Many in residential construction are beginning to see the economic sun set a little earlier these days.
Now is definitely the time to make sure your conversions are at peak efficiency, or as close to peak as possible. You also must do everything you can to trim excesses ― without losing key assets, people or product. Non-productive people also must either become productive or be given the opportunity to join your competition.
This also is a time for bargains — to obtain the things that you need for your business like a Bobcat to backfill your jobs, for instance, rather than having to wait for your dirt contractor to become available.
In this economic environment, you may be tempted to diversify your business. Bargain-priced businesses are out there ready to be acquired, but be very careful.
Trying to diversify during economic hard times is like scavenging — if you find something be careful it’s not rotten and don’t let it poison your operation. You can get a good bargain, but don’t make that move at the expense or health of your main ride.
Diversifying is something you should only consider undertaking when your core business is good ― when your business is kicking off more money than you need for operations and when you have more than enough “reserve capacity.” (Reserve capacity — that’s what I would tell people I had plenty of when they asked me if I was busy. I would tell them I was enjoying some “reserve capacity.”)
Do You Have What It Takes to Diversify?
When I wrote The NAHB University of Housing course on diversification, I made a very real case that anyone who is considering diversifying their business should first evaluate their talent, preparedness and readiness for seeking a diversified line of business.
Do you have the funds that the new venture will take to get started? Can you and the people who are part of your core company spare the time it will take to buy into and administer the new program?
That business venture you are considering may seem like a bargain right now, but look beyond its price tag and consider the full investment you will have to make. When things are tightening up, as they are now, may not be the best time to venture into uncharted waters.
The NAHB University of Housing course I wrote on diversification does a fair job on helping you decide how suited you might be to expanding your business into other areas. You actually can get a glimpse into your potential by measuring your Diversification Quotient.
One thing is for certain, however. If your core business is doing well ― giving you an excellent return on your investment — make sure you have a good reason for looking elsewhere rather than improving what you have.
Also, if you’re making so much money that you are embarrassed by your riches, send some of it to me. I’ll make your apologies for you.
MM “Mike” Weiss, CGR, CAPS, CGB, GMB, has been a full-service remodeler for more than 25 years and is a past chairman of the Remodelors™ Council of NAHB. Weiss tours the country teaching both CGR and CAPS courses to hundreds of professional remodelers a year. For more information, e-mail Mike@WeissRCMI.com.