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INCREASING MARGINS
Recessions are not new to the A/E/C industry. It has seen recessions of varying degrees in the early 1970s, the 1980s, the 1990s, and the early 2000s (after 9/11 ), and there are common pitfalls in the ways that firms have dealt with these recurring situations. At the top of the list of pitfalls is not having a recession contingency plan in place, according to David Burstein, PE, of PSMJ Resources. Those firms without a plan can only hope that the recession doesn't last too long or become too deep; if so, it can mean the death of the firm altogether. The next mistake is casting too wide a net in business development once work starts to slow down. The result is that you lose focus, write too many low-probability proposals, and spend too much money on losing proposals while the ones that you win may bring in clients that you'd be better off without, even in a recession. The third pitfall is being in denial and waiting too long before making the adjustments that you really need. Your financial position may worsen before you actually make the adjustments. Not paying attention to your current clients is the fourth pitfall, because you get lulled into a false sense of security while competitors try to steal your best clients. Failing to protect your top performers is the number-five pitfall. If you don't manage your human resources properly, you can lose not only the people you need to survive the current slowdown, but also those you will need when recovery begins. The final pitfall is not seeing the silver lining in the cloud, because there are definite benefits that can accrue during a downturn. One of those is the ability to recruit high-quality people that in normal times are not available. Hiring freezes are a big mistake, according to Burstein, as they may close the door to some great opportunities.
What are the warning signs? When you hire a new employee, it takes about six months to start to show a profit, according to Burstein,...