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While we may have, thus far, avoided a recession in 2023, there are still signs of slowdown and significant economic uncertainty. And of course, few industries are hit harder by market uncertainty than construction.
Uncertainty is the bane of future planning.
The impact of economic uncertainty on construction planning
Today’s inflation rates are causing material and energy costs to skyrocket, as well as labor costs to climb — even as the amount of skilled labor shrinks. Rising fuel costs exacerbate ongoing supply chain issues and can lead to equipment shortages. Change orders, always frequent, become even more prevalent as owners themselves adapt to hard times.
It’s hard to plan work when you don’t exactly know what you’re working with. Does the business have the resources and equipment the project will need? Can it adjust if anything changes mid-project?
Be prepared: Equipping your business for downturns
The answer to dealing with economic uncertainty and downturns is to — as the scout motto goes — be prepared. Preparedness is the key to long-term sustainability and making it through hard times. But in an industry like construction, rife with uncontrollable variables, being prepared is incredibly challenging.
That’s not to say there aren’t several key steps you can take to ready yourself for whatever the future holds.
Establish a risk management framework
Even in more predictable times, having a formalized risk management strategy is vital to ensuring you maintain acceptable risk levels when taking on new projects. This includes monitoring risk levels and regularly conducting assessments, as well as closely monitoring revenue streams. Of course, monitoring and maintaining cash flow provides a cushion should financial times go south. It may go without saying but minimize rework and other costly inefficiencies to mitigate financial risks associated with them.
An AI-powered financial automation platform like Briq can help by providing both real-time details around cash flow and revenue, as well as historical data about what has worked financially in the past.
Strengthen financial management
Know where the business stands financially and have a clear picture of its health. Implement accurate budgeting and cash flow forecasting — based on financial data as close to real-time as possible. Practice defensive cost control measures, identifying processes and expenses that are costing more than they need to. There’s a lot of complexity in construction finance; work to drive that out through digitization and automation. Become proactive, not reactive solving financial issues before they become a problem.
Know your numbers
Eliminate guesswork and gut decisions with accurate, real-time numbers. Automate data and processes so reporting can be done faster, improving accuracy. When preparing for an uncertain tomorrow, last month’s data won’t cut it. Using Briq, construction businesses can generate reports more frequently with more accurate data, constantly monitoring for potential risk.
Invest in technology
While it may seem counterintuitive to spend money when you don’t know what’s on the horizon, it’s not when that investment helps you prepare for the future. Look for and embrace innovative technologies that improve efficiencies, streamline processes, minimize rework, and enhance collaboration — all of which make you better able to handle economic headwinds. Investigate AI and automation as ways to do all of the above, while reducing the workload on existing talent.
Be proactive: Get ahead of the curve to ensure success
Being prepared is the first step in weathering economic headwinds, if you’re prepared you can also take better advantage of the opportunities that lie ahead.
There are more than a few ways towards the journey to greater proactivity in your construction business. Some rely on the massive amounts of business data you already have at your fingertips; others require cultural change.
Use your data
By this point, it may seem like common sense but take advantage of the vast amount of data from the various projects in your portfolio. Pull it into a single source of truth and use AI-based analytics to review it for what’s working (and has in the past) and what is not (and hasn’t.)
Encourage a culture of innovation and adaptability within the organization. This needs to come from the top and requires a certain level of bravery and readiness to accept early failures. No one is going to look for ways to improve processes, drive out complexity, or find new efficiencies if they are afraid of being punished if it goes bad.
Keep on top
It’s a fast-moving, ever-changing world in construction and technology. AI technologies in particular feel like they are changing by the day. Part of being proactive is being informed, so when something happens you know it is coming. Read news articles and blogs, attend webinars, and meet with your network to stay informed on industry trends, emerging technologies, and market dynamics.
You can never eliminate the uncertainty from construction, it’s the nature of the business. But you can be prepared and proactive to reduce risk and make the most of opportunities ahead. As the old adage goes: you can’t direct the wind, but you can adjust your sails.
Want to find out more about the part Briq plays in helping your organization be prepared to take on whatever the future holds with confidence? Talk to the Briq team at briq.com/demo