While businesses in many sectors experience ebbs and flows, in the contracting world it’s a foregone conclusion that boom times will be followed by some belt-tightening. In fact, a substantial drop in demand is so predictable, that it even has its own label: “the slow season.”
As such, just as how wise farmers realize that the time to start adjusting for winter is when the faintest chill is in the air vs. when inches of snow cover the ground, successful contractors know — or need to know, if they aim to survive and thrive — that intelligently preparing for the slow season is arguably the most critical effort they’ll make all year.
Unfortunately, many hard-working and highly-skilled contractors — particularly those who are newer to the field — make one, some, or quite often each of these four major mistakes when preparing for slow season:
Not only is disappearing from the marketplace radar a mistake as slow season approaches, but it can be fatal because that’s when contractors have the greatest opportunity to generate brand visibility. When they “plant seeds” through marketing that start to grow for a few months, they’ll be ready to take on new clientele when needs for their services increase again!
Many contractors downsize as slow season approaches — such as reducing the size of their operations team, or letting some of their project managers go. While this is understandable and typically doesn’t take anyone by surprise, just like all other businesses contractors should have a legitimate offboarding process that involves exit interviews. This can reveal valuable insights related to recruiting, retention and performance management.
What’s more, this pleasant discussion can make a positive impression on outgoing staff, and incentivize them to join the roster in a few months when demand spikes.
Every contractor knows that repeat business and word-of-mouth referrals are both essential for survival and success. However, as demand starts to dip and contractors have more time on their hands, many of them fail to use this opportunity to reconnect and check-in with existing customers. While an in-person visit is ideal (though perhaps impractical), even a phone call or hand-written letter can make a lasting positive impact — and translate into more revenues and referrals in the months ahead.
Contractors know that capacity and profitability are connected; i.e. the more they can offer and the faster they can offer it, the more revenue they’ll generate. Yet, many contractors don’t make strategic investments as slow season approaches, because they have limited working capital and want to preserve as much as they can.
However, a consequence of this decision is that contractors are either obligated to make strategic investments during busy season — when vendor and supplier prices are usually at their highest and selection is at its most limited — or, more often, they neglect to make investments during busy season because their attention is consumed by open projects and an ever-growing task list.
The way out of this vicious cycle is for contractors to increase — rather than preserve — their working capital as slow season approaches, so they have maximum leverage (cost, choice and time) when making strategic investments. Then when busy season resumes, the enlarged capacity and resulting profitability will more than offset the total cost of borrowing. It may even happen with a single project!
As the old saying goes, you have to spend money to make money, and the approaching slow season is, quite surprisingly to many contractors, the best time of year to illustrate this business truth.
Where does the money come from to maintain your marketing, reach out to customers and make investments when you don’t have any work for the season? Taking out a traditional business loan saddles you with monthly payments you might not be able to handle. But with a line of credit, you only have to pay for the funding you use. This gives you the freedom to draw out small amounts for various business needs, including basic costs, with no long-term loan payments cutting into your cash flow.
When you apply through an alternative lender like National, you can get fast access to a credit line, without slogging through a complicated application process. You may also be able to qualify for a larger credit limit with lower rates than you’d get with a business credit card if your overall financial standing is good.
Smart contractors don’t limit themselves to seasonal outdoor construction or landscaping jobs. Instead, they go where the work is no matter the weather. Customers need help with indoor tasks, too, like remodeling rooms and upgrading business locations. Leverage your team’s talent to offer interior design and construction services, or brave the elements to plow and shovel snow.
If you’re in an area where people use wood furnaces or fireplaces for supplemental heat in the winter, consider putting your equipment to work making firewood deliveries. You can even have a little fun during the holiday season helping people put up elaborate Christmas light displays.
This is one of the reasons why you should stay in touch with your customers all year. When you maintain connections, it’s easy to reach out and ask what services they need that you might be able to provide during the winter months. They’re more likely to hire you instead of an unfamiliar company because they know you can be trusted to do a good job.
To learn more about increasing your working capital as slow season approaches — so you can position your contracting business for measurable growth and profitability in the months and years ahead — contact the National Business Capital team today or fill out our two minute application. We proudly support contractors across the country through business lending and business line of credit opportunities so that you can weather a slow season or capitalize on a busy season!
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Megan Capobianco is the Marketing Manager at National Business Capital & Services. Megan is passionate about helping business owners along their journey - providing them with relevant content they can use in their day-to-day operations.