How To Build During a Recession
A recession can pose challenges for everyone, including homeowners, businesses and contractors. People looking to build or renovate a home may be experiencing more stress as the U.S. prepares for a recession and prices keep increasing.
If you want to renovate or build but are worried about the rumors of a looming recession, this guide can help walk you through the most important things you’ll need to know.
How Does a Recession Affect the Construction Industry?
Recessions affect every sector of the economy, and the construction industry is no exception. The construction industry is already experiencing material shortages, shipping delays, supply chain challenges and labor shortages from the COVID-19 pandemic. The potential for a recession could make these problems worse. Some of the ways a recession can affect construction companies include:
- Project security: A recession can result in a more competitive bid environment for construction companies. Customers are likely to put projects on hold to measure prices and market conditions. It will likely be cheaper for customers to build during a recession as construction companies submit lower bids to encourage them to build. Since recessions typically bring fewer jobs and rising costs, project security can become a problem for many construction companies.
- Labor: A recession often results in job loss for numerous people, especially in smaller companies where these businesses don’t have the capital to diversify. Since companies will take on many projects at a lower price than usual, some workers may leave the construction industry to avoid a pay drop.
- Finances: Since fewer clients are looking to complete projects during a recession, many construction companies will experience challenges in their cash flow. Many contractors will be forced to take on projects at a lower price than usual to maintain a cash flow that keeps them afloat during a recession. As a result, construction costs in a recession often go down for consumers but not for contractors.
- Supply chain: Every industry is struggling with the supply chain, including construction. A recession could worsen the supply chain situation, especially if it hits the trucking industry hard. Construction companies may have difficulty getting the necessary supplies to complete their projects.
Why You Should Build or Renovate During a Recession
Many people’s budgets get tight during a recession. People can’t spend as much on new business ventures, forcing them to find ways to continue their growth without hurting their budget. Renovating or building is an excellent way to keep a business growing since building costs often decrease during a recession.
A recession also often presents a greater availability of high-quality contractors as it limits how many people can afford new builds or renovations. While your ideal contractor may not have been available during the construction boom, a recession frequently opens up contractors’ schedules. Contractors are also more likely to offer competitive rates to get work and keep their construction crew busy and employed.
How to Tell if It’s Safe to Work With a Building Company During a Recession
Determining a construction company’s financial strength during a recession may seem challenging, especially without insider knowledge. However, a few red flags can reveal underlying problems with a construction company while you’re trying to build or renovate during a recession.
Below are three tips you can use to ensure the building company you’re working with is capable of withstanding a recession and completing your project. These tips can help you choose a construction company that can withstand a recession and won’t try to take advantage of you during these challenging times.
1. Perform Due Diligence With Pricing and Contracts
A building company’s pricing and contracts are one of the first signs that it can withstand a recession. Traditionally, consumers would request a quote or estimate from different contractors and compare the prices, choosing the one with the lowest price. However, making your selection by price alone can result in a disaster. Pricing construction work this way means you may hire the company most desperate to buy a job rather than one with experience, expertise, high-quality work, and a notable safety record.
Construction companies are currently working with positive cash flow. As long as they have more construction contracts than the previous year, they can lose money while still paying the bills and sustaining their operations. Building companies will only start to fail if their sales stagnate, which causes all operations to crash.
Keeping an eye on pricing and contracts is essential to reduce the risk of working with a company close to failing. Instead of automatically choosing the company with the lowest price, you should consider other variables, such as their reputation and the quality of their work.
2. Use Caution With Salespeople or Unusual Contracts
Stay objective when a construction company presents an estimate or figure range lower than another builder’s price. Highly skilled salespeople will do whatever it takes to retain customers. It’s vital to watch for building contracts that list specific allowances but lack specific details regarding what the contract includes.
A healthy amount of caution can help ensure you don’t sign a binding contract for anything you don’t want. Your contract should specify all the details of your deal with the construction company. If you receive a contract that uses overly general terms or has specific information hidden, you should consider looking for another company with more trustworthy practices.
3. Learn the Difference Between an Estimate and a Quote
While many people use the terms “estimate” and “quote” interchangeably, an estimate and a quote are usually two different prices.
Many companies can deliver an estimate in about 30 to 40 minutes. An estimate is the company’s best guest at a price, so you should only use an estimate as a general idea. It’s also best to assume that the estimate is low since many construction companies know that customers will choose the company with the lowest price.
On the other hand, a quote will tell you what the construction company actually intends to charge. Calculating all the material, labor and time components can take 30 to 40 hours but will typically give you a more accurate measure of the cost.
Trust Anslow-Bryant With Your Construction Projects
If you want to renovate or build during a recession, Anslow-Bryant is here to help. We’re a family-owned construction company with over 20 years of experience in the industry and numerous services to help projects reach completion. We’re commercial building contractors who do whatever it takes to ensure our clients are satisfied with their project outcome, making the building process as smooth and stress-free as possible.
We aim to help our clients save wherever possible, especially during a recession where prices keep increasing. You don’t have to stop your building goals because of a recession. Trust Anslow-Bryant to help you with your construction needs any time of the year. Contact us online or call us at 713-626-1216 today to learn what we can do for you!