Surviving the Economy
By: Wendy Ward
It is no secret that 2009 presented many challenges for members of the design and construction community. One of the best ways to develop ideas for how to weather an economic downturn is by speaking with those in the industry who have survived downturns in the past. A secondary theme to the 2009 TCA Annual Convention in Amelia Island, Fla., was “Don’t Waste a Good Recession.” We spoke with several industry leaders to get their perspective on the economic situation and tips for survival.
Architect’s Perspective:
Glen Stephens, president of SAA Architecture, LLC, offered his insights on how his firm is weathering the current economic conditions. For more than 30 years, SAA Architecture has been providing design services to the Mid-Atlantic region. The firm has offices in Laurel, Md., and Charlotte, N.C.
Q. How has the recession affected your firm?
A. With such a dramatic and sudden decrease in revenues, it appears more significant than my worst-case scenario planning. I am not aware of anything we could have done differently. We are reviewing all expenses and attempting to price the opportunities we have appropriately.
Q. What tough decisions have you had to make as a result of the economy?
A. We made employment adjustments early. We have a cooperative landlord; we relocated the firm to an older, less prestigious office space eight years ago when I first started to worry about the direction the economy was headed.
Q. How has your firm adapted to the changing market conditions?
A. We have made several changes, including:
- Reduced staff
- No administrative assistant
- Postponing capital expenses
- Eliminating anything we can do with out
Q. What are the biggest mistakes firms make in a tight economy?
A. Pricing work too cheaply, and not being diligent about collections.
Q. What marketing tactics have you utilized to differentiate your firm?
A. No idea what we could do differently!
Q. What are you doing to position your firm for the economic recovery?
A. Trying to survive and be there when whatever occurs, occurs.
Q. Have you started to see signs of economic recovery?
A. None — and we are in the Washington, D.C. area!
Contractor’s Perspective:
Randy Simmons, president of R.R. Simmons, recently spoke at the TCA Annual Convention in Amelia Island, Fla., on “Marketing Development During Economic Downturns.” He shares some of his thoughts regarding the economy. Simmons’ firm has been a design/ build solution provider in Tampa, Fla., since 1968. The firm has in-house design and construction professionals.
Q. How has the recession affected your firm?
A. Fortunately for us, our market held strong until late 2008. For others, the downturn has been far deeper and more difficult. Clearly, our 2009 has been much more of a challenge, but we are turning over a lot of rocks and trying to position our firm for a return to normal, whenever that occurs.
Q. What tough decisions have you had to make as a result of the economy?
A. We have managed to hold our key staff members, but not without managing our expenses tightly. The decisions we have made have been just smart business in tough times, not the more severe pain that many firms have had to endure. We have intentionally run a tight ship for this very reason. Having been through downturns over the past 42 years, we have a very conservative posture even in good times.
Q. How has your firm adapted to the changing market conditions?
A. We are clearly pursuing institutional work like most firms, even though this has been a small part of our general marketing approach. Our focus has been private sector and will be again. I do think, however, that we will continue to pursue smart opportunities in the public sector, even after the market corrects.
Q. What is the biggest mistake firms make in a tight economy?
A. Lingering in the mode of denial. When you think you see it slowing down, it has already swung to the negative. The mortality rate for firms sitting on debt will be through the roof. We are cash-oriented people and have always been so.
Q. What marketing tactics have you utilized to differentiate your firm?
A. As a design/builder, this gives us a bit of an edge to start with. The total accountability promise is far more attractive these days to firms. In most cases, the delivery is quicker and more affordable. Everyone is chasing the savings premise; design/ build provides the savings feedback much quicker in the process. One other approach we have taken is to reach out to the not-for-profit community. We are helping these groups extend their limited dollars by providing free consulting and planning. We feel this is a better investment in our community than chopping jobs.
Q. What are you doing to position your firm for the economic recovery?
A. I think Steven Covey said you need to “sharpen the saw.” We are examining and tuning our processes and products. While we have the luxury of the time, our entire staff is in an extensive training and research mode. Spending our time smartly is our best investment. Our industry does not conduct the R&D that many other industries do. We need to re-invent the construction industry in many ways. Tilt-Up is a prime example of this change — look at the impact this system has had. What if someone had not taken the time to do the leg work to make Tilt-Up the system it is today?
Q. Have you started to see signs of economic recovery?
A. We sense more than we are seeing; however, there are signs of momentum in the market. Commercial construction is going to be bumpy for a while, and we just need to come to grips with the issues and move on. However, it would appear that housing is starting to regain some strength. This is good for all of us.
Q. What lessons has the economic downturn taught you?
A. Never have your eggs in one basket. We are very thankful we never ventured into the condo market. This has taken down several good firms in our market. We need to make a stronger commitment to a higher percentage of public work going forward. This will never be our mainstay, but should represent a higher percentage than we have historically pursued.
Engineer’s Perspective:
David Tomasula, a principal at LJB Inc. and vice president of CON/ STEEL Tilt-Up Systems, reveals his thoughts on the current economic situation. CON/STEEL Tilt-Up Systems, a building program offered by LJB Inc., provides construction training services, marketing support and access to experienced engineering and design to an exclusive Alliance of pre-qualified general contractors and concrete contractors. CON/STEEL’s 35-year history of design-build experience includes 1,200 projects totaling more than 83 million square feet. LJB Inc. has offices in Ohio, Michigan and Missouri.
Q. How has the recession affected your firm?
A. By design of its shareholders, LJB is a diversified company, with three divisions – Facilities, Infrastructure, and Safety. The division most affected by the recession has been the Facilities division, which is heavily focused on providing services in support of new commercial construction. Facilities division revenue and, as a result, staffing are down in 2009 relative to 2008. The Infrastructure and Safety divisions have been able to maintain their revenues in 2009, driven by their public sector work. Even with the tough economy, though, the company is expecting to hit 2009 financial goals.
Q. What tough decisions have you had to make as a result of the economy?
A. Being a professional service firm, we understand that what distinguishes LJB is the quality of our people. So, the toughest decisions have been the ones involving people. Specifically, in order to get staffing levels and capacity in line with workload (both current and projected), it was necessary for the Facilities division to reduce staff levels by approximately 25 percent earlier this year. LJB has always been able, in the past, to maintain our staffing levels with cross-training and internally shifting staff resources during down market conditions. Without clear indicators that the commercial construction industry is about to start growing again, though, we knew that tough staffing decisions had to be made.
Q. How has your firm adapted to the changing market conditions?
A. For the Facilities division, we are responding to the market conditions by changing how we are bundling and selling our services, and as a result, we are able to make our firm attractive to a wider range of clients. In the past, we had a “one-size fits all” approach to the commercial construction industry, and focused on a very specific customer profile. We had enough of these specific customers to keep our pipeline full, such that we did not have to sell to customers that did not fit the profile. We have realized that there is a much wider market of clients who would derive benefits from our services – and we have developed unique sales strategies for each client type. By casting our net wider with varied offerings, we are starting to win work from clients who were not targets in the past.
We also have focused on being a more proactive sales organization, rather than a reactive sales organization. Again, in the past, we have been able to keep our pipeline full simply by reacting to clients who called on us, i.e. waiting for the phone to ring. Since mid-year, we have been actively prospecting and recruiting new clients in targeted markets where we have a strong value proposition.
Q. What is the biggest mistake firms make in a tight economy?
A. With fewer opportunities in the commercial construction market, we all understand that there are more competitors for fewer projects. I think that the biggest mistake firms make, though, is to cut their prices and to compete solely on price in an effort to win these highly contested projects.
In a tight economy, building owners have less money at their disposal – meaning they cannot afford to make a mistake with their purchase. Rather than competing on price, I think that firms should continue to focus on the value they bring to a project – including providing assurances to owners that their money is being well spent. The focus should be on selling the benefits that your firm brings to a project – even if that means that the price is higher.
I think the other mistake that firms make is to stop selling, period. It is important that firms stay relevant in the minds of customers, so you get consideration when an opportunity does arise. Our Facilities division has continued to promote our CON/ STEEL Building Program at the World of Concrete and the TCA Annual Convention, even though we are in a tight economy.
Q. What marketing tactics have you utilized to differentiate your firm?
A. For the Facilities division, we have relied upon our industry involvement in TCA and ACI to distinguish our firm as a leader in the Tilt-Up industry. LJB has staff on the TCA board, the ACI 551 committees and the ACI C-650 committee.
Q. What are you doing to position your firm for the economic recovery?
A. Each division within LJB has a strategic business plan with growth goals through the end of 2013. Although we are being careful on the operational side of the business to make sure our staffing is consistent with our workload, we will be actively prospecting and recruiting new clients in 2010 – knowing that these new clients will be essential for achieving growth goals in 2011, 2012 and 2013.
So, in a nutshell, we are continuing to commit resources (time and money) to following our strategic business plan.
Q. Have you started to see signs of economic recovery?
A. We have not seen any broad-based signs of recovery. However, our Facilities division has clients nationwide and internationally, so we have experienced pockets of good news (such as a new speculative or office facility) that would indicate localized signs of recovery.
Q. What lessons has the economic downturn taught you?
A. The downturn has taught me not to be complacent with the status quo. Even when work is abundant, it is necessary to have a plan for the future, and then to continue to work that plan. I believe that those firms who planned for the future are in a better position to survive, and possibly thrive, during the downturn – and will be in a position to capitalize when the economy does recover. Fortunately, the senior leadership at LJB had plans to build a diversified company that relied upon a mix of public- and private-sector work, which has allowed our company to remain profitable even with the shrinking commercial construction market.
Engineer’s Perspective:
Craig Olson, P.E. and project engineer at C.E. Doyle, offered some viewpoints on today’s changing marketplace. C.E. Doyle is a full-service design/build contractor specializing in Tilt-Up, masonry and steel construction. Founded in 1974, C.E. Doyle has offices in Campbellsport, Wis.
Q. How has the recession affected your firm?
A. It has reduced sales volume by 25 percent for 2009. On the positive side, it has allowed time for evaluation of our day-to-day operations and an opportunity to make changes that can be more effectively monitored.
Q. What tough decisions have you had to make as a result of the economy?
A. Reduction of staff and salary cuts. We also had to delay equipment purchases and choose a limited amount of technology upgrades in all areas of our business.
Q. How has your firm adapted to the changing market conditions?
A. We haven’t changed, but have used the time generated by the slowdown to explore other avenues of business.
Q. What is the biggest mistake firms make in a tight economy?
A. Laying low. While it is hard to spend money during a recession, it is also an excellent time to explore other opportunities and maximize marketing efforts. The biggest mistake is pricing work too low. Our market has seen pricing reduced by as much as 33 percent – well below costs.
Q. What marketing tactics have you utilized to differentiate your firm?
A. Same tactics, just a more personal approach. Along with direct mail, calls, e-mails, etc., we now arrange for face-to-face meetings to introduce our firm and services.
Q. What are you doing to position your firm for the economic recovery?
A. The slowdown in our day-to-day schedule has allowed time to explore and pursue more business with owners, general contractors, developers, etc.
Q. Have you started to see signs of economic recovery?
A. Not in our state [Wisconsin].
Q. What lessons has the economic downturn taught you?
A. We actually prepared for this. The lessons we learned in the early 1980s have proven very beneficial.
Global Associate’s Perspective:
Kimberly Corwin, business development manager at A.H. Harris & Sons, Inc., shares her thoughts on today’s economic challenges. Founded more than 90 years ago, A.H. Harris represents approximately 300 manufacturers and more than 3,500 products from more than 40 distribution centers in the New England, Mid- and South Atlantic regions. The firm serves the heavy and highway, commercial, industrial and residential markets, specializing in areas of Tilt-Up, concrete formwork and accessories, concrete repair and restoration, geotextiles and erosion control.
Q. How has the recession affected your firm?
A. Overall sales are down 30 percent. Gross margins are slipping. We also are seeing our Accounts Receivable extending.
Q. What tough decisions have you had to make as a result of the economy?
A. Last March we took a look at the year ahead, and we made all staffing cuts at once. We are operating flat and fast, and we can sustain the recession.
Q. How has your firm adapted to the changing market conditions?
A. We continue to look for opportunities, new customers, new geographies and new products/applications. We have spent time educating our people in green/sustainability as well as the repair/restoration market.
Q. What is the biggest mistake firms make in a tight economy?
A. Making multiple layoffs — it affects morale.
Q. What marketing tactics have you utilized to differentiate your firm?
A. We continue to look at growth opportunities and acquisitions. We continue to add value to our people and products through education.
Q. What are you doing to position your firm for the economic recovery?
A. We are developing a Government Project initiative. We are expanding our product offering to be available to the sectors to first recover. We are working closely with our customers to build partnerships for growth.
Q. Have you started to see signs of economic recovery?
A. Yes, we believe we are beginning to climb upward, although we feel margins will continue to be constricted.
Q. What lessons has the economic downturn taught you?
A. That markets and personnel should always be evaluated and tweaked. Don’t wait for a recession. Always continue to diversify and look for growth opportunities; you should never be content with status quo.
