Although many countries are currently in the midst of an economic downturn due to the COVID-19 pandemic, this still may be the right time to launch a new business. After all, some companies famously launched during recessions, including FedEx and IBM.
There are quite a few advantages to starting your company in the construction industry during an economic downturn. These include such factors as a reduced amount of marketing competition, decreased recruiting costs, the ability to hire great talent, and access to less expensive raw materials.
If you’re interested in learning how to bring your new construction business idea to fruition amid a recession, check out the following five tips.
1. Find Your Niche
If you’re launching a business any time – but particularly during an economic downturn – you’ve got to be very specialized to ensure that you can capture a particular market, so you must appeal to a very well defined niche. You don’t necessarily have to invent that niche, but you should at least be able to adapt your idea to fill a particular category that you see.
For example, many construction firms have had to slow or halt production of certain structures due to a shortage of lumber prompted by the coronavirus. A business that is able to source and deliver lumber, repurpose wood or create lumber alternatives might find this to be the perfect niche to fill right now, with a built-in audience ready and waiting for its arrival.
In addition, some industrial buildings have changed their construction requests to meet the new requirements of COVID-19. As more companies want materials installed in their buildings that can be easily sanitized, it’s created a new market for things like anti-microbial door handle covers or shrink-wrap for bathroom doors. Companies that are considering launching these types of products may be able to find a niche in today’s market.
2. Go Lean When You Can
An economic downturn probably isn’t the right time for a heavily funded launch that allows you to make huge investments in all the bells and whistles. Instead, it’s a good time to go as lean as possible, investing your seed funds only in the items that are essential right now. Rather than buying a huge office space, perhaps you can work from home and bring on remote employees as you need them until your business grows to the point where you require a shared space.
This also means foregoing such things as expensive marketing campaigns. Instead, you can optimize your use of social media and organic marketing methods. You can also skip things like buying a company car and printing out all of your handbooks — instead, go digital to save money.
Keep in mind, however, that not everything can be done frugally, especially in the construction industry. Although your office space and marketing program can be operated on a shoestring, the same can’t be said about the tools needed to operate a job safely and efficiently.
The money you save on office paper and a company car can go toward essential areas like hiring competent team members, buying the best construction equipment and ensuring that you have all of the appropriate licenses and insurance policies that will protect your company.
3. Focus Fiercely on Customer Needs
If you are interested in starting a new construction business, it’s essential that you’ve confirmed that a market need exists for it. It’s not enough to simply assume that you’re offering something that people desire. Therefore, you must do your market research as much as possible to find out exactly what the customers need and how they will use it.
You can then build your business around that need and market it to the target audience that you’ve identified. And once you’ve got customers who are using your products, do everything you can to keep them happy.
Here’s why: You may have heard that it’s more expensive to acquire a new customer than it is to retain an existing one. If you’re wondering just how much more costly it is, you may be surprised by the answer. According to research from HubSpot, it can cost up to 25 times more to bring on a new customer than to hang on to the ones you already have. In addition, a five percent boost in your customer retention rate can boost your firm’s revenue by 25 to 95 percent.
The best way to ensure that you keep your customers happy is to frequently check in with them and ensure that their needs are being met. If they tell you they have a concern (or even a complaint) about your firm, listen carefully without getting defensive, and ensure them that you’ll get to the root of the problem and solve it for them. This creates a two-fold result: Customers stay with your firm, and then they tell other people about you, creating new business via referrals.
4. Outsource When Necessary
When you’re starting a business, one of the biggest investments of time and money can often be around hiring staff members to handle your back office services like finance, accounting, recruiting and HR. To save money, you can consider outsourcing those essential services. Although it’s helpful to have these resources in-house, outsourcing can actually help you boost your competitive edge and strengthen your business.
Here’s why: A 2019 study by Deloitte reports that 65 percent of businesses that use outsourced services say the biggest advantage of outsourcing is that it allows them to focus on core business functions. This means that while an outsourced business handles things like accounts receivable and payroll, the business owner can work on actually scaling the business.
Other advantages cited by Deloitte include reducing labor costs, solving capability issues, enhancing service quality and driving broader transformation, just to name a few.
Outsourcing these back-office functions can be particularly helpful for construction firms, which are often operating 24/7. Although you may not have an in-house employee who can answer labor law questions at midnight, many outsourced firms would have someone you can talk to at that hour.
In addition, you save money because you don’t have to buy the software, equipment and technology necessary for handling all of these functions.
5. Take Advantage of Reduced Competition
When a recession occurs, many companies halt their innovation pipelines to save money. This is what creates opportunities for new businesses to come in and capture market share. With reduced competition happening, you’ve got more opportunities to rise to the top of the industry.
Naturally, if you create a new market niche that’s popular, others will imitate your idea and try to enter the category once you’re established. But by that point, you’ve probably already got a leading position in the market, and you can use step three above to deploy customer services strategies that will allow you to hang on to that market-leading role.
Bonus Tip: Get Organized Before You Take the Leap
It’s never a good idea to start a business on a whim. If you’re thinking of launching a new construction company, do your research, create a business plan and identify what makes your firm unique and different. Planning is essential to ensuring that your company will thrive in today’s business environment.
This is a guest post from Ruby Sahiwal, the chairman of Escalon Services. The company provides all of the back-office services essential to maintaining a company, from CFO services to accounting, payroll and HR.