The Road Ahead | For Construction Pros

I have been reviewing my notes the last few days for this column. The main topic was going to be about the decline of the Auto Industry and some thoughts on how you could get into a decent new or slightly used truck for an amount lower than what you have been hearing about on You Tube. What started this investigation was an article stating CarMax was selling vehicles for less money this year compared to last year, and at the same time making more money. How do you do that? Charge less but make more. Don’t you wish you could do the same?

A little more exploring and you find that Car-Max is paying less for the cars they are getting from the dealers, which means they can sell them for less money but still make a higher margin compared to the previous year. Makes sense,

They are getting the cars for less money because dealers are still sitting on the lot they can’t get rid of because of the pricing you see in the window. Dealers need to be ready for the new 25 models and just cannot afford to keep the 23 and 24 models in their floorplan.

My final point was to explain that there may be exciting deals available if you really need a new truck or two for the business. Personally, I do not buy new cars any longer. I bought used, one with some warranty left on it. But even if you run out of warranty there are many recent models you can get 200,000 to 300,000 miles out of if you provide service as noted in the owners-manual. YouTube can help you zero in on the best models to buy if you plan to keep the vehicle long-term.

There is more to discuss regarding changes in the Auto Industry I was going to bring up, but then the California fires appeared on my TV and ruined my day. They could ruin your day, and your year (2025) as well because changes that will take place in terms of materials, delivery dates, inflation, interest rates, insurance, lack of equipment, financing, and if you don’t play your game right a lack of personnel. In other words, the road ahead will be not only winding but also lead to troublesome financial issues.

Right now, I predict that every one of the threats mentioned will kick you in the butt in 2025. Which means you need to plan out where your pain points will be, some of which are not visible now, and prepare a list of solutions to choose from to put you back on the right road going forward.

Now that you have a list of solutions in front of you, you have to realize that every change in business operations be they either a revenue or cost line item will modify both your book income/loss and cash flow changes. These changes then must find their way into your business planning going forward until you change them because another of the threats appeared in front of you causing another change that will change operating results and cash flow.

The point here is if you just stay the course with your initial 2025 budget and not plan for any threats you will become cash poor which will hamper your ability to run your business properly. Why let that happen when it is much easier to deal with problems if you have a handle on the pros and cons to making the changes to address the problems.

There is little doubt that the West Coast fires will impact material costs and delivery due dates. This will cause inflation on this front. To protect yourself I would contact my primary vendors and stay in contact with them to have an idea how these issues will impact on their service levels to you. If it looks like higher prices are a given I would make an appointment with my banker to discuss your terms for a working capital loan along with the related interest rate. This threat alone may make you think about the type of work you want to do this year.

Another threat that is sure to pop up is higher insurance rates. That being the case I would review my policies to see what I can do to reduce premiums. One sure way is to get rid of assets you are not using but are paying insurance on. You should review every area of coverage and know exactly how the premiums are set for that type of coverage. You will be amazed how much you can save.

There may also be a lack of equipment if most used units wind up our west. Check in with our rental companies to ensure they have what you will need and that it will be there when you call. If you must arrange with the rental company to ensure they will meet your needs it may be worth it.

Finally, losing personnel is on the table if you cannot keep them working. I would take steps to show your appreciation for their efforts and pay out bonuses or profit-sharing dollars if they agree to stick around for the entire season. This may not be as big a threat for union shops but is certainly a risk for non-union shops. But in either case this is the year to take extra steps to share the wealth and find ways to improve efficiency and productivity.

So, get out your planning tools, get your 2024 results finished as soon as possible to help you know where to start for 2025.Make an estimate of what you will do by quarter and calculate the cash flow for that quarter. Also meet with your leaders to get their input on where and what threat will show up. Then work with them to plan your defensive move and the impact on cash flow. Follow this plan and you should make it to the end of year with some dollars in the bank.