The Rollercoaster Nobody Talks About
Every contractor who has been in the game long enough has lived through at least one bust. The phone stops ringing. Projects get delayed or cancelled. Clients start asking for discounts on work they were thrilled to pay full price for six months ago.
Jim Heimler of JHAI has been through multiple cycles in his 30-plus year career in architecture and construction. On the First Shift Podcast, he shared hard-won lessons about what separates the firms that survive downturns from those that do not.
The answer is not luck. It is preparation, discipline, and a willingness to make uncomfortable decisions before you are forced to.
Understanding the Cycle
Construction cycles typically follow the broader economy but with amplified swings. When the economy is growing, construction booms. When it contracts, construction crashes harder and faster than most other industries.
Key indicators that a downturn may be approaching:
- Rising interest rates reducing new project starts
- Longer bid lists on projects (more competitors chasing fewer jobs)
- Clients pushing projects to "next quarter" repeatedly
- Subcontractor pricing becoming more aggressive
- Permit applications declining in your market
You cannot predict exact timing, but you can recognize the patterns. And recognizing them early gives you months of lead time to prepare.
Building a Recession-Resistant Business
1. Maintain a War Chest
The single most important thing you can do is build and maintain cash reserves. Jim Heimler emphasized this point on the podcast. The firms that survive downturns have money in the bank when the downturn arrives.
A practical target: maintain three to six months of operating expenses in a dedicated reserve account. Do not touch it during good times. It exists solely to carry you through lean months.
This is hard to do when business is booming and you want to invest in equipment, hire more people, or move to a bigger office. But discipline during the boom is what funds survival during the bust.
2. Diversify Your Revenue Streams
Contractors who rely on a single type of work in a single market are the most vulnerable. Consider diversifying across:
- Project types. If you do only new construction, add renovation and maintenance work. Renovation tends to hold up better during downturns because building owners maintain existing properties when they are not investing in new ones.
- Client types. Mix residential, commercial, and institutional clients. Government and institutional work often continues during recessions because of long-term funding commitments.
- Service offerings. Add maintenance contracts, facility management, or consulting services that generate recurring revenue.
3. Control Your Overhead
During boom times, overhead creeps up. You move into a nicer office. You add staff positions. You upgrade your truck fleet. Each expense feels justified individually, but collectively they create a cost structure that requires constant high revenue to sustain.
Overhead management rules for cyclical businesses:
- Run your overhead as if the current revenue level is temporary (because it is)
- Use variable costs instead of fixed costs wherever possible
- Lease equipment instead of buying when utilization is inconsistent
- Hire subcontractors for surge capacity instead of adding permanent headcount
- Review every recurring expense quarterly
4. Build Relationships That Outlast Cycles
Your best source of work during a downturn is repeat clients. The contractor who has maintained strong relationships with five loyal clients will weather a recession better than the contractor with 50 one-time customers.
How to build downturn-proof client relationships:
- Deliver consistently excellent work (nothing else matters if the work is not good)
- Communicate proactively, especially when things go wrong
- Check in with past clients even when you are not bidding on their projects
- Offer value beyond the contract. Share industry insights, warn them about cost trends, suggest preventive maintenance
- Be the first person they call when a new project comes up
5. Keep Your Best People
The worst thing you can do in a downturn is lay off your best workers and hope to rehire them when things recover. They will not be available. They will be working for someone else.
This is where having a war chest pays off. If you can keep your core team employed through a six-month slow period, you come out of the downturn with an experienced, loyal crew that is ready to ramp up. Your competitors who laid everyone off are scrambling to hire and train new people.
If cuts are unavoidable, be transparent with your team. Explain the situation. Offer references. Help them find work. The way you treat people during hard times defines your reputation for years.
When the Bust Hits: Tactical Moves
If you are already in a downturn, here is the playbook.
Immediate actions (first 30 days):
- Review all active contracts for profitability and cash flow timing
- Cut discretionary spending immediately
- Accelerate collections on outstanding invoices
- Renegotiate supplier terms for extended payment periods
- Pause all non-essential hiring
Short-term actions (30 to 90 days):
- Reach out to every past client and let them know you have availability
- Pursue work types you might not normally chase
- Explore public sector opportunities (government projects often increase during recessions)
- Evaluate whether any team reductions are necessary and make them decisively
Medium-term actions (90 days and beyond):
- Invest in training for your team during slower periods
- Improve your systems and processes while you have the bandwidth
- Position yourself for the recovery by maintaining your marketing and brand presence
- Look for acquisition opportunities. Struggling competitors may be willing to sell their client lists or equipment at favorable prices.
The Recovery Advantage
Here is the silver lining. Companies that survive downturns in good shape often experience their fastest growth during the recovery. Why? Because many of their competitors did not make it. The firms that went bankrupt, that lost their key people, or that damaged their reputations are gone from the market.
When the phone starts ringing again, you want to be standing, staffed, and ready.
Jim Heimler's advice on the podcast was simple and direct: build your business for the long term, not for the current moment. The boom will end. The bust will end too. What matters is that you are still here for the next cycle.
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