7 ways to recession-proof your home improvement business
It’s been a tumultuous couple of years for business owners, particularly those in home improvement. In addition to labor and supply shortages and ongoing inflation, concerns about a looming recession continue to swirl.
As a home improvement provider, coping with the challenges an economic downturn can bring is part of the job. Although a recession is never a welcome event, you can take steps to keep your business afloat and even thriving. Use these helpful tips and tricks to ensure your company rides out any of the potential financial headwinds.
Prepare for cancellations
If you have a lot of projects in your pipeline, you may not be able to rely on that business when a recession hits. When money gets tight, customers may decide to delay or cancel planned renovations or repairs. Focus on strategies to keep up cash flow up if your backlog starts to disappear in a downturn. You might decide to focus on niche services that don’t have a lot of competition. Alternatively, you could broaden the type of work you do to reach more customers. For example, if your core business is roofing, consider expanding into siding, windows and doors.
Keep a close eye on your books
It’s always a best practice to know exactly how much money is going in and out of your business bank account, but in a recession, having a clear and accurate understanding of where your company’s finances stand is even more important. With rising material and labor costs, optimizing job expenses and overhead will improve profit margins. Up-to-date data on your finances will help you assess the situation and make needed changes to keep your account balance healthy.
Reduce non-essential expenses
Once you have a firm grip on your finances, start thinking about where you may be able to cut costs. Trimming the fat will allow you to have more cash on hand and some wiggle room if revenue begins to slow down.
Just like you might analyze your own bank account for recurring charges for products or services you don’t use (like that streaming service you keep forgetting to cancel), consider if your business subscribes to any publications, apps, software or professional organizations that aren’t being utilized.
Talk to your suppliers to see if you may be able to negotiate a better deal that serves both parties. As customer demand dwindles, you may want to pare back on materials as another savings strategy.
Don’t cut marketing
While cutting unnecessary costs can improve your bottom line, marketing is one expense you shouldn’t eliminate. Continue to advertise and market your business to ensure steady revenue. Because many companies make the mistake of cutting marketing in a downturn, holding steady may even help your business stand out more amid less competition. It also sends the message to potential customers that your business is strong and prepared to weather the storm.
Offer flexible financing options
Maintaining strong customer service will be essential for retention during an economic downturn. One of the best ways to do that is to put yourself in their shoes. Think about the challenges they may be facing and work to address them. For instance, your customers may be dealing with job loss and dwindling savings in a recession. These economic hardships may be holding them back from spending on home repairs and renovations.
Help them out by making your services more financially feasible with a variety of flexible financing options to accommodate different budgets and preferences. Your customers will remember your company’s willingness to work with them, fostering loyalty for the future.
Maintain high-quality work
An economic downturn is no time to rest on your laurels. Play to your strengths and ensure a consistent standard of work to maintain a good reputation, which will both keep happy customers coming back for more and increase the likelihood they’ll spread the word about your company’s good work. Get back to basics and prioritize the qualities homeowners value most — like high-quality work, honesty and transparency.
Show your staff you care
Your employees are one of your most important assets. When times are tough, make sure they know how much you value their contributions. Keep a strong company culture intact. Welcome staff feedback and listen to their concerns. When raises and bonuses may be tougher to dole out, consider non-monetary forms of compensation your employees may appreciate, like extra time off or flexible schedules. When business inevitably bounces back, you’ll be glad your most loyal employees are still there.
Make it through a recession rough patch with confidence
A recession poses a lot of difficult challenges for a business owner. But with the right strategies and priorities, your home improvement enterprise can weather the storm and ensure your company comes out the other side. When the economy inevitably rebounds, your business will be better than ever and primed to thrive.
Offer your customers the financing solutions they need.
Whether they’re weighing the costs of DIY vs. hiring a professional or comparing your services to the shop around the corner, homeowners have a lot of choices when it comes to home improvement projects. Your business needs to stand out from the pack to ensure you can compete.
Over the last few years, contractors and home improvement providers have faced a seemingly endless parade of challenges: supply chain issues, sky-high lumber costs, and heightened interest from homeowners looking to update their work-from-home spaces.
As the saying goes, it’s usually a good idea to expect the unexpected (or something of that nature). Nowhere can that ring truer than in the world of home improvement projects.