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On the recession and construction: Effective cost-cutting measures

Posted by Brian Eastwood | Mar 10, 2009 | 05:31am

We've written a lot lately on the recession and the construction industry. Given that this recession resembles a dark cave that are all navigating without a flashlight, thus making it impossible to see just how deep it goes, we expect to continue writing about it. To that end we have created a new blog category, the construction industry and the economy, to house all these posts.

Most of the focus lately has been on the US economic stimulus package, which aims to pours billions of dollars into public works construction. Some firms will undoubtedly benefit from the stimulus package. Many more will not. For contractors in the latter grouping, all is not lost. This is the time to take a hard look at your business and see what you can do to climb out of that cave.

Last week Associated Construction Publications ran a story listing 100 ways to cut costs in a down economy, ranging from getting rid of the "miscellaneous" account to looking into group medical coverage. (The list comes courtesy of Glenn Matteson, senior consultant with FMI Corporation.)

Just as important as the list of cost-cutting measures, though, is the way in which they are implemented. For starters, asking employees to brainstorm cost-saving ideas, and then offering rewards to those whose ideas save the most money, will go over a lot better than implementing cost-cutting measures on which workers had no input. In addition, tightening the belt needs to be part of a larger exercise, noted Associated Construction Publications:

[B]egin a systematic examination of your expenses in the office and in the field. Focus on structural improvements, such as reducing turnover, minimizing rework, consolidating overhead functions and increasing input from all of your employees.

As you embark on this larger exercise, you need to keep in mind that the ultimate goal is making your company stronger. All too often, Tim Davis of The Builder's Coach said in a blog post called Is your business growing or dying?, growth is associated with getting bigger rather than getting stronger. Streamlining standard businesses processes and, yes, looking for little ways to save money can have a significant impact on the bottom line -- and such tasks require a lot less effort than trying to build more houses with the same personnel.

Davis provided five specific tips for making your business stronger. Among them is using the downtime to create training manuals for everyday procedures such as closing a sale. That way, employees will feel more comfortable wearing several hats in lean times and will spend less time training new colleagues once business picks up again.

Ultimately, the same way of thinking that helps you save money at home -- brewing your own coffee, for example, or brown-bagging your lunch -- can help save money at the office. Your actions need not be drastic to make a difference.

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