We’ve recently passed the one-year anniversary of the onset of the widespread economic and social impact of the COVID-19 pandemic. The pandemic brought extreme disruption to our lives and businesses. As we continue to move into our new post-pandemic “normal,” it’s important to reflect on what your business did well during the pandemic and what could have been done better.
During 2021, contractors not only have to recover from any lingering effects of the pandemic itself, but also prepare for any secondary issues caused by the pandemic. Supply chain disruptions, material price increases and continued difficulties finding skilled labor are all areas where we expect to see significant difficulties for contractors during 2021.
It’s crucial to apply effective strategies that will help you reestablish business operations and ensure any future disruptions will have a minimal impact on profits. As we reflected on the experiences we’ve seen contractors have over the last year, we gathered the following tips for how contractors can bounce back from the pandemic and be even stronger than before.
Focus on Core Competencies
One lesson is clear in the aftermath of the pandemic: those contractors and companies that were able to identify and concentrate on core competencies were better able to cope with the challenges they faced. In which job type, size, customer demographic, geographic area, etc. has your firm consistently performed well? Chances are good that these areas are your core competencies.
First, identifying your core competencies and how they generate profit allows you to better leverage these areas of expertise. What areas do you perform exceptionally well in? When thinking through this question, you should consider the skillsets in your company, what your market needs and how profitable that area is for your company.
By focusing on areas where you perform well, you can maximize productivity and profitability—and maybe even expand into a new market. This approach allows contractors to have the benefit of being able to scale up and down as needed with confidence, providing valuable flexibility in any economic environment.
In uncertain times, there is great temptation to pursue work that may be outside the scope of a contractor’s experience. While innovating can certainly be rewarding, it is not without risk. Ensure that you know your core competencies and leverage them fully in your pursuit in new areas. This strategy will ensure that your core business is as strong as possible while mitigating risk in pursuing new areas.
Risk Management and Continuity Planning
No one could have predicted the onset of the COVID-19 pandemic, and most of us couldn’t have even fathomed a global event like that. Companies now recognize the importance of risk management and continuity planning more than ever.
Business continuity planning is a set of protocols that ensures a business can continue to operate during disruptive events. Every business is different, so each business continuity plan will focus on different areas of personnel, technologies and business processes that are critical to normal operations.
Many contractors have developed a disaster recovery plan and assume that they have business continuity covered. It’s important to recognize the difference in these strategies. A disaster recovery plan predominantly focuses on preparing for technology disruptions during unexpected events, but it doesn’t necessarily address other critical areas that will need to continue to operate, such as sales and marketing, customer relations and human resources.
It’s imperative that contractors are prepared to maintain effective communication with clients and employees, access their data (and prevent loss of data) and repair failed systems after any disruption.
Product Costs and Procurement
One of the current challenges faced by all contractors is the increase in construction material prices and pandemic-related supply chain disruptions. This uncertainty impacts every step of your supply chain. Contractors had reliable supply chains before the pandemic, but now they are having to discover new ways to procure building materials.
In addition to finding the materials, managing product costs has become even more crucial. The disrupted supply and availability of components and raw materials provides additional challenges in the current business environment compared to business-as-usual conditions.
With suppliers facing their own unique challenges, established supply chains have become less reliable for raw materials, such as lumber. As a result, the industry is experiencing much higher costs from all angles—transportation, customs, delays, international shipping, etc.
It’s important to be creative in finding ways to best handle your current challenges. Maybe that means identifying new supply chains as a back-up, assisting key subcontractors with their supply chain, rebalancing costs within your company to cover material increases, adjusting construction schedules and preparing for any changes by staying up to date on industry developments.
Contractors have the opportunity to gain a clear competitive advantage by staying at the forefront of any supply chain issues and acting accordingly in a decisive and quick manner.
Continued War for Talent
It’s widely known how tight the pre-pandemic construction labor market was. Moving into 2021, we expect these issues to be exacerbated. Enhanced unemployment benefits, availability of COVID-related paid leave, strong demand for labor in other sectors of the economy and ongoing demographic changes will continue to put pressure on the construction labor pool.
Contractors should proactively focus on recruiting and retaining their talent. While their base pay rate is obviously very important, employees also value many other things: company culture, training, working conditions, benefits and opportunities for advancement are all important to your employees. Incentive compensation plans throughout the organization are also becoming increasingly common. We have assisted several contractors in implementing such plans and have found them to be helpful.
The process of recruiting talent never stops. Remember that someone else is always recruiting your best employees!
How Contractors Can Move Forward in 2021
Many contractors experienced hardships in 2020, yet many are stronger today, and still some are striving to bounce back from the pandemic. The ability to stay flexible during periods of uncertainty provides valuable advantages.
With the COVID-19 pandemic testing business continuity plans and business processes, it’s important to capitalize on valuable lessons learned in making your business more resilient for tomorrow’s challenges. Being prepared for any new challenges will allow you to recover quickly. As the old adage goes: prepare for the worst and hope for the best.
If reviewing these tips for contractors leaves you questioning what your next move should be, Warren Averett’s trusted advisors can help. Contact your Warren Averett advisor today for guidance, or ask a member of the team to reach out to you.