{"id":9609,"date":"2021-08-09T09:31:33","date_gmt":"2021-08-09T15:31:33","guid":{"rendered":"https:\/\/www.shieldagency.com\/blog\/?p=9609"},"modified":"2025-01-22T14:27:48","modified_gmt":"2025-01-22T20:27:48","slug":"keeping-it-lean-6-strategies-for-contractors-to-help-reduce-overhead","status":"publish","type":"post","link":"https:\/\/www.shieldagency.com\/blog\/keeping-it-lean-6-strategies-for-contractors-to-help-reduce-overhead\/","title":{"rendered":"Keeping it lean: 6 strategies for contractors to help reduce overhead"},"content":{"rendered":"\n

Reduce Overhead | Business Insurance<\/a> | Get A Quote!<\/a><\/p>\n\n\n\n

Liberty Mutual<\/a> > Business Insurance<\/a> > Insights<\/a> > Keeping it lean: 6 strategies for contractors to help reduce overhead<\/p>\n\n\n\n

It\u2019s been a volatile year in the construction market. In March 2020, dozens of major cities and some entire states put a moratorium on construction to help reduce the spread of Covid-19. Meanwhile, hold-ups in the global supply chain drove up the cost of materials by as much as 80%.<\/a> Many businesses tabled their construction projects to prepare not only for a possible global recession but also for a fundamental change in the use of commercial real estate.<\/p>\n\n\n\n

For many contractors, this market turbulence has led to anxiety \u2013 and a temptation to chase business outside their normal territories or areas of expertise. But this is a mistake, according to Matthew Campbell, a Liberty Mutual Surety Plus underwriter specializing in the small to mid-size contractor space. Instead, he advises companies, \u201cif the market does not present itself, keep it lean.\u201d<\/p>\n\n\n\n

In this article, we\u2019ll dive into six strategies contractors can use to help get lean, avoid unnecessary risk, and survive an unpredictable market.<\/p>\n\n\n\n

6 strategies to \u201cget lean\u201d and reduce overhead<\/h2>\n\n\n\n

Since March 2020, we\u2019ve seen a steady decline in non-residential construction spending, and current indices suggest that the slowdown of work will continue. Today\u2019s lean market is largely due to a volatile global economy, uncertainty about the future of commercial real estate, and anticipated corporate tax hikes under the Biden administration. And some construction markets have been hit harder than others. Hotels and lodging, for example, have seen a more than 25% decrease in growth in the last year<\/a>. Many companies stayed afloat by relying on backlogs, but even those are drying up after a year of pandemic.<\/p>\n\n\n\n

Rather than diving into risky projects, Campbell and the surety team recommend taking a leaner approach, focused around these six strategies:<\/p>\n\n\n\n

Reflect on compensation structure<\/strong><\/h3>\n\n\n\n

The cost of labor is a huge expense for many contractors, particularly if they offer employees healthcare and other benefits. It might make sense to take a different approach to your compensation structure during lean times, particularly if your team doesn\u2019t have a lot of work on their plates.<\/p>\n\n\n\n

Paying employees a lower fixed or base salary and compensating them with bonuses or incentives is one strategy to reduce labor costs. With this model, you still compensate employees for their hard work, but it costs the company less during slower periods.<\/p>\n\n\n\n

If your business is really struggling, doing universal pay cuts across the board is also an option. Although this will be unpopular, it will feel more palatable if managers and leaders are also part of the plan. With slowdowns in the market, savvy contractors should consider what size labor force they really need to get the job done.<\/p>\n\n\n\n

Optimize your workforce<\/strong><\/h3>\n\n\n\n

Click here for the rest of the article<\/a>…<\/h3>\n\n\n\n
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More great articles!<\/h2>\n\n\n