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Surviving The Next Recession

 
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Old 03-05-2019, 11:44 PM   #21
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Re: Surviving The Next Recession


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vacations & scheduled down time are extremely important to maintain your mental health & perspective.

so long as you didn't mortgage the farm, aka afford it, you need to do it...

it is VERY important to get a break from work. including stay at home and just kicking it....
I almost pulled the trigger on a trip to Hawaii in 2009. Glad I didn't because the bottom dropped out for me shortly thereafter. I don't know what I was thinking but I was stressed out bad. I probably saved at least 10 grand which I was going to need later.

I still have dreams at night that I am there.
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Old 03-06-2019, 07:09 AM   #22
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Re: Surviving The Next Recession


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Hey guys,

Everyone keeps talking about the next recession coming and it seems like it has been 1-2 years away for about 4 years now...

That being said, it's going to hit eventually. For those of you that were in business during the last one. How did you make it through?

I think the obvious things are to horde cash and do good work.

But... how did your company survive?

I was working for another company at the time and they did a myriad of things. Number one being layoffs. But the upper management took pay cuts, no bonuses, no raises, no 401k contribution, smaller profit target and sometimes break even. But they were a large construction outfit ($350 million a year at the time) What do the 1 and 2 or even 10 guy companies do?

“Have a wife who makes a lot of money.”
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Old 03-06-2019, 07:22 AM   #23
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Re: Surviving The Next Recession


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ďHave a wife who makes a lot of money.Ē
Being able to live on only one of your incomes sure makes life a lot easier.
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Old 03-06-2019, 09:46 AM   #24
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Re: Surviving The Next Recession


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Grants Pass
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Old 03-06-2019, 09:57 AM   #25
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Re: Surviving The Next Recession


Our business dropped by 2/3 when the 2008-9 recession hit. Went from more than we could handle, booming business to very limited work available to do.

Luckily, we carried no debt and had plenty of cash reserves. Just tightened up the overhead, eliminated any unnecessary positions, cut all unnecessary spending, and got what work we could get.

I'm not a fan of getting down in the ditch and working cheap, competing against all of the guys that the recession is going to break. Instead we self perform more of the projects, doing some items we may have normally subbed out, to keep our guys working.

These slow times are a great time to improve your relationship with your regular active clients by overwhelming them with great service, doing more lunches and entertainment, etc. Also a good time to work on sharpening your tools; better marketing and advertising programs, estimating systems, personnel training, cost control systems, etc. If you've got the cash you can also do overdue remodeling to your own facilities, rework and paint equipment, etc.
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Old 03-06-2019, 07:34 PM   #26
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Re: Surviving The Next Recession


There's been lots of talk on this subject because this is a very long run we've had, almost 11 years. It was a 100 year storm. History repeats itself and it rivaled the crash of 1929. Not all recessions are created equal though. I don't see this next one being as impactful. The amount of wealth lost in 2008 was estimated around $16 trillion. We have reached that level again which is why there's so much talk around the subject.
Certain things incentivize growth, when the fed makes changes the economy reacts. Keep an eye on the money and react accordingly.

"He who lives by the crystal ball will eat shattered glass."
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Old 03-06-2019, 09:06 PM   #27
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Re: Surviving The Next Recession


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There's been lots of talk on this subject because this is a very long run we've had, almost 11 years. It was a 100 year storm. History repeats itself and it rivaled the crash of 1929. Not all recessions are created equal though. I don't see this next one being as impactful. The amount of wealth lost in 2008 was estimated around $16 trillion. We have reached that level again which is why there's so much talk around the subject.

Certain things incentivize growth, when the fed makes changes the economy reacts. Keep an eye on the money and react accordingly.



"He who lives by the crystal ball will eat shattered glass."


The amount of wealth lost in 2008 was gained on a lot on false pretense. The commutity reinvestment act of 1979 not only forced banks to give loans to unqualified people it was seen as opportunity by Wallstreet.

There's a huge difference in the loans today than in 2008.


Mike.
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Old 03-06-2019, 09:08 PM   #28
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Re: Surviving The Next Recession


There were people buying homes with the intention of drawing out all the equity and walking away. 25 year old kids driving around in exotic cars.


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Old 03-06-2019, 09:13 PM   #29
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Re: Surviving The Next Recession


They arenít giving anyone with a pulse a mortgage nowadays. My sister is trying to buy a house. The type of mortgage she was approved for denied the loan since the septic was 49 feet from the well not the required 50. The vibe I get out there is people are very optimistic.


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Old 03-06-2019, 09:19 PM   #30
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Re: Surviving The Next Recession


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They arenít giving anyone with a pulse a mortgage nowadays. My sister is trying to buy a house. The type of mortgage she was approved for denied the loan since the septic was 49 feet from the well not the required 50. The vibe I get out there is people are very optimistic.


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There's many out there that need to paint the picture bleak for obvious reasons.


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Old 03-06-2019, 10:53 PM   #31
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Re: Surviving The Next Recession


It's really as simple as the banks tightening credit. A flip of the switch.
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Old 03-06-2019, 11:02 PM   #32
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Re: Surviving The Next Recession


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It's really as simple as the banks tightening credit. A flip of the switch.
So,......if you own a bank you're in great shape

If you owe one.....not so much

We saw that play out last time
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Old 03-07-2019, 11:39 AM   #33
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Re: Surviving The Next Recession


I am as prepared as I can be for the next recession, which will come in the next year or two in my opinion. Like fish said, it is due.

I know I will lose quite a bit of money in the first 6 months while I get things scaled-back and control overhead. Lifestyle will change a little bit, but that's not terrible.

Last recession we were doing repairs and small bathroom remodels Etc. So it is not as bad when you have two or three or four guys to keep busy and overhead that matches. I will net work very hard, push all my contacts, go after small remodel projects that we had turned down for years, put all sales skills towards any job including $25,000 range stuff just like if it was a custom home , and stack as many of them as I can while still promoting construction hopefully through the Parade of Homes. If I have one decent project a year I can still stay out there and Market. If you are complacent you will lose market share and you will be overtaken by the better competition. I do not plan to be part of that group.

I also watch my bonding ability, and I have some pretty good contacts for going after Municipal projects throughout the region, and a great contact to do all the front side paperwork and get us in a kill position to get the job.

The biggest thing is to not lose your Edge no matter what. I just went through a spell where I lost six new homes in a row, and was to the point where I was 6 weeks from finishing one project and eight weeks from finishing another. After 6 weeks that would be losing about $10,000 a month in overhead, after 8 weeks I'd be losing close to 20,000.

So it's pretty easy to put your balls in the jar on top of the refrigerator and lower your prices to get the work and justify it to yourself. I did not do that and I'm glad I didn't, I've signed up plenty of work since, just in the last few weeks, and I kept my prices the same.

It all involves risk though, you could not get another set of plans for 6 months after losing that six in a row if it is a bad recession. Timing and a little bit of luck is needed to know when to start scaling back prices to pay overhead and keep the guys moving. I agree with Griz, stay moving no matter what, if you give a stagnant it's like being a shark you'll sink. Unless you're Mike and you can just play golf, smoke expensive cigars and go to Europe on vacation while you are waiting for the Market to return. LOL. We call that going dormant. LOL

All part of the game. It's not all sunshine and roses and if it was everyone would survive recessions. They are needed to call the herd, correct pricing ect... although there are plenty of douchebag Replacements after recession. LOL

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Old 03-07-2019, 03:18 PM   #34
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Re: Surviving The Next Recession


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it all depends on your reputation & what kind (types) of work you can do.

RETIRING debt
and SAVING as much as you can is a HUGE factor.
FIFY... Better to enter a recession with the slate clean and as much cash on hand as possible for equipment purchases or investing...

Don't have 3-6 months of Capital Reserves, Emergency Fund, and Equipment Fund? Now's the best time to work on getting them funded...


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Originally Posted by griz View Post
recession(s), down turns whatever you call them did not bother me much.

however, i knew several guys who went broke.

truck asses, with big houses & big mortgages, expensive equipment that wasn't paid for, credit card debt & lots of toys that were not paid for....

and don't forget fancy car for the wife and a cowboy cadillac they drove around in....
The "employees" you can't lay off or fire until a specific time... for some reason, the banks still want to get paid no matter the state of the economy...

The way I look at it is if you think there's a coming recession in the short term, plan for it by putting yourself in a position to make it through unscathed by kicking it in gear, live beneath your means, and retire debt... even if you don't think a recession is coming short term, follow the same path, as it will just put you in a better position when it does...

Not something you necessarily need to know Griz, but for others who may not be taking advantage of the current economic conditions, so your post was handy...

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Old 03-07-2019, 03:37 PM   #35
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Re: Surviving The Next Recession


Something else I think causes me to have pretty good feeling of security versus a lot of contractors that are my peers is that I can actually build houses. I'm quite good at it actually. With the people we have on staff right now we could consistently build parade of homes quality best craftsmanship stuff ourselves and may not make as much money as we are when it's booming but we will still make a living.

Wide range of skills is important to me. We can weld (and have a work barge to build/repair boat docks), do retaining walls and concrete (have the forms and equipment) any manner of repairs, framing/siding/windows/doors, custom trim and cabinets, decks ect... and draw full sets of architectural plans for any of the above

The local handyman/small project guys who love me now because I refer them stuff all the time would hate me because I'd be at every mixer, social, ribbon cutting, council meeting ect... handing out cards for our "new maintenance and repair" division lol

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Old 03-07-2019, 05:22 PM   #36
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Re: Surviving The Next Recession


I am definitely in a better position this time around. The last one hit us later than most, and we had about 18 months where it was very lean. My top two GC's combined to give us a whopping $35000 worth of work for all of 2011. I was also paying tuition for our first daughter, had a mortgage, and was optimistic about how long the down turn would last.

This time, no mortgage, both kids graduated, and we moved into a community with lower taxes. We also have put ourselves into a better position by branching out a bit into insurance and remodel work. Prior to 2011, we were almost exclusively framing new homes. I think we have averaged about 2 new frames per year since the recession.
Still working with the two GC's primarily, but have a better network with more to fall back on now.
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Old 03-07-2019, 05:36 PM   #37
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Re: Surviving The Next Recession


Worst thing you can do is start cutting your prices to the bone. My dad always said if you're gonna go broke, you may as well be sitting on the river bank fishing, rather than going in every day busting your butt doing work that doesn't pay.
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Old 03-07-2019, 06:03 PM   #38
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Re: Surviving The Next Recession


We went from:
$500k in sales in 08
$300k 09
$250k 10
I took enough to pay my personal bills without dipping into any savings the whole time. My brother made more than me for many of those years. Lol.

We were doing jobs here and there. When you specialize and only do one thing youíre screwed. Especially, when you rely on volume. We Just road it out.

Iíve always kept overhead as low as possible thankfully. Never like more than one truck payment at a time. Why I like to put a big down payment down too. I prefer the lower monthly payment.


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Old 03-07-2019, 06:43 PM   #39
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Re: Surviving The Next Recession


I've never subscribed to the idea of sitting on the couch drinking beers rather than take low-paying work.

If low pay is all that's available, take it and work a few more hours each week. That way, you're not just draining the bank account, and you're keeping yourself out there highly visible for when the better jobs eventually come along. And they will.
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Old 03-07-2019, 07:13 PM   #40
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Re: Surviving The Next Recession


Depends on the situation for me. I will absolutely be slower then I should be and not lower my prices to keep the price Integrity in place.

I've also done what I've called buying a job, and desperate times, to keep a good crew in place. Only when I had really good prospects still on the horizon I just needed something to fill in. Otherwise it could be suicide, working 15 hours a day to do it. LOL

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