The word on the street is another housing recession is coming or is it just a correction or maybe there will be no bubble and business will continue to be all butterflies and lollipops. No matter what happens in the remainder of 2022, preparing for any of these scenarios, including the butterflies and lollipops, is all the same.
When an economic forecaster makes a prediction, they have a 50/50 chance of being right. Many businesses hear what fits their business’ situation best. If they are already having financial hardships, hearing someone say there is a housing recession coming gives them a reason to rationalize their problems.
If another factory is doing quite well, they tend to believe the economist that says this is just a minor correction. Nothing to worry about here.
Neither of these scenarios is right. Sure, your company may be floundering but don’t blame the recession or Covid or labor or anything else. Blame yourself for easing off the gas pedal when you heard your problems are the result of the coming recession.
If your factory is doing quite well. You’ve found the secret sauce of success and you aren’t going to change anything you’re doing. Just like sports stars that have routines before games or wear something special during every game, some factories fear that changing anything within their company could send the company spinning out of control. No problem is big enough to make us change!
One thing the construction industry has learned in the last two years, it’s the importance of adaptability. Change is inevitable, so the ability to pivot and be flexible is key to surviving any recession and even the good times.
You can’t be married to any specific strategy, product, or service. A good example of this is what happened when Volumetric Building Systems bought Katerra out of bankruptcy. After reviewing everything they bought, the decision was made very quickly, that doing business as Katerra did was not the answer.
They brought in the right people that are putting new procedures in place, deciding what works for them and what had to go. They adapted their workers and management to what processes actually worked for Katerra and introduced new ones. They adapted.
This is what you have to do even if your factory is running at capacity and every day is bright and sunny. Those butterflies will fly away and the lollipops will disappear while you eat them. Finding ways to renew things that inevitably will change or become an Albatros around your neck is imperative for your business.
What should you be looking at adapting for tomorrow’s business? I have no idea. It’s your company. Nobody said it would be easy.
Understanding and serving your customers’ needs is important at any time. But it’s crucial to empathize with their struggles in the midst of a recession and celebrate with them their successes.
Customers come in all forms these days. Just a couple of years ago who would have thought Zillow or Airbnb would be building homes for their customers. Or what about all those city and state housing authorities that realize that building their homes with the help of offsite factories could solve their homeless and affordability problems.
Your company’s future depends on finding out what both your existing customers want and what is happening beyond your current production. A well-designed and precisely targeted survey can collect these insights far better than any panel, ‘gut feeling,’ or word-of-mouth ever will.
If the owner and management would simply take a couple of hours a week and begin talking with customers and prospective customers about what they want and need, you just may find a couple of companies or organizations that have been looking for someone like you to work with to ease their housing pain.
Keeping a close eye on expenses and cash flow can help you plan for your financial future and avoid overspending. Of course, it can be hard to cut back on your costs today with prices rising on everything from nails to gasoline. You have to maintain a high level of quality in your products and that is getting harder every day. The shortage of skilled labor, higher wages, and material shortages can take their toll on quality.
This is going to be a long, financially lean road. Seeking out customers that may want you to build housing you’ve never done before could allow you to improve your profit and use less skilled labor. You need to continue building your client base, allowing you to preserve your financial stability, even when existing customer sales are down.”
Financial experts recommend keeping six months’ worth of expenses in savings in case your sales drop. However, this isn’t always possible, especially for businesses that depleted their savings trying to stay afloat.
If you constantly find yourself short on cash flow, you may want to explore financing options. It’s always better to have access to a line of credit before you need it. It’s a matter of being incredibly detail-oriented and leaving no stone unturned in the pursuit of being as financially stable as possible.
In addition to cutting expenses, you need to know where your business stands financially. You need to understand what’s happening with your cash flow, profit margins, inventory, and monthly sales.
Use accounting software to monitor your business’s day-to-day operations closely and check your financial reports.
All these are great ideas but if you don’t actually look at the numbers because you are either discouraged seeing them every day or you think there are butterflies and lollipops everywhere you look and don’t need to see your daily financials, you are just kidding yourself.
I think it’s interesting that when a company closes its doors or goes bankrupt, your employees and customers all have answers as to why your company is gone. Too bad you didn’t want to hear from them before you closed up shop.
Recessions aren’t just stressful for business owners — they’re also stressful for your employees. Your employees are feeling uncertain about what the future holds, and they may be worried about losing their jobs.
That’s why it’s important to communicate openly with your employees. Let them know what’s going on in your business and why you’re making certain decisions.
It’s also helpful to begin building an agile workforce before a recession hits. If possible, give employees the option to do their work remotely. You can also supplement your business with freelancers or independent contractors.
Be transparent with your employees so know what is happening. They are paying more for rent, food, and gas than ever before and realize the factory has to be doing the same. Share your problems about rising prices, material shortages, and labor openly with the employees. You might get a response that could help keep your business moving forward. Remember, Jeff Bezos worked at McDonald’s before he founded Amazon.
Surviving an economic downturn will be difficult for any business owner, but keep looking for opportunities, even when things feel bleak.
Don’t stop marketing and advertising. Businesses that continue to invest in themselves and advertise during recessions come back stronger and bounce back faster than those that don’t.
Related Articles:
“Why Change?” Is Always A Big Question In The Offsite Construction Industry
Change Is Inevitable – Just Watch Your Step!
“Adapting” Is The Key Word For Off-Site Construction
Gary Fleisher is the Editor in Chief of Modular Home Source and Offsite Builder. Email at [email protected]
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