While we do not necessarily know if the nation is about to head into a recession, it is always a good idea to be prepared and that includes any home improvement work you may be or plan on doing. But the first thing you need to know is if your contractor will make it through tough economic times.
There have been as many as 48 recessions in the United States dating back to the Articles of Confederation, and although economists and historians dispute certain 19th-century recessions, the consensus view among economists and historians is that “the cyclical volatility of GDP and unemployment was greater before the Great Depression than it has been since the end of World War II.” Cycles in the country’s agricultural production, industrial production, consumption, business investment and the health of the banking industry contribute to these declines. Since the Great Depression, the National Bureau of Economic Research (NBER) has identified 12 recessions in the United States. The NBER defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production and wholesale-retail sales.”
The home improvement industry is cyclical, and recessions are a normal part of the cycle. In fact, the home improvement industry has been through several recessions in recent years, including the Great Recession of 2008-2009. So, what does this mean for your contractor? Will they make it through the recession?
Find your answers here.
What are the factors?
The answer is, “it depends.” Several factors will affect whether or not your contractor makes it through the recession, including:
- The size of the contractor’s business. Larger contractors are more likely to have the resources to weather a recession than smaller contractors.
- The contractor’s financial health. Contractors who are in good financial health before the recession are more likely to survive than those who are not.
- The type of work the contractor does. Some types of construction work, such as residential construction, are more sensitive to recessions than others, such as commercial construction.
- The contractor’s location. Contractors in areas with strong economies are more likely to survive than those in areas with weak economies.
What can you do?
If you’re concerned about whether or not your contractor will make it through the recession, there are a few things you can do:
- Talk to your contractor. Ask them about their financial health and their plans for weathering the recession.
- Consider working with a different contractor. If you’re not comfortable with the risk of working with a contractor who may not survive the recession, you may want to consider working with a different contractor.
- Be prepared to pay more. Contractors who can survive the recession may be in a position to charge higher prices.
Ultimately, the only way to know for sure whether or not your contractor will make it through the recession is to wait and see. However, by understanding the factors that will affect their survival, you can make an informed decision about whether or not to continue working with them.
What do you do if you’re a contractor?
Here are some additional tips to help if you’re a contractor trying to survive the recession:
- Cut costs where possible. This may mean reducing the number of employees, cutting back on travel expenses or negotiating lower prices with suppliers.
- Focus on cash flow. Make sure you’re collecting payments from clients on time and that you’re not overextending yourself financially.
- Diversify your portfolio. Don’t put all your eggs in one basket. If one type of construction work dries up, you want to have other types of work to fall back on.
- Stay positive. The construction industry is cyclical, and things will eventually turn around. In the meantime, focus on doing your best work and building relationships with clients.
Will Valor Home Services survive a recession?
While we can’t say for certain that we will be open before, during or after a recession, but what we do know is that we have measures and processes in place just in case we are hit with one soon or in the future. In fact, this isn’t the first recession we’ve been through. Since we’ve been open for over 25 years, we’ve experienced and survived the most recent recession, the Great Recession, which began in December 2007 and ended in June 2009. The Great Recession was the longest and deepest recession since the Great Depression. It was caused by several factors, including the collapse of the housing market, the subprime mortgage crisis and the failure of major financial institutions. Even with the economy falling apart, we were able to stay afloat and eventually continue growing. Therefore, if you want to work with a company that has survived a recession and most likely will again, then contact Valor Home Services.