Defining the 'New Normal'

At the 2009 Associated Equipment Distributors (AED) Executive Forum, a couple different speakers mentioned the "new normal" as it applies to the construction market. While they were talking largely in terms of equipment sales, the concept of redefining what's normal can apply to other aspects of construction, as well. The challenge lies in recognizing and accepting the changes in the market and adjusting your business to accommodate them.

Many of you have already taken steps to rationalize your business - both in terms of equipment and personnel assets - to adjust to the decline in construction activity. The question now is: How low should you go? While certain market sectors are seeing signs of life, others aren't expected to see an upturn for months to come.

If you haven't already, it's time to take a good, hard look at the market outlook for your territory. How likely are you to see improvement in construction activity in the next six to 12 months? If you anticipate improvement, what types of construction (e.g., road building, public works, etc.) are likely to see the greatest volume? Do you have the crews, equipment and expertise to effectively bid on this or related work? Figure out what steps you need to take to be prepared, then be willing to rethink who you are as a company and whether you can, or can't, afford to tailor your business to the available work.

If flat or decreased construction activity appears to be the "new normal" in your territory, it could be time to make some tough choices. Should you downsize further to "right size" to the shrinking market? Or are there opportunities to expand into new territories? If so, what are the risks involved, and do you have the necessary resources to ensure successful market entry?

Construction equipment fleets in the U.S. are aging, and at some point, the cost to maintain certain equipment in your fleet will exceed the cost of a new purchase. What is your plan to replace them?

There is perhaps no better time to buy new equipment given current low prices, stimulus-based tax incentives and record-low interest rates. Yet, in order to obtain equipment, you may need to rethink not only how you finance it, but how you go about acquiring it.

While credit conditions have seen minimal improvement, your dealer or OEM rep may be able to help you find solutions that enable you to get the equipment you need. This may include helping you to find alternative financing sources, or exploring acquisition options such as leasing, rent-to-own, long-term rental with purchase option, etc. Suppliers are eager to move iron, so keep an open mind and be willing to get creative.

Of course, their eagerness can be a detriment, as well. As discussed at the forum, a number of dealers are focused only on survival. They may be willing to wheel and deal to get the sale, but make up for it by cutting back on service and parts support. The best dealers, however, will work with you to provide reasonable pricing and quality service and parts availability.

So where does your dealer fit in this scenario? If it falls under the first description, it may be time to find another equipment supplier. In this new market environment, you can't afford to be shortchanged on service or parts when they're needed most.

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