How can I salvage my construction business?
After laying off all his employees, a builder in crisis seeks help from FSB.
Dear FSB: I've owned a small construction company for the past 15 years. The company frames houses for other builders in addition to building custom homes in Cleveland. Other builders have said Cleveland is out of work. For the last two years my business has steadily declined and I've been forced to lay off all my employees. I am now facing the possibility of folding the business. Before taking this step, is there anything I can do to salvage it?
- John Bennett, Imperial Construction Inc., North Royalton, OH
Dear John: Your experience is not uncommon. Residential construction is down nationwide - thanks, in part, to the credit crunch. According to a September report from McGraw-Hill Construction, a division of the McGraw-Hill Companies (Charts, Fortune 500), the residential building market across the country between January and August was down 25% over the same eight months in 2006.
Stephen Lechner, an engineering and construction industry expert at PricewaterhouseCoopers in San Francisco, advises residential contractors to broaden their horizons before folding or relocating. "Consider acting as a sub-contractor to bigger construction companies," he says. "They may be working on larger scale infrastructure projects that could open some doors."
The McGraw Hill report supports Lechner's suggestion. While the residential building sector is stumbling, the nonresidential building arena is gaining traction. The first eight months of 2007 yielded a 3% increase over those same months in 2006. As of August, year-to-date construction of non-residential buildings was up across categories, including stores (11%), offices (9%), and public buildings such as courthouses and detention facilities (19%).
If you can't find non-residential projects in the Cleveland area, start exploring the rest of the country. "The Southeast is an active market with a lot of big projects," says Lechner. "Right now there is a large building market in high tech and energy utilities plants, such as massive power generators."
For more insight, do a bit of digging on the web. You may want to start with Constructionbusinessowner.com, which suggests innovative ways to maximize business and, like FSB, has its own "Ask the Expert" column for industry-specific questions.