So How's Business?

Are you better off today than you were four years ago? This was a predominant question leading up to the presidential election last month. Though it was intended to push voters toward a particular candidate, it’s also a valid question to ponder for your business as you look ahead to 2013. How does its performance compare to where it was when the recession hit? Have you regained any lost ground?

A lot of economic uncertainties remain as we close out 2012, yet it seems that we’re heading in the right direction. Housing is in the early phases of a turnaround, private construction activity appears to be gaining momentum and economists are increasingly optimist — assuming, of course, that the issues surrounding the fiscal cliff are addressed. Moving forward with that assumption, there is upward potential for a full-blown industry recovery within the foreseeable future. Pent-up demand in both private and public construction, and the need to repair a crumbling U.S. infrastructure, hold promise for the industry’s long-term outlook.

Whether your company will be in a position to capitalize on the recovery depends largely on its progress thus far. As we close out the year, it’s important to take a step back and perform an assessment to determine how far your business has come, and how far it still has to go.

•How has your business fared over the last four years? No one likes to look back on tough times. Yet, identifying the “bottom of the trough” will provide a baseline to gauge the company’s progress. Though few companies have returned to pre-recession peaks, incremental progress can be measured on a variety of levels — in annual sales volume, construction backlog, profit margin, booked business, etc.

Use this baseline to measure your successes, as well as identify those areas where little or no progress has been made. What weaknesses remain and how might they be addressed to overcome any shortcomings going forward? If the answers are unclear, consider bringing in an outside consultant to provide a more objective evaluation of your company’s position and options.

•How does booked business compare to this time last year? In the second half of 2012, pessimism centering on the fiscal cliff and its potential repercussions delayed major capital investments. Yet, there are a number of construction segments poised for expansion as we head into 2013.

If your booked business is slim at this point, look outside your historical project types and/or market territory to determine if there are opportunities elsewhere. Assess the risks, then determine whether you have the experience, personnel and equipment required to move the business in a different direction, if needed, to sustain profitability.

•How has your fleet held up? The average age of equipment in construction fleets climbed steadily during the recession, and O&O costs rose along with it. As your largest annual expenditure, it’s important to evaluate these costs to determine which machines have been eating away at profits via subpar performance, excessive maintenance and downtime or under utilization. Replace those you can and repair, rebuild or get rid of those you can’t. Disposing of dead-weight iron gets it out of the yard and off the books for a cleaner balance sheet.

Has your company historically used rental as a means to boost productivity, cut operating costs and/or obtain projects beyond the scope of your existing fleet? If not, evaluate whether this strategy could open doors for you in future.

Industry economists believe a construction recovery is on the near horizon. Assess your current position to determine if your business will be ready when it comes.

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