Surviving The Economic Slowdown: Part Three

For more, see Part One, and Part Two, of this series. Look at your fixed costs! Another part of the equation is your fixed cost of doing business. What things do you need and what things can be postponed or eliminated from your ongoing cost of doing business? If you think your business volume will go down by 20% in the future, start cutting your overhead by 25% now. Cut more than you think you’ll need as profit margins will also go down in a tight economy. Start with your largest expenses first – your equipment, backhoes, forklifts, cranes and trucks. If you aren’t using them on the jobsites at least 24 to 32 hours every week, they’re costing you more money to own than they are making on the jobs. Sell what you don’t need and lease the equipment you need when you need it. Getting rid of that old unused equipment littering up your yard will free you to focus on getting more profitable business instead of keeping your equipment busy. Take a hard look at your management, supervision, administration, foreman, and field personnel. Now is the time to eliminate every “C” player, keep the “A’s” and warn the “B’s” they need to improve. As work slows, you will be able to replace poor workers with quality employees who will be readily available. Don’t accept less than the best now. It is an employer’s market so take advantage of it. Get your team together and let them help you reduce fixed expenses. State your goal to cut your fixed cost of doing business by 10%, 20% or more. Let them come up with ideas how to make it happen. By making cost reduction a team activity, everyone will help and feel a part of keeping your business running as costs go down. Be sure to look at every major cost items including job costs, production, benefits, training, receivables, payables, banking, insurance, and technology. George Hedley

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[Carl Anderson]

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