The construction industry did well during the pandemic, and most contractors kept working. But supply shortages, dramatic price hikes and regulation changes present further risks. General contractors and specialty contractors in the Mountain States tell me they’re struggling. They quote a job one week, and a week later it’s 200% higher. No matter what region you’re in, now is the time to do some planning.
Most contractors tend to focus on what’s in front of them right now – moving from one job to the next. In other words, they don’t do much planning. They aren’t filling the pipeline with future jobs. That puts them at a high risk of business failure – especially given the uncertainty of the market right now.
If you can take some time to plan, however, you may be in better shape.
Start by thinking through your goals. What do you want to see happen in the next three to five years? Do you want to keep growing or stay comfortably where you are? If you want to grow, what kinds of jobs do you want? What industries would be a good match for you? Even if you want to remain at your current job levels, you have to plan if you want to thrive.
Next, look at the market. What jobs are coming in the next 12 to 18 months? Are you in a position to go after those jobs? Your bonding capacity is an important factor there, as is your safety program. Reach out to your broker for guidance on how you can protect or grow your bonding capacity.
Consider regulatory requirements you may face. Some of the best jobs also have strict rules about the documentation you have to provide upfront. For example, the Denver and Salt Lake airports are going through huge remodels right now, and those jobs are appealing. But you have to have a lot of things in place before you can bid. This includes is a list of all drivers and workers, financial records, contracts, on-site safety programs, training certifications, loss history and certifications. You must have all your ducks in a row before you can go after those jobs.
Look at your plans for attracting and retaining labor. How competitive are you? In a market like Denver, labor is tough to come by. I’m talking with a roofing contractor who lost one of his best teams when a competitor pulled up and offered them double pay for the next year. They came back at the end of the year and wanted their old jobs back, and he had no choice but to take them. That kind of competition can leave the small to mid-size companies floundering. To compete, look at your employee benefits, signing bonuses and market adjustments.
Make sure you have a strong safety program. It’s not enough to just say you have a safety officer or program. You also have to:
- Have strong communication with your employees about the program and corrective actions – creating a true culture of safety
- Measure your program well – both your efforts and the results
- Have a claims management process in place
- Have a documented process that recognizes the root cause of problems and puts programs in place to address them
- Document your safety protocols, including return-to-work policies and training records
Consider your financials. If you want to grow, you need a bonding surety program. Your partners at The Miller Group can help you break down your financials and look at benchmarking data to help you see where you can grow in the next six months. We can also review your bonding applications, talk with the markets and make sure carriers understand where you want to go.
During this market, if you’re not moving forward, you’re going backward. And you will be left behind – especially if the bubble pops and a recession hits. This may seem like a lot to think about, but The Miller Group is standing by to help.
By Jason Rock Carter, Vice President, Construction Risk, The Miller Group