Recession Ready: Preparing for Your Construction Business

As a construction business owner, you know that the economy can have a big impact on your business. When the economy is doing well, business is booming, and you can't keep up with the demand for your services. But when the economy takes a turn for the worse, construction projects are put on hold and revenue dries up. If you're not careful, a financial downturn can quickly put your business in jeopardy.


Fortunately, there are steps you can take to protect your business from a financial downturn. By taking some proactive measures now, you can tackle any economic downturn that comes your way. Here are some tips to help you get started.

Form an LLC 

It can be wise to register as an LLC. Doing so can provide legal protection for all involved in the business, and you’ll gain potential tax advantages. An LLC's flexible structure also gives entrepreneurs greater control over their assets and the ability to reinvest their profits back into the business. You may want to work with a formation service instead of doing the legwork on your own. 

Closely Monitor Revenue Projections

As a construction business owner, it's important to closely monitor revenue projections. This will help you identify potential problems early on so you can take corrective action before things get too out of hand. Make sure to review your revenue projections regularly and compare them to actual revenue numbers. This will give you a good idea of how your business is performing and whether or not you need to make any changes.

Keep a Close Eye on Your Spending

Many business owners focus on large expenses like equipment as being the culprits of draining cash, but it’s sometimes the small, everyday expenses that can lead to detriment. It’s a good idea to closely monitor your spending every time you hit the checkout line, whether you’re buying a pallet of lumber or lunch for the crew. Holding onto and tallying up every receipt is tricky. Instead, the best option is to use a mobile scanning app that lets you take a photo of your receipt using a smartphone so it uploads as a PDF. You can then save these files into a folder you reference at the end of each week to add up these incidentals. You can also email the PDFs to your accountant, who may be able to score you some tax deductions based on your spending.

Lessen Debt and Cut Costs

If your construction business is saddled with debt, now is the time to start paying it down. Interest payments can eat into your profits and make it difficult to stay above water during a financial downturn. In addition to reducing debt, you should also look for ways to cut costs. Evaluate all of your expenses and see if there are any areas where you can trim. For example, if you're renting office space that's larger than what you need, now would be a good time to downsize. Every little bit helps when it comes to protecting your business financially.

Build Up Cash Reserves

It's always a good idea to have cash reserves on hand in case of an emergency. During a financial downturn, cash reserves can be especially helpful in keeping your business afloat while revenue decreases. If possible, try to boost your cash reserves before things start getting tight. This will give you some breathing room if projects are put on hold or canceled altogether due to the economy.


Secure Additional Funding


A business loan can be an excellent way to secure the funding needed to stay in business. With a well-structured loan, entrepreneurs can use the funds to invest in equipment, inventory, or marketing and see significant returns on their investment. Keep in mind that when applying for a business loan, the lender will take into account your credit score. A good credit score will increase your chances of being approved for the loan and getting a lower interest rate.

Pay Close Attention to Job Estimates

One of the biggest challenges facing construction businesses is accurately estimating job costs. If job costs exceed estimates, it can lead to big problems down the road. To avoid this, take some time to review your estimating process. Make sure you're including all relevant costs in your estimates, such as materials, labor, and overhead. This will help ensure that job costs stay within budget and help improve your overall cash flow.


A financial downturn doesn't have to spell disaster for your construction business. By taking some proactive steps now, like closely monitoring revenue projections, watching your spending, and reducing debt, you can weather any economic storm that comes your way.

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