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When Times Are Tough

The housing industry is in another slump. This is nothing new to those of you who have been around for a few years (since the last slump). The housing industry is cyclical. If it is up, down times are ahead. Fortunately, the opposite also holds true. Believe it or not the causes of these events are beyond the scope of this article (as well as beyond my control).

The first and foremost goal is to survive the current downturn. Your second goal, however, should be to position your company to survive the next one. Anyone (just about anyone) can survive good times but it takes a well-managed, forward thinking company to survive when the inevitable downturn comes.

Your accountant, banker and a wide array of business planners can help you with managing your debt, equity, payroll, and other financial issues. But what about diversification, taking the knowledge, equipment, and expertise that you already have and applying it to other areas of the concrete industry?

Foundation contractors have at least two viable options for diversification. The first one is the commercial market. As is often the case, when the residential market is down, the commercial market is up – or at least steady. One advantage to commercial work is that you can get into it almost immediately. It’s a different world, but one in which you should be able to survive if you know the ins and outs. One of your first contacts should be a general contractor. Drive around and see what type of foundations are being constructed on commercial projects in your area. Find out who is building them. Many foundations on commercial structures are built using site-built wood forms. If that is the case, you can probably save the contractor some significant time and money – two benefits that go a long way in opening new doors.

Another early contact should be other CFA members who have already expanded to include commercial structures. There are some caveats to be aware of such as payment procedures and retainage. You will likely also be working on unique or one-of-a-kind projects. Design professionals such as architects and engineers are often involved. Unions may be an issue. Who better to lead you through the process than a fellow CFA member.

The CFA has added seminars to its regional and summer meetings dealing with issues relating to expanding into the commercial market. Look for the next one in your area and consider attending – if not, give us a call for people outside your geographical area who are involved in commercial projects.

A second opportunity is right at your fingertips – the above grade housing market. Those involved in the above grade market have a considerably greater piece of the housing pie available to them. They need fewer projects (and customers) to create the same revenue stream. However, this is not a market you can decide to get into on Monday and be working on your first house by Friday. It takes considerably more planning and preparation. The time to start the planning is now. If you do, there is a good chance you will have something in place by the time the next downturn occurs. If you start the process, don’t abandon it when the foundation market begins to improve – an easy trap to fall into.

There are ways to shorten the learning curve and perhaps the greatest of these is to network with a CFA/CHC contractor who has been there – who is doing above grade projects. Visit a job site or two, “bend their ear”, that’s one of the biggest benefits of a trade association. Find out what mistakes they made, what they would do different, what has worked and what hasn’t. You need to develop a relationship with a builder unless you are going to develop your own projects. Bring specialty subcontractors into your effort. Since you will be doing more of the project, you will need to develop a relationship with plumbing and electrical subcontractors and other specialty trades. Last but not least, get a project under your belt – and don’t expect to make money on that first job. There is a learning curve and a cost associated with it. If you expect the builder to pay for that experience, you will probably never get your first home (unless its your own). Consider it an investment. Also, the CHC will publish its manual on RCF above grade construction in the first quarter of 2007 – call the CFA to reserve your copy.

By planning now, you’ll be ready for the next market downturn.

Ed Sauter, Executive Director, CFA

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Concrete FACTS, a publication of the Concrete Foundations Association, is THE voice for residential concrete industry news, market intelligence, business strategies, technical solutions, product information, and other resources for professionals in the cast-in-place concrete industry. Subscriptions to Concrete FACTS is available to anyone involved or interested in the residential concrete industry as a service to your industry. Please contact CFA Headquarters to find out more about your free subscription or Email Us