Construction Informer

You just gotta love recessions. And if it’s called a depression, then so much the better. These are the times when all of our short sightedness is laid bare in the glaring light of “reality on planet earth.”

These are certainly not comforting words for the person who just lost a home or job, and certainly not for the person who lost a home and a job. Yet the handwriting for many was on the wall for a long time. Too much debt, too little savings, and a blind faith in others to make sure everything would turn out alright.

At the construction business level the same dynamics are at play. Companies that didn’t pay attention to how exposed they were are dying quick deaths. Others that didn’t modernize, find new efficiencies and broader customer bases are struggling. Still others are wringing their hands and fuming about how the economy has crumbled their dreams. The economy is really only the result of the collective actions of all the players interacting with it. So, it really isn’t the economy’s fault – it’s ours.

Yet, there are many construction businesses that are doing quite well. Over and over again we hear about how times like these actually end up making the survivors stronger and more resilient. These companies are taking advantage of low costs and stocking their larders with equipment, materials and supplies. They are adopting new technology that wrings out even more efficiency from their operations. And, they are carefully guarding their most valuable employees, while allowing those who haven’t been performing to find new interests with other employers.

So what’s to love about recessions, or depressions? They strip the value out of everything and cause us to scrutinize how we live, how we work, and just what we really value. They remind us of how tenuous our existence here is, and of how important it is for us to take responsibility for our own lives. And, they present opportunities that we might have missed otherwise.

If you’ve been paying attention there has been an ongoing consolidation trend in many business sectors. Communications, supermarkets, airlines, Internet media, construction materials suppliers and construction companies, just to name a few. There are a lot of reasons why one company would buy another but lately businesses are constantly searching for new efficiencies, new markets to serve, and frankly, they are doing buy-outs and take-overs just because they can. As markets tighten up business values sink for certain players making them attractive for buy-outs and take-overs.

Another factor affecting consolidation on a global basis are tighter margins resulting from intense global competition. And like it or not, global happenings are affecting local businesses and they are doing it in similar ways.

Andrew Spellman, an audit partner with Price Waterhouse Coopers, recently spelled out the three biggest issues facing the construction industry:

• Reduced demand in key sectors;
• Intense competition bringing pressure to bear not only on margins but also on contractual items like timetables and guarantees; and
• Attracting top performing professionals.

Spellman predicts the evolution of a few, very large firms with a group of smaller players serving niche markets. When I think about those niche markets I think about things like hospitals and medical facilities, education, energy, high-end residential and other construction activities that require a special knowledge base and finesse factor.

So as this new economy continues being born it would serve most players well to consider just where they fit into the larger picture. Is yours a business that is ripe for a buy out? Or, is yours one that could benefit from expansion through acquisition? If you are serving several markets now, but are seeing some of them drying up, is one of them a niche where you can differentiate yourself?  How much more efficient can you get? Where ever you fit, do you have the right people for now, and for future plans?

Knowing where you fit is an exercise in cold, hard deduction. It’s a matter of seeing your company like others might, but more importantly it’s a matter of seeing it for what it really is. Once you have the assessment you can use it to position yourself for much more than just survival.