Seasonal lows are a common occurrence for most construction companies and managing cashflow can become difficult. Many factors, such as cold weather, ice, snow and even natural disasters can discourage any businessperson, and can also disrupt the progress of current construction projects. Despite this slowdown, construction companies are still responsible for paying for rent and operational costs all year round. Balancing this inconsistency may be difficult, but there are various strategies to follow to make up for any revenue disparity you may experience. These tips are designed to make sure businesses are never caught scrambling during quiet months, and provides alternative methods of income which can help pay the bills in the interim.
Negotiate with Suppliers
Although the need for supplies and equipment is year-round, some months are busier than others. To maximize your construction revenue, try negotiating with suppliers and settle on a payment method that best works for your business. Ask your supplier if you can work out a contract that allows you to pay them a lager sum during the busy months, and scale back payments during slower months. This arrangement will help keep your finances balanced throughout the year, allowing your business more flexibility during slower periods.
Sell, Don’t store Inventory
Another creative way to get around cashflow deficiencies is by reassessing your inventory management. If you notice a particular trend within your business where you can predict when the slower period will begin, you can start selling off building materials at a discounted price. This will generate some revenue during the slower months. More importantly, it eliminates the added costs associated with carrying or storing inventory. The combination of selling these materials, and reducing storage payments will prove to make up for some of the lost revenue you may be experiencing.
Generate new Revenue Streams
Rather than seeing downtime as a break from the business, consider looking at it in a different manner. Brainstorm other ways you can use your employees and their skills to fulfill other needs that you may not have tried before. For many companies, winter often brings a slowdown in business. For construction companies that are experiencing this, try shifting your focus to other construction trades and consider introducing other services. You can reach out to existing customers, seek new ones or do extra research and target a new geographic area. There are various ways to generate new revenue streams, all of which are dependent on the capabilities of your specific team. Offering new services or creating new types of teams can be the start of a new revenue stream, even if it only operates a few months in the year.
Cashflow Management Tools
As most in the construction industry know, late payments from clients can leave you unable to pay your own bills and expenses. If you find that this is a common occurrence, consider adopting a cashflow management tool to help advance payments on outstanding invoices. Gaining better control of your finances and keeping better track of billing and payment cycles will significantly impact the profitability of your company. Work with your customers to create a payment plan that benefits both parties. Even small, incremental payments can help overcome temporary cashflow gaps and can help sustain the business, even during the slowest of months.