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Unleashing Potential_ Boosting Your Small Business Through Financial Literacy 468 313

Unleashing Potential_ Boosting Your Small Business Through Financial Literacy

Build Your Business on a Budget With These 10 Resources 468 312

Build Your Business on a Budget With These 10 Resources

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Build Your Business on a Budget With These 10 Resources (Opens in a PDF)
Article written by Thomas Walker

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A Recession Looms: Is Your Construction Business Prepared? 468 312

A Recession Looms: Is Your Construction Business Prepared?

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Lately, there’s been increasing speculation that we’re heading for an economic downturn. While the full extent of the damage is yet to be seen, small construction companies need to prepare for the worst. After all, construction is one of the first industries to feel the squeeze when a recession hits. So, how can you protect your business? By following these tips from Monica Rockwell, you can shore up your business and come out on the other side unscathed.

Limit Spending and Debt

One of the best things you can do to protect your business during a recession is to reduce your debt and cut costs wherever possible. This may mean postponing or canceling non-essential projects, renegotiating loans, or even downsizing your office space. Whatever it takes to save money, do it. Every little bit helps.

Be Careful With Revenue Projections

It’s also important to keep tabs on your revenue projections and adjust your spending accordingly. This may mean cutting back on advertising or delaying new hires until business picks back up. Whatever you do, don’t pull any money out of retirement accounts or take on additional debt to keep things afloat. Doing so will only make things worse in the long run.

Tighten Up on Job Cost Estimates

In construction, accuracy is key. That’s why it’s so important to accurately estimate job costs before starting any project. If you lowball your estimates, you’ll end up losing money on the job. If you overestimate, you’ll price yourself out of work. Either way, you’re in trouble. Take the time to do your homework and get your estimate right before breaking ground on any new project.

Build Up Your Cash

Another excellent way to recession-proof your business is by increasing your cash reserves. This will give you a cushion to fall back on if revenue starts to dip. You can build up your cash reserves by invoicing promptly and collecting payments as soon as they’re due. You may also want to consider selling off any non-essential assets, such as vehicles or equipment that you no longer use. Whatever you do, make sure you have enough cash on hand to cover 3-6 months’ worth of expenses. This will help ensure that you can continue operating even if times get tough.

Try to Keep Your Staff

Whenever possible, avoid layoffs, as they can have a negative effect on morale and productivity. If you do need to let people go, try offering early retirement packages or voluntary buyouts first. These will allow you to shed some overhead without disrupting your business too much. You may also want to consider reducing hours or implementing a hiring freeze until things improve. Again, doing whatever you can to avoid layoffs will help keep your business running smoothly during tough times.

Convert to a Corporation

It’s important to be tax-efficient in order to keep more of your hard-earned profits. One way to do this is to convert from an LLC to a corporation. Single-member LLCs are taxed as sole proprietorships or partnerships, which means that the business owner is personally responsible for paying taxes on the profits. In contrast, S corporations are taxed separately from their owners, which can provide significant tax savings. In addition, S-corps can take advantage of many deductions and credits that are not available to other business structures.

No one knows for sure how long this economic downturn will last or how bad it will get. What we do know is that small construction businesses need to be prepared for the worst. By following the tips above, you can protect your business and get through the lean times.

Monica Rockwell is a certified public accounting firm providing contract CFO services, certain attest services (compilation and review), consulting and accounting assistance. Reach out today to get started!