The many changes recently have hit the construction sector very hard. Like everybody else in the industry, you may find yourself searching for possible ways to keep your construction business afloat and your employees working. To diversify your business is one of the best advice if you want to survive a recession if ever it happens. Essentially, this means that you’ll be branching out the work you do and the clients you are serving.
Are you currently experiencing stagnation in your business? Maybe this is the right time to start diversifying your business. Diversifying does not mean that you should start framing; instead, you’re going to benefit from looking at the bird’s view perspective for your next clients.
So read this blog to determine why diversifying matters to your business and if it is the right time to expand your company. Discover also some practical strategies you can apply when planning to diversify.
Why Diversifying Your Construction Business Matters?
The many things that have happened recently have shown how vulnerable the construction sector can be to economic forces and government orders. In some places in the U.S., like Washington and Pennsylvania, all but the most crucial construction projects have been shut down. However, some contractors made their way and can expand their work portfolios with infrastructure projects, especially hospital facilities. A flood of new jobs is ready for them. However, construction businesses focused on corporate, commercial, and residential jobs saw their bottleneck of projects canceled overnight.
Did you see the difference? Whether your business specializes in commercial or residential, or both, you can choose to diversify the project types you work on. Because the more you diversify, the better position you will be in regardless of what may happen, regardless if there is a recession.
Here’s a breakdown of diversifying your business to understand the concept even more:
- Diversifying may mean taking on numerous construction project types, such as private or public jobs.
- Diversifying also means expanding into service work or learning a new skill or trade that you can add to your business repertoire.
- If one source of your income slows down or dries up, you can place more resources into another that you are already working on.
Ways Construction Contractors Can Diversify Their Business
Let’s take a closer look at seven strategies you can expand your construction business, including the steps you must take to survive a recession and eventually achieve lasting success.
1. Expand to New Locations
Perhaps expanding the types of construction services your business offers is not feasible or something you are not attractive to your audience. If that is your case right now, change the location instead of changing the type of job you do. Moving into new regions or cities is a huge challenge, but it widely opens your business up to numerous clients.
Start with baby steps. You can start expanding to the areas your business resides and setting up a satellite office in the nearest city. Everything is easier said than done, and you may make mistakes right out of the gate. That is why you have to take it slow. To begin with, a business expansion strategy that breakdowns to the details below:
- What tools will you use for communication between offices? Will you consider construction scheduling software for management and tracking purposes?
- How will you bridge technologies between offices?
- What local factors are necessary to run the new office more different?
Project management software makes it easier to bridge and communicate the gap between locations. Your people can access all the information they need in real-time rather than sending emails, making phone calls, and waiting for responses. If you’re now planning to diversify your business and operate offices in various zones, this type of immediate access to data is particularly important.
2. Offer New Services
You can expand your business more organically by simply offering expanded construction services. The most effective and smartest way to do this is to thrive in some areas adjacent to your business. Determine what you are good at and think about what one step beyond that will look like.
For instance, if you construct roads, you can further expand to building bridges. If you specialize in residential construction, you may want to expand your business to commercial buildings. Lately, many contractors have been exploring to include design services in their diversifying strategy. Their goal is to offer design-build project delivery to their customers rather than the traditional DBB (Design-Bid-Build) method.
3. Consider Acquisitions and Mergers
Setting up a new office or building a new team can be huge undertakings for you. However, expansion does not have to be organic. Alternatively, you can opt to expand by merging with companies that already have the clients and skills you are looking for. However, always keep in mind that a merger may go south quickly, especially if things are not well-planned.
Here are the other essential things you should keep in mind as well:
- You have to look for businesses with similar cultures and core values to your company, regardless of whether they are in a different market.
- You can also consider whether you can obtain any of your competitors to get into new markets and locations.
- As with any expansion, ensure that you have a strategic plan for merging. Cross your T’s and dot all your I’s ahead of time so your plans do not fall apart down the road due to the many unrealistic expectations and differences in opinion.
4. Balance construction project types
It is already mentioned that you have to explore other project types. If you specialize in residential projects, perhaps it is time to try commercial projects, and so and so forth. Now, let’s talk about how you should balance your projects.
A balanced approach is perhaps the best bet here. For instance, public projects will typically continue once they get started, despite what happens economically. In many cases, the government provides projects to help fuels the economy, which is undoubtedly good for your business.
Yet, depending on the government as your sole provider means you have to be extra competitive when bidding. And it would be best if you even bid on tons of projects to keep afloat and busy. It is advised to balance you’re the projects you are accepting and doing. Adding a couple of negotiated private jobs will pad your income and give you the opportunity to run your construction business instead of bidding all the time.
5. Fill Equipment Needs
Let us assume you pass the “ACCESSIBLE CAPITAL” test. Having to pass that test means you can now afford to take the job. If that is your case, make sure to look at equipment requirements from beginning to end.
- Do you have other work going that needs that particular equipment?
- Can you afford to own equipment onsite for the whole work period?
- Are you aware of what it will cost to maintain and transport construction equipment on the worksite?
- Will you have the right people to make repairs if necessary?
You can opt to get the best rental company near you that can provide construction equipment. Make sure that they meet your deadlines and can produce service to deal with necessary repairs in a timely manner. This can free up most of your tools and equipment issues and can save you extra money in the process.
6. Adopt Project Management Solutions
Using a specialized tool with the right features is critical for your construction business, especially if you plan to expand and diversify it even more. Modern tools like this can help you succeed, specifically when your goal is to take over a large share of the market.
Project management software helps you complete projects faster, promote effective business processes, and eventually increase your ROI. With this software solution, you can create and manage various jobs from different places at the same time. In addition, you can keep all your equipment, tools, and people under control. Is it amazing? Your goal to diversify your business is much easier than you can ever imagine because of this cutting-edge software.
4. Ensure you have funds
Let us now discuss the financing first. It can be undeniable that you wanted to take advantage of your PPP loan funds. Right now, you are still in the process of finding out if that loan for expansion purposes is 100% forgiven. If your loan is accepted, it clearly shows that it would be the PPE funds you are investing in and not your very own. Right?
Under such circumstances, there are increasing risks, and you will generally find acceptable to anything higher. And you do not want to throw that money away. However, if you have a decent job opportunity, you can bid. Having those PPP funds allows you to fund that risk without worrying so much about it. And suppose in some cases, taking that job opportunity helps you meet the PPP requirements while bringing your people back to work.
Keep in mind that PPP is taxable. And as you get closer to your end-year, ensure to understand your tax position thoroughly.
Diversifying Simply Means Survival
If you find that your business has gotten into a rut in terms of the type of projects you are doing and accepting, it may be time to search for other options. Whether private/public, commercial/residential, or a different infrastructure type, diversification can help you ride out any flops and recessions in the economy. No matter how things change, there’s always the need for construction work. And diversifying your business is one of the best pieces of advice you can follow since it is a great way to ensure that your construction can meet all of them no matter what and where the needs are.