How Your Construction Business Can Survive and Thrive in a Recession Nextec Blog


“Inflation” and “recession” are two words businesses never want to utter when discussing the economy—and for good reason. In general terms, inflation brings higher prices for goods and services, while recession indicates a distressing downturn in economic activities, which affects the entire economy. Sadly, inflation reared its ugly head months ago and a possible recession may be hard on its heels.

 As a construction professional, you’re aware of what this possibility means, but is recession a sure thing? Well, it depends on who you ask.

 According to a recent article by For Construction Pros, Dodge Data & Analytics Chief Economist Richard Branch said during an online webinar that a recession for the construction industry is not guaranteed but that avoiding one “will require taking a narrow road.” Branch also said the potential recession would not be as severe as the “Great Recession of 2008.” Still, Branch is watching a few events that may cause a recession, including escalating tensions between Ukraine and Russia and between China and Taiwan, production cuts for OPEC and a potential rail strike.

 In a recent Forbes article, Senior Contributor Bill Conerly writes that “a recession is not absolutely certain but highly likely,” and that certain nonresidential construction sectors will do “better or worse than the aggregate based on their microeconomic conditions.” Conerly notes that commercial construction has been growing since the summer of 2020, spending on power plants has dropped, manufacturing construction is up 22%, office construction may shrink in 2023 and 2024, and more.

Altogether, it’s a bit of a mixed bag of good and bad news for the construction industry, but the fact is, sitting back and hoping for the best when economic indicators suggest a recession is likely not a wise strategy. Let’s look at how a recession could affect you as a construction professional and how modern cloud construction management software can help you during these uncertain economic times.

 How the Construction Industry is Impacted By a Recession

 A recession could bring a number of daunting challenges to the construction industry. A Construction Executive (CE) article examines the main recession pain points as explained by Anirban Basu, Chief Economist for Associated Builders and Contractors.

Basu’s pain points for construction contractors include:

  • Having to compete for work vs. enjoying high demand in a strong economy
  • Squeezed profit margins
  • Declining or stagnating construction input prices

 Basu also penned an article for the Construction Financial Management Association where he outlined a few other economic concerns, such as the Overall Confindex decline of 2.8 percent in the third quarter, labor shortages, limited availability of financing for projects, higher interest rates and the Financial Conditions sub-index decline of 8.2 percent over the last year.

 “The risk of global recession is elevated. The Federal Reserve remains committed to further slowing economic growth in an attempt to weed excess inflation out of the economy,” Basu writes. “[Supply chain disruptions are set to persist]. Those disruptions, combined with large-scale worker shortages, suggest that inflation will take a lengthy period to subside. All of this compromises the economic outlook.”

 Recession Preparedness with Construction Management ERP Software

 Though it’s obvious a recession adversely impacts construction businesses, with a solution like Acumatica Cloud ERP, you can prepare for an impending recession with the right cloud-based enterprise resource planning (ERP) software designed for the construction industry. Also known as construction ERP software or construction management ERP software, it’s a comprehensive business management tool that allows you to access real-time, synchronized data from every department. With this incredible visibility, you’re able to see how profitable—or not so profitable—your business is currently and how you can improve profitability and efficiency, even amidst industry uncertainty.

 Acumatica’s Cloud ERP solution allows you and your workers to access your vital business information on the go and provides financials, job cost accounting, project management, payroll, inventory, order management, service management, equipment management, route optimization, CRM (and more) capabilities, all packaged within a single system. Whether you’re dealing with opportunities, contracts, scope changes, budgets, job costs or schedules, you have everything you need at your fingertips.

 With this in mind, Acumatica’s Chief Revenue Officer, Sanket Akerkar, highlights six ways an ERP solution, such as Acumatica construction software, can help you prepare for a recession:

  1. Understand and prune or develop differing aspects of your business. ERP software can assist you in streamlining workflows, increasing efficiency and cutting costs.
  2. Pay off debts, and avoid new financial liabilities. Having access to accounting and financial data allows you to identify debts, pay them off, reduce expenses and build a cash reserve. According to Thomas C. Schliefer, PhD, “Cash is King” during this unsettled time. “For the duration of this disrupted market and potential for recession, move cash flow management to the top of your CFO’s priority list and leave it there.”
  3. Develop stable and sustainable access to capital. Akerkar writes, “Managing finances doesn’t stop at paying off debt and curtailing expenses. It also involves securing additional financing, such as a business line of credit. This ensures that you have access to short-term funding when unexpected expenses arise or when revenue streams dry up.” And he points out that an ERP solution with an integrated financial management module allows you to track activities, offer personalized reports and dashboards, and more, helping you simplify the application process.
  4. Diversify your sources of revenue. Don’t rely on a single source of revenue. Expand your reach using the data from your ERP system.
  5. Maintain a lower inventory. Inventory management functionality allows your ERP system to help you reduce your inventory load while ensuring you don’t short yourself in the long run.
  6. Build a culture of resilience. Finally, Ankerkar suggests you engage and communicate with your entire organization through your centralized ERP solution, thereby keeping your staff aware of what your plans are for getting through what is admittedly a very stressful experience. He writes, “Keeping employees informed through open communication, collaboration and visibility will not only keep them in the loop but also reassure them that you have a plan for riding out the economic storm.”

With the help of a construction-specific ERP solution, your business will not only survive but thrive during a recession. With over 28 years in ERP consulting and as a gold-certified Acumatica Cloud ERP implementation partner, NexTec Group is confident Acumatica can help you overcome potential economic challenges. Efficient and effective management, automated processes and a single source of truth via a fully integrated solution all add up to 360° visibility and critical cost savings that are so crucial in today’s (and tomorrow’s) economy.

 To learn more about NexTec and Acumatica, contact our experts with any questions or to schedule a live product demo. We’d love to chat.

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