractors hate, it’s “recession.” And with the recent economic trends, you’ve probably been hearing it a lot. When you hear about a recession often, you start thinking about your contracting company and how things will turn out. How do you recession-proof your business so you can not only survive but thrive during an economic downturn?
We know a recession is stressful, and we want to help your business make it through the downswing. Our CEO, Ben Hodson, weighs in on the five areas of your business to focus on to prepare your company for a recession and the three major issues that a recession brings for contracting professionals.
We’ve also compiled some tips you can implement right now to help keep your business afloat during a recession.
Let’s get started!
How Does a Recession Impact Contractors?
Customers Are More Price Sensitive
In a recession, everyone feels costs more deeply. Your customers will be more sensitive to how much your services cost. A customer might have been more willing to pay $500 for a roof repair four months ago than a $250 repair this month.
Because customers are counting pennies, they’ll likely take longer to consider your proposal. They’ll get quotes from a few different companies and compare prices before making a decision. Customers might even try to haggle the price with you.
With fewer available jobs for contractors to take on, there will be more contractors than projects. Competition will be fierce, and many companies will go out of business. As the industry shrinks, you’ve got to prove your worth to keep your company on the map.
In an economic downturn, fewer people will reach out for your services. Getting new leads will be difficult, and only a portion of them will turn into paying customers. Homeowners will try to save their money by only taking care of necessary projects and waiting to do voluntary projects.
5 Areas of Your Business to Optimize for a Recession
During a recession, you don’t have time or money to waste. Your company needs to be as efficient as possible to help trim down unnecessary time and money expenses.
If your processes aren’t working correctly, reevaluate them. Identify precisely where problems are and what’s causing the issue. Find what’s working and cut out or change what isn’t.
Disorganization makes you less efficient. Organize your folders, customers, and workflow. With a roofing CRM like JobNimbus, it’s easy to get and stay organized.
Part of organizing your business is managing your inventory carefully. Take a full inventory of your supplies, equipment, and materials. You want to be well-stocked but not overstocked since excess inventory takes money from your pocket.
Because you’ll have fewer jobs coming through your pipeline, you’ve got to make them count. Get more bang for your buck by offering more products and good-better-best estimates. Our 2023 Peak Performance roofing report found that about 50% of customers choose the best option on good-better-best estimates. That’s extra profit right off the bat.
A recession is also the time to provide secondary services if you aren’t already. Consider offering landscape cleaning, pressure washing, snow and ice removal, or another service with a high-profit margin. It’s simple to ask the customer if they’re interested in additional services when you’re on the job.
Leads are harder to come by during a recession. You’ve got to have a solid system in place to bring in more customers.
The best and most effective way to get leads is through referrals. In fact, 36% of roofing leads are customer referrals. That’s why a referral program is crucial for your contracting business! Giving customers a small reward for their recommendation pays for itself with solid leads that convert into paying customers. If you don’t have a referral program, set one up to bring in more prospects.
Good reviews have a similar effect as referrals. Positive reviews online will help more people find and choose your contracting company.
Ask customers to share their good experiences with your business on your platform of choice. Nextdoor, Facebook, Google, and your company’s website are great places for good reviews. Check out our blog post for a step-by-step guide on how to start a Nextdoor business account.
Know where every dollar is going. Your business should always be aware of expenses, especially when the economy is leaning toward a recession. Regularly check your finances so that you can pivot sooner rather than later if you need to make any changes.
Go over variable and fixed expenses in your business. Is there anything you can cut for a few months and revisit later? Anything you’re paying for that you don’t benefit from or use? Now is the time to make those adjustments.
Want to prep your business for a recession?
Download our 30-page guide with insights from the 2008 recession, things to keep an eye on, and next steps to take to help your company weather an economic downturn.
Bonus Tips for Recession-Proofing Your Business
Hire the Right Employees
With companies going under, more people will join the job market, looking for a job in the construction industry. If your company needs to hire, you’ll have plenty of options. But you’ve got to make sure you hire the best candidates.
Don’t just hire someone because you have an opening. Hire because they’re the right fit for the job and your business.
Payment options will be essential for winning over customers in a recession. One of the best things you can do to overcome this is to offer financing to your customers. Homeowners might balk at having to pay everything at once, but with financing, they can spread their payments out into manageable chunks.
If you aren’t already giving financing options to your customers, try adding it to your estimates and proposals. If you’ve got a financing partner, make it a point to tell customers about your financing options.
Prepare Your Business for a Recession
By focusing your efforts on these five aspects of your business, you’ll be better prepared to weather the storm of a recession. Taking definitive steps to become more efficient, organized, and cost-effective will pay off in the long run.
What steps are you taking to recession-proof your contracting company? Let us know in the comments below.